The Death of ‘Homo Economicus’

Good incentives are no substitute for good citizens.
Human beings, notes Sam Bowles, a Research Professor at the Santa Fe Institute, are complex, psychological beings given to all sorts of motivations well beyond naked self-interest. That might be news to the economics profession, which posits a one-dimensional image of ‘homo economicus’, a rational, utility-maximizing agent, largely driven by the so-called “invisible hand” of the marketplace. Incorporating the disciplines of a multiplicity of social sciences, Bowles produces compelling evidence that self-interested financial incentives can in fact produce behavior that is inefficient and violates a society's morality.
In his work, Professor Bowles has conducted extensive field research, illustrating that humans can evolve as cooperative strategies when they participate in groups that share long-term similar norms and are willing to sanction those that do not follow group agreements. One example he cites regularly comes from behavioral experiments Bowles has conducted in which individuals have the opportunity to divide up substantial sums of money between themselves and others and also to pay for the opportunity to punish those who act selfishly. His research shows that people cooperate not only for selfish reasons but also because they are genuinely concerned about the well-being of others, as they try to uphold social norms, and value behaving ethically for its own sake. Moreover, people punish those who free-ride on the cooperative behavior of others for the same reasons.
This body of research has huge implications for the way we teach economics and, more broadly, construct policy. In our society, we rely on fines and rewards to harness people’s self-interest in the service of the common good, but do we get the balance right? To be sure, the threat of a ticket may well keep drivers in line, and the promise of a bonus likely inspires high performance. But that’s not the whole story: incentives can also backfire, diminishing the very behavior they’re meant to encourage
So what are the implications for the teaching of economics? How do we construct policies to bring out the good nature that is fundamentally intrinsic to mankind, rather than using traditional incentives which appeal solely to rational self-interest? Watch the interview as we discuss these important issues.

[@philgwellington6036]

Well said Professor. I've been saying the same for decades. Amazing that this is news to folks.

[@davidbuls2865]

When i read these comments, it's interesting that intelligent people listen to intelligent topics. These comments are intelligent and thought provoking.

[@l000tube]

Totally inspired by this guy, going to get his book.

[@AnimeshSharma1977]

"you did a very generous thing... in which you didn't expect anything in return, you just did it!, because you felt like it" :) Very nice blow to the idea of "Rational Being" so prevalent in Economics! As a subject, if we were such a rational being, mathematics should have been natural to all of us ;)

[@nv7287]

But then even with maths - you need a good teacher to teach the basics and make it make sense, as to how it works. (apparently the economists didn't have good teachers either)

[@cosmopolitanism6453]

Maths are natural to us indeed, but too much focus on maths is bad. Maths is just a science not more important than languages or economics or philosophy or theology and arts, even gymnastics. But geometry and simple maths are important for the world and useful in order to be rational with money. We are rational but the assumption that we are able to get rid of our emotions,sentiments or feelings is false.

[@pappapaps]

@@cosmopolitanism6453 We are rational? That's a bold statement. You might be reasonably rational sometimes. Others might also. But a lot of people do very irrational things all the time. Pick a topic from gambling addiction to suicide, all the way through cults, mania, group-think, witch-hunts, hooliganism, cutting, doomsday predictions and beyond. Some people pay money to get aids, it's called bug hunting and is an eerily popular phenomenon in some parts of the world. Rational? We're a bunch of hairless apes believing in ghosts when the dark sets in, while splitting atoms and deducing upper dimensions in the daytime. We basically found _free energy_ but mass hysteria and sensationalism has produced more bombs than power plants out of it. Rational my a**

[@AugustinTomasOBrienCaceres]

Very good presentation professor

[@stndsure7275]

Rather than just modeling things like GDP and determining value solely on growth, we need more sophisticated ways of measuring human satisfaction and societal happiness and corporate value. Something like OECD efforts to measure the happiness of individual countries

[@danielhutchinson6604]

If we substitute our devotion to money, with altruism, we can live..... Devoting our respect to selfish desires seems to be killing us all.....

[@PhillipLandmeier]

This is excellent.

[@HusamuddineIsmail]

Rationality is no more a priori assumption, it is utility maximisation.

