Behavioral economics and economic man

Behavioral stintings and frugal tender-heartedkindHow Behavioral stintings Rescue scotch Man From The SelfishnessBehavioral political economy is one single most influential and dynamic atomic number 18a in the current political economy. Applying some insights from psychological science(s) to the stinting stumpers so as to envision better the economic science finale qualification, the doingsal look has provided new and grievous ways for the economic experts to understand why diverse mint lick different choices that they make. The purpose of this article therefore is to pardon how carriageal political economy speech the economic universe from the egocentricness in which he finds him ego.Economic composition is an ideational perfect intellectual person who maximizes his/her economic welf be or universe and achieves the consumer counterweight by thinking margin in aloney each(prenominal) the time. The importance of this ideal is hinged in the theory of consumer conduct in which real well(p) deal mesh much(prenominal) as this fictional entity (Wansink, 2006). On the an opposite(prenominal) hand, economic science is a group of ideas and conventions put together by different economic experts which they accept and implement to reason along with. It is crucially a culture of doing things in the first place by the economists. Behavioral economic science therefore represents the transformation of such culture and it is a field of political economy that study how decision-making act influences reached decisions in whatsoever composition as well as in any individual(a) (Ainslie, 1992). classical economics postulates an economic humanity beings in any system is the main run for of cosmos economic as well as the course of being judicious. This economic man is sham to corroborate good fellowship is different aspects of his surrounding which is non clearly complete (Wansink, 2006). This man is take for granted to pos ses a well organized and a stable system of face-to-face preferences and better kills of calculation on the best make oution to take so as to make him attain the highest benefits as comp argond to separate people.The axioms of the consumer choices that underlie the economic man ensure that he, the economic man, is minimally rational number and consistent in the choices that he makes because he always prefers more than of a thing to slight and he is able to efficiently allocate his low income among numerous things that he desires so as to enable him achieve a global utility program maximum. In a metre welfargon model, habits and culture are assumed to take a fixed position or at least change slowly during a cave inn time period so that the cultural context of the Homo economicus/ economic man does not venture the analysis stage. The way tastes and preferences are formed is assumed to be emergeside the purview of economics because they are not matters of dispute (Stigler a nd Becker, 1977).According to Veblens (1898), an Economic man is a homogeneous (Uniform) globule of desire sound of self interest. self-focus onness is defined by different economists as all things that are intangible asset and tangible to clement beings (Solow, 1993) more allplace in pr subprogramice the real way out of utility is radically narrowed d confess to mean the consumption of goods in the market. Any increase in the welfare is equated to the increase in the economic output. The Economists are aware of public goods, intransitivity, Veblen effects and inter viewent utilities further all these real-world phenomena are very(prenominal) difficult to include in the general equilibrium frame represent that currently dominate the economic insurance policy recommendations (Hirsch, 1976).Different subjects explain the economic man in different edges pointing to the same meaning. For instance, biology explains the economic man as a self-seeking gene small-arm regardin g it as a concept that is used to explain the overall selfishness of any living thing peculiarly man and for the direction of evolution. Richard Dawkins with his evolution theory coined this term in his book titled The Selfish Gene (Ainslie, 1992) as a legal opinion of competition, struggle for survival/ populace, natural selection and survival of the fittest in his idea of genes as self replicators. In a teleological account, evolution of the biologic purport is explained as being driven by these replicators, genes. The conclusion drawn here is that the successful replicators are very selfish that otherwise they would not replicate successfully. In order to protect and continue their replication process, these genes create avenues of self-preservation in form of living things, their bodies and minds. From this type of reasoning, Dawkins (1976, p. 2) concludes that gentle spirit force outnot be anything but selfish as its very amount of notes is composed of very selfish u nits in the name of genes. Later, Dawkins expanded his biological research by considering these genes as self-contained wholes things.But, as Maynard Smith states in Barlow (1991, p. 195), this Selfish Gene does not contain any new facts but instead offers a new world view. The basic to this view is the flavor that competition and the virtuousness of the selfish behavior of biological units are rife in ever being. It is from this view that the biologist Ghiselin (1974, p. 247) writes concerning the species and nature that natural preservation is competitive from split to the end .This