Homo Economicus

What is Homo Economicus?

Homo economicus, or “economic man,” is an idealized decision-maker used in economic models. This person chooses consistently to maximize utility, often under strong assumptions about information, reasoning, and self-interest.

Rationality and selfishness are separate assumptions. Someone can consistently care about other people's welfare. Donating money is not automatically irrational simply because it reduces the donor's bank balance.

Why the model has limits

Real people have limited information, time, and reasoning capacity. Herbert Simon's A Behavioral Model of Rational Choice examines decision procedures that work within those limits. Behavioral game theory also studies how strategic reasoning, learning, and social preferences affect choices, as described in Camerer's review.

Homo economicus can be a useful simplifying model. Its usefulness depends on the question and assumptions. Treating every departure from monetary self-interest as a human error confuses the model with the person.