[@cosmopolitanism6453]

Rationality in economics is what David Hume said, "a slave of the passions" . These passions were later combined in the term utility by Jeremy Bentham. Thats where it comes from. So Rationality in economics is indeed what you said. Rationality as it is defined by Immanuel Kant or the Ancient Greeks, Plato and Aristotle, and modern sciences like psychology etc is a different thing. The truth is in the middle, but neuroscience confirms Hume's opinion. Thats why the Human behaviour is so oftenly similar to that of an animal. Who can deny that? Finally the model of Homo Economicus is partially true, as i mentioned. The economists mostly are trying to promote this model as an examble for us rather than believe in it as something natural and a priori.

[@windokeluanda]

Very beautiful!

[@dallaswwood]

Why do critics of mainstream economics conflate "utility maximization" with "purely self-interested behavior"? They are not the same thing. For example, Gary Becker discussed how Alturism could be understood in the context of utility maximization almost 40 years ago. I'm sure Bowles knows this, but the temptation to play maverick is too tempting.

[@distopiadnb]

Listen again - Bowles does point to this very distinction. He makes it clear that he's not, at least in this talk, discussing optimization as a way to model behavior. He's just discussing the self-interest assumption, defined as an admissibility constraint imposed upon the arguments of any U(·). I am pretty sure Becker did not elaborate in any meaningful length about altruism - happy to change idea if link is provided though. What he did was to relax other, more conventional constraints on what could feature as argument in utility functions. His goal was not to put self-interest into question, quite the opposite I think, but rather to stretch the definition of self-interest in order to accommodate for choices that are prima facie implausible to explain in such a way. That does not even entail mentioning altruism.

[@user-pk3bo7tg2b]

Great video I learned a lot from this. However, to be mathematical or in anyway scientific the assumption of human decision and behavior has to be made. I wonder how our exact feelings and natural behaviors can be observed and be represented mathematically. This question will certainly take a lot of time and effort tobe answered.

[@user-pk3bo7tg2b]

***** Well first of all economics is a form of social study but the main difference(to this area) is it uses scientific method like math, formula, equations, and etc. I really dont think math or other equations or formula is anyway laughable to those mathetician your talking about. On the other hand, I have to aree with you that finding exact ways how we behave or we will react could be really difficult but not imposibble. With enough data and some help with math and other social studies we might just get some ground breaking answers... who knows...

[@distopiadnb]

김규민 That concerns about tractability - perhaps very profound ones - just have to arise seems intuitive for many but, as Sam points out, it is probably quite misleading. Actually, in many applications the modifications needed are quite simple and much of the old analytical tools can be put to work for modeling altruism. Having other-regarding preferences simply means one more maximand among others - and given usual constraints. Evolutionary game theory, not a particularly complex field, appears to be well suited for purpose and extremely versatile. Of course, as with the presumably real feelings of satisfaction evoked by self-regarded preferences, for many applications direct characterization of the biological-emotional mechanisms is definitely not necessary. It would be hard to, but most of the time there would be enough observable proxies/correlates/indicators to separately identify different feelings. The problem, if anything, again not a new one, is the exact opposite. If any outcome can be accommodated by positing optimization with respect to a set of preferences which are essentially derived to explain facts in a functional way, then there is no independent reference to facts which may eventually falsify the conjecture that such preferences are actually there. This is a more general problem with existential quantifiers - Popper's remarks on this still stand quite well I think. However, this is still enormous improvement over revealed preferences even on this respect. At last the idea that preferences should be treated as empirical facts, which are not just worth, but essentially commanding, investigation, is beginning to open a breach into the obsolete logical positivistic minds of still too many economists.

[@harrycox6303]

During Thanksgiving, the topic of 'Homo Economics' always seems to dominate our dinner table.

[@doellison]

It is true you can not motivate everyone by appealing to their self-interest. But those who are motivated by self-interest, and are successful are rewarded with power. What those few possess is a self-interested power to preserve thy self. Others gain other rewards, but only only power can bring the change the professor seeks. However through neoliberalism gaining power through anything other than self-interested/greedy motivation is impossible. Being smart is only valuable as the money you can make with it, not the minds you can enlighten.