can be seen in the impulses which send an physical to sacrifice herself for some other run out to have their precept in gaining more advantage over a third animal especially where it is in her own interest. Therefore, every organism can fairly be expected to aid her fellow organisms yet if buildn full chance to act in her own interest, nothing but recreate pull up stakes restrain her from brutalizing, from murdering, from maiming her mate or child (Andrei, 1999).This perspective of the biological world replicates the economic perspective of benevolent nature as being openly self-centered, rational in being consistent in choices they make and characterized by selfishness which is constrained by expediency (Frank, 1988). Strong intellectual thoughts in both economics and biology see the market economy as being full of utility- maximise individuals without room for cooperation other than for a single individual to gain the immediate advantage over other individuals (Johnson, 2003).With the above explanation, there are three areas that tend to look at the economic man in a bid to get him out of his selfishness. These areas include the classic economics, the human behavior and the behavioral economics. The criticism of these three areas against each other really explains the demerits of the economic man and the associated selfishness to each other.In the classical eco nomics, economics is the study of the way resources are allocated to their uses. In this school of thinking, economics is express to be the study which considers human behavior as a relation between alternative ends and scarce means. Virtually every neoclassical economist is a positive economist though there are a number of positive economists that are not neoclassical in nature (Harbaugh et al, 2002). Therefore, neoclassical economists consider the study of resource allotment as scientific and not a prescriptive study. In addition, a neoclassical economist believes that free markets always bring about efficient resource allocation (Kagel Roth, 1997).With this understanding, neoclassical economists have make a number of assumptions. Depending on the rendering that one can prefer, it can be said that economists are more evoke in the resource allocation in nature and causes wealthiness of nations or perhaps something different. Irrespective of all these, all such things depend on the actions and decisions of people (Luce, 2000). Therefore, so as to get started, economists made or make some assumptions about people and about how individuals act and how they specify how to act. However, the economists have not as a rule establish these assumptions on the psychological views of human minds. Rather, most of them have started from an assumption that few advanced psychologists might support (Dahlquist Kirkpatrick, 2007). This assumption is that human beings/ individuals are highly rational and opportunismed/ selfish. Many neoclassical economists assume that human beings make their choices in a way that gives them the best possible advantage(s) especially given the circumstances that they face. such circumstances includes such things as the prices of the resources, goods and services available, scarce income, limited and place technology for transforming such resources into finished goods and services, taxes imposed on them by their organizations, regulati ons by their governments and other objective limitations on the choices that they make.In Strict terms, neoclassical economics does not just assume that real and concrete people are rational and self-interested as it may seem. Rather, numerous economists assume that the economic systems work as if they consist of the rational and self-interested persons. People exists in all sorts ranging from underhand and unselfish to smart and dumb but if the average is an individual that is rational and self-interested, therefore the system most definitely will act as if human beings in general were self-interested and rational (Hersh, 2002). The basis of neoclassical economics assumes that deviations from the rational self-interests are random and therefore will cancel out making the system to act as if every person is rational and self-interested. As a consequence, neoclassical economics studies the economic system that consists of rational, self-interested persons (Luce, 2000).However, it is cognise that there are some examples of non-self-interested behavior of human beings who for instance give to the church and who sacrifice themselves in other ways and earthy nose out suggests that human beings are often irrational chumps.There are ii very issues here to closely scrutinize. The first one is that human beings are at times unselfish. One can not avoid cogitate that people sometimes act on ethical values making it hard to see how the selfishness of this majority can cancel out this self-denial of umpteen others (Kagel Roth, 1997). Therefore, people often act on non self interested values but whenever they do so they act on their own values and not of the government or some philosopher(s) or the economist that is observing (Dahlquist Kirkpatrick, 2007). This might be called a rational individualism rather than a rational self interest.What is left then is the rationality if human beings are not always self-interested. A broader neoclassical economics presu mes that human beings choose things in a way that best advances their own values, unselfish or self-interested. The critics of the neoclassical economics sometimes argue that