[@nblumer]

Psychologists have demonstrated 1. Altruism in infants and many mammals 2. Distress over unfairness among infants and mammals. It might seem then seem that altruism and the engrained sense of the merits of fairness is a universal force that is innate in the animal kingdom and does not require a religious explanation

[@derbezacesanchez3779]

Our current profit system is driven by debt. Use debt (loans, bonds etc) to create a business, buy land etc.- then pay back the loan with interest. Where does the interest come from? From banks using our currency to lend out to others. Where does the interest that loan repayments come. From other people, but why do prices and wages rise? Because maximizing profit even when it means creating debt by lobbying for Federal Reserve to print more currency is the norm for Wall Street and friends.

[@pepechen]

what if individuals were altruistic only when they have enough to spare? when it means survival aren't we all selfish? maybe this should be a factor in a hypothetical mathematical model that attempted to quantify it

[@shaynestothart5637]

he did that.

[@cosmopolitanism6453]

Human is greed and always wants more because nature created us like this. We cannot understand that we are already survived and we keep obeying to our feelings which tell us to earn more. But when a person is poor being egoist and greedy is good and useful, thats how nature protects life, its an enstict of survival. The function of money as method of saving value has worsen greed phenomena, so from this point of view, money has worsen greed. Before money was created people couldnt save so much capital, goods and foods would spoil, so they shared them with others. On the other hand, capitalism has increased production at a lot better levels for humanity.

[@pappapaps]

@@cosmopolitanism6453 You didn't watch the video. That's exactly what he says _is a misunderstanding_ stemming from myopic overview. As soon as you zoom out a little you'll se something completely opposite. When one is poor and alone, it is often beneficial to team up with others. Therefore you see gangs in areas where black markets prevail. You don't see individual players of those games fair well. Solo poor people are the ones you run into at the subway, dying of habits by piecemeal, smelling like piss and vinegar. Grouped poor people are those that make you fear for your life when caught in a wrong situation. The bum on street leaves no mark, has no power. The group leaves organisations that last for decades, such as gangs and cartels.

[@stavroskarageorgis4804]

It is well and truly misleading to contrast selfishness with *altruism*. The "alter" (other) in actually existing "altruism", not the ideal altruism, is not random or just *any* other. So-called altruism is, more often than not, "group 'egoism', groupism, parochialism, 'ethno'centrism. Genuine altruism is moral individualism, humanism.

[@jamesbuchanan3888]

What of the moral implications of states assuming power to make people do whatever political whims declare is the "right thing"???

[@stephaniecarrow4898]

There are plenty of cooperative species in the world: bees, ants, termites, lions, wolves, meercats, prairie dogs, orcas, dolphins, humpback whales among them. Also inter-species cooperation. And there are cooperative human societies, including the Amish, Mennonites, and Shakers. "Survival of the fittest" applied to economics is disproved by nature itself, as well as common sense. Darwin resented the way his theories of natural selection were misused to justify greed and brutality (including slavery).

[@HariPolitopoulos]

The simple fact that "cooperation", forced, motivated or voluntary is the basis of all our achievements in the last 10 000 years, does not come through in this conversation. What has lifted us from the bestiality of primitive life, from irrigation in Mesopotamia, to Roman roads and aqueducts and to the electricity, transport and information networks of today are the results of "cooperation". The so called free market and competition is one form of "cooperation" but some of our greatest achievements (the world wide web ?) and failures (the atomic bomb ? the destruction of Iraq, Libya and Syria ?) cannot be explained by the assumptions describing "homo economicus".

[@uptoit100]

+Hari Politopoulos There is a lot to say in favour of co-operation, but it doesn't in my mind provide the answer to human achievement in the last 10.000 years. Nomads and food gatherers survive in part through co-operative societies but they have no spare time to spend inventing things. What you're missing is the requirement of an agricultural economy creating a food surplus.

[@HariPolitopoulos]

+Gerald Comeau Important point but does it contradict my point? Α surplus is indeed the engine of all accumulation but it arises only out of some form of joint effort, forced or voluntary, competitive or "cooperative".

[@uptoit100]

In an important way I believe it does contradict your point. Food gathering societies, even when you take the spirit of co-operation into account, continue to be food gatherers indefinitely because food gathering is pretty much a full time occupation. In an agricultural economy, the surplus quantity of food produced is available for consumption by individuals and groups of individuals that have nothing to do with the producing of the food they eat. They then have time to pursue new innovative occupations. New forms of society with specializations like shoemaking and building construction etc. are able to evolve evolve. People no longer have to roam for food and are able to live in one fixed location. Civilized societies, I am quite sure are exclusive to societies that have a food surplus created through agriculture and co-operation is not the determining factor.

[@distopiadnb]

Interesting, but not unambiguously related to the extent of cooperative institutions and norms. The agricultural revolution might have implied a strong turn toward individual and household-based possession, if not clearly defined property rights, but village institutions survived and re-emerged to serve different purposes: reciprocal health insurance and collective action to resist feudal rents or imperial taxation for example. Scope for collective action in most agrarian economies was far from absent, it was just different from that which stemmed out of hunter-gatherer societies. In his book on the industrial revolution, Bob Allen has an interesting discussion of the way in which peasant communities (somewhere) in England attempted to devote commons to experimentation with new rotation and techniques - to some extent successfully. Moreover, most agrarian societies had very little time for amenities - although some of them did consume substantial amount of leisure. The point here is that free time is not enough, without any incentive to adopt technology and improve production processes even highly knowledgeable societies fail to generate agricultural surpluses. Moreover, even then, a highly commercialized agriculture with trade and proto-industry does not, as a rule, guarantee a transition to capitalism. China had been just that for centuries, at least twice in the last 1000 years, and both times ended into a demographic cul-de-sac. Ironically, the key institution of capitalism, the modern firm, is indeed based on cooperation in production. Exchange in competitive markets is not a form of cooperation anyway: there is no intentional attribution of benefits to others and the gains from trade are realized out of pure self-interest. Cooperation usually arises when opportunities for mutually beneficial exchange are missing - which might be the case for a multiplicity of reasons.

[@geoffreynhill2833]

I challenged the assumed characterisation "homo economicus" in a sociology tutorial in 1967 and drew a blank.

[@AugustinTomasOBrienCaceres]

Professor bowles

[@headrat1]

When I suggest to people that we all simply give of the need for money they act like I'm trying to steal their crack pipe!

[@stavroskarageorgis4804]

The notion that actual managers or would-be managers of other peoples' conduct have not, in practice, not recognized and sought to "take advantage of" the non-instrumentally-rational facets and dimensions of people's motivations and intentions is risible. Anyone who has read carefully e.g. Andrew Ure's The Philosophy of Manufactures (which was, in fact, a philosophy of MACHINOfactures) knows otherwise. Classical, marginalist, and Austrian economists specifically *obscured* aspects of reality for ideological purposes. It wasn't that they were/are "ignorant"; they were/are *mendacious*.

[@FatFrankie42]

Mutual Aid: A Factor of Evolution written in 1902 by Peter Kropotkin Quite a bit of the work had already been done, you could've read the book and spared yourself some time and effort. I don't discount the necessity of research and studies on the way humans exist in current times, but there was a base of knowledge which could have provided a foundation to build on, or a launchpad perhaps, which apparently nobody was aware existed, or maybe they did but for whatever reasons discounted it offhand or thought it lacked validity.

[@isaacdarche7103]

Nash equilibrium shows that "mostly co-operative, but capable of some deceit" is the optimal evolutionary strategy. Economists ask "so what?" in the face of empirical evidence. The real question is "should we continue to use economic theories that are wrong? or any economic theories at all?" Economics is shopkeeper intuitions run amuck.

[@cosmopolitanism6453]

The conclusions of the economists are as effective as the covid vaccines are in fighting the virus.

[@cosmopolitanism6453]

Karl Marx on German Ideology explains that ideologies are theories which are trying positively to change reality in favor of some interests. Later communists like Althusser said that ideology is an extension of power. Classic Economists were skeptical about power, maybe we should be skeptical about ideology too. Originally when Ideology was created it was a "science of ideas" using the method of physics. That sounds like economic theory.

[@alfredhitchcock45]

Cooperative Species Both self interested and Altruistically oriented Theory of Moral Sentiments Natural Selection

[@yveslegault6825]

We would be better off if we contribute to a given cause and the state matches the act up to a ceetain percentage with his own.

[@pepechen]

but what about the utopis based altruism that have almost in all cases failed? is it because altruism has to be freely exercised and not imposed? if altruism is always for the benefit of the group isn't that also a materialistic and selfish way of seeing it?

[@forgivemeifidontshakehands9091]

pepechen yes reciprocal altruism is selfish at its core, but I don't think selfishness of this calibre should be viewed cynically, as if you want to take part in society you must just accept it as a case of you scratch my back I'll scratch yours. people's balance of how much they give and take to others varies quite a lot but we are all the centre of our own world's so there has to be some benifit in it for us no matter how small or unconscious.

[@BaneTrogdor]

But milton friedman said GREED IS GOOD !! Awful

[@cosmopolitanism6453]

It could be, but the function of money as a saving method has worsen greed phenomena. Beofre money people couldnt save food and other goods for long, so they shared more. But, as i said above, Capitalism has increased production and the level of life for humanity. Going back to a society without money would be a disaster, but fixing this one is better. The economists must find a way to boost the mobility of money.

[@plough323]

Austrian economics is the ONLY economics which takes full account of human behavior and motivation, good and bad. Its premise: Human beings are goal-seeking and therefore employ means to achieve ends. Because these means are scarce, not all goals are realizable, and thus each person must prioritize and economize. No false assumptions about rational action being only that which maximizes profit, which is the premise of Classical and neo-Classical/"neo-liberal"/ mainstream economics. The idea of the individual who acts merely as a businessman was the purview of the Classical economists, because they had yet to discover the true origin of value: the subjective valuation of the marginal unit of a given supply of goods, as evaluated by the individual in any particular circumstance. Neo-classical economics errs in attempting to quantify this value, which is impossible. It errs also in failing to account for motivations which cannot be quantified. Value is a distinction made in the human mind when facing a choice between preferring to trade one resource (e.g. labor) for another (e.g. a bushel of apples, among a supply of a dozen bushels). Do I prefer one hour's leisure, or a bushel of apples? If the latter, the individual engages in trade/exchange. Do I prefer a night in bed with my love, or a night of drinking with my buddies? Value is comparative, and relative to the individual's subjective evaluation under specific conditions at a specific point in time. It is not objective, nor measurable, nor inherent in any good/resource.

[@Thomas83KO]

the members of the German liberal Party (FDP) should watch this :)

[@rabokarabekian409]

Don't forget people such as this though, "Bernie Madoff dominates the hot chocolate market in prison"

[@charlesxav1er]

Where is Elton John?

[@travcat756]

You can't cure over commercialization by commercialization

[@johnellington1932]

Value of the word Work. Is not just Paycheck. Its Change of Individual. Values towards understanding we are Human. Hypocrisy wants Saint Nicholas. Superior to What? Come On. Tell us.

[@Marco-wq7nn]

Economics means quantisation as everything is reduced to numbers. Then a human being becomes a number and in fields where there is direct work with numbers like in banks it provides a pseudo legitimacy to maximize profit. Quality of life cannot be really reduced to numbers but can be subjectively translated. Economics want to feel they are doing hard science with so they retreat from evidence giving no service of what economics is really about. That is why this field is so poorly working and so much deviated from reality.

[@EmilNicolaiePerhinschi]

did Bowles actually read Adam Smith ?? I think he only read commentaries and collections of quotes

[@kasunkt]

Emil Nicolaie Perhinschi did you ever read Adam Smith I'm not talking about the Stanford edited versions .

[@cosmopolitanism6453]

Adam Smith was different than friedman,hayek, and modern liberals(not left) or libertarians,

[@roc7880]

no serious biologist would ever defend the theory of selfish person based on evolutionary genetics. I ignore Dawkins of course.

[@colonel__klink7548]

The problem is the very farcical idea of mathematically modeling what is in effect all of human civilization. Every action requires energy and resources therefore every act falls within the purview of "the economy." Its sheer arrogance to think you can model mathematically something so irrational. Let's take stocks and futures. How is it that tesla, a company that loses money on every car sold, that manufactures inferior products, that offers no stock buybacks, that offers no dividend, that offers no voting share, that operates on a primitive pre 1970 vertical supply chain model, that produces less cars than any of the big three... came to have the greatest stock evaluation of any automotive company in the world? A rational mind would never invest in a company that loses money on its core product line and DOES NOT OFFER A RETURN ON INVESTMENT but markets are not rational. The price got so high because Elon Musk is one heck of a hype man. It reveals what the investment markets are. A pyramid of idiots. The trick is to hype the theoretical property up as much as possible so the tide of idiots comes in to drive up the price. It goes with everything. A few years ago there were ad blitzes claiming there would be a great cocoa shortage by now. Futures prices skyrocketed. How do you in your silly computer accurately predict and model some dirt bag waking up one day and deciding today he's going to trick everyone into evaluating cocoa beans at a higher price. How do you predict that he'd pick cocoa to dupe us witn and not natural rubber? You can't. The very idea that you would even attempt to model these interactions really shows you aren't paying attention to how it all really works.

[@kyaume21]

Showing that most economists simply need to be sacked.

[@pepechen]

communism and other Utopias we're based in the assumption of solidarity but when the spirit of the revolution that fed the emotional energy that sustained that generosity faded, often very soon, the system reacted by proping it by other means and that's when communism created aberrations that were far worse that this of capitalism. where does this idea that the individual is not by default selfish account to the failure of all socialist Utopias? I'm dying to know...

[@pigofapilot1]

+pepechen Democracy v Authoritarianism is the answer to your question. If democracy survives so does capitalism and democratic socialism and any other democratic -ism that you care to mention. Communism and Corporate Capitalism (plutocracy) cannot co-exist with true democracy. The same is not true of private capitalism or social democracy. The UK recovered from WWII under a social democracy. Corporate capitalism cannot cope with rebuilding a devastated and indebted nation but can feed off a successful one, much to its later regret if left unchecked.

[@maxkline8985]

it seems like he is building a straw man in regards to what people consider a "rational actor". People have a variety of things they value, money, honor, family, a sense of purpose, ect. It is a completely rational decision to do something because you value the attributes it comprises of. A person who is fighting in a war for his country isn't acting irrationally, they might just have a different system of evaluating what actions are worthwhile and what aren't. The "rational actor" isn't someone who only acts in their own self interests and makes value judgements based off of what benefits them the most, it is a person who makes judgement s based off of what they value the most. These values are what determines decisions. If you look at rational choice theory through this lens there is no contradiction because again they are making rational choices they just might not be entirely self serving choices.

[@jannikthorsen3531]

By defining rationality so broadly it essentially becomes a tautology. Any choice that a human makes can be construed as rational. You are missing the point, that Bowles is objecting to the common conception of homo economicus in the economics profession. He is not trying to disprove common conceptions of a "rational actor" among the public. So there is no strawman building on his part.

[@thelaw3536]

@@jannikthorsen3531 Isn't the idea of a rational actor already considered incorrect as perfect markets do not exist? Wouldn't assuming rational actors also assume perfect markets?

[@stefanmetzeler]

As the space to comment is a bit limited here, I've written a Facebook Note to reply: facebook.com/notes/stefan-metzeler/new-communism-is-still-wrong/2416118435076591/

[@TheShootist]

angered at unfairness? no. angered because of envy.

[@megetmorsomt]

People like simplistic explanations; for instance: co2 governs the planets temperature...

[@richardfinlayson1524]

well if you are trying to disprove global warming by that simplistic trick ,you failed

[@megetmorsomt]

@@richardfinlayson1524 I don't feel the need to disprove what has not been proved.

[@123axel123]

Interesting but no follow up questions to provide depth. Thus largely a waste of time

[@distopiadnb]

time to close youtube and open books, then.

[@RushuFriends]

Pretty much lmao. A 20 minutes video is not a class.

[@erinclovenhoof4940]

I often find the short little clips like the work well in the same way that book jackets do, it helps decide which ones I'm interested in before I read further.

[@xeraph02]

Of course, humans can be cooperative when they are forced to be :)

[@cosmopolitanism6453]

hahahaha sometimes without force, dont be so absolute. Cooperations is in favor of everyone and sometimes that is obvious to anyone. Thats why there is commerce, domestic and international, and why peole make friendships and interact with others.

[@OlOneEye]

ughhhhhh

[@michaeltabone7085]

Austrian Economics could have told you all this

[@Allanvp1]

Interesting video, but horrible edit

[@s.lilymendoza4772]

Thanks for your work! Reminds me of James Woodburn's essay on "Egalitarian Societies" where hunter-gatherer societies are noted to have implemented stringent social leveling mechanisms to maintain social equality web.mnstate.edu/robertsb/380/egalitarian%20societies.pdf