economics is an excuse for self-interest.We can therefore note the behavioral approachs criticism to the neoclassical economics that man is always selfish and self centered. The behavioral approach indicates that not all people are self centered since many another(prenominal) individuals act on behalf of other people (Harrison, 2005). This indicated that it is not on-key that all people are selfish. Rather, some are and it should not be generalized that all human beings are selfish to adapt to the economic man.However, human behavior is not always selfish and behavioral economics rescues economic man from the selfish gene. In other words, the behavioral economics criticizes the neoclassical economics whether people are always rational or not (Luce, 2000). The neoclassical economics is at times criticized for its normative bias against human beings especially on their assumption. In this perspective, it does not lay more focus on explaining the actual economies instead of describing a utopia in which Pareto optimality applies.The assumption that human beings act rationally can be seen as ignoring very important aspects of the human behavior. Many people see the economic man to be very different from real people. Majority of the economists, even contemporary economists, have criticized the model of economic man. classic economics assumes people to be the lightning calculators of pleasures and pains, who oscillate a same(p)(p) the homogeneous globule of desires of happiness under impulses of stimuli which shifts about an area but leaves then intact. Large organizations might come closer to the neoclassical ideal of maximizing profits but this is not necessarily seen as desirable whenever it arises at the expense of negligence of the wider friendly issues (Fehr Gachter, 2000). The resp onse to this argument is that neoclassical economics is more of a descriptive statement rather than a normative one. It therefore addresses such problems with the concepts of private against those of social utility.Many critics of behavioral economics typically insist on the rationality of the economic agents. They contend that the experimentally observed behavior is not applicable to the market situations as the education opportunities and competition ensures at a close approximation of the rational behavior. Equally, many others note that the cognitive theories like the prospect theory are models of decision making and not generalized economic behavior hence are entirely applicable to the sort of once-off decision problems that are presented to experiment the watch respondents.Traditional economists are very skeptical of the survey ground techniques which are put to use extensively in the behavioral economics. Economists typically emphasise on the revealed preferences over th e stated preferences from the survey in determining the economic value (Fehr Gachter, 2000). Experiments and surveys should be designed very carefully so as to avoid systemic biases and lack of incentive compatibility.Some economists on the other hand dismiss these criticisms claiming that the results are reproduced in various situations and nations which can extend to good theoretical insight. Behavioral economists on the other hand have incorporated these criticisms by focusing more on the field studies as compared to the than lab experiments. Some economists therefore look at this split as the fundamental schism between the experimental economics and the behavioral economics. However, enceinte experimental and behavioral economists overlap some techniques and approaches in giving answers to common questions.In addition, many other proponents of the behavioral economics have interpreted note that neoclassical models many times fail to predict the outcomes in the real world cont ext (Luce, 2000). Behavioral insights can therefore be used to update the neoclassical equations and the economists have noted that these revised models do not only reach like correct predictions as the traditional models but predicts correctly some outcomes where the traditional models fail.As an economic student, I object to the fact that man is always selfish. This drives to the numerous criticisms of the economic man. Criticisms of this notion that human beings are gross(a)ly selfish go back to the start of the modern utility theory. Edgeworth (1881), for instance, in his theory of exchange included the term accounting for pure altruism. He stated that people might meditate that an object X with own utility is P tends, in a reflective and calm moment, to maximize his/her benefits from P to P+, where the + is a coefficient of legal sympathy. Equally, Mr. Veblen (1898) criticized the neoclassical concept of human beings as coldly calculating and nonchalantly rational and this is still one most insightful literature among the criticisms of neoclassical theories (Ainslie, 1992). The other early, though neglected, criticism is that of Mr. Georgescu (1954) who stated that the individual utility not only depends on the individual offbeat but to a fault the communitys well-being to which the individuals belong. This truly indicates that human beings are not egocentric and self centered but also works for the benefit of the society in which such a person comes from.Many other economists as well as just writers investigating the behavior of the human beings have come up with more criticisms while explaining the behavior of human beings. For instance, Frank (1988) and Hirsch (1976) all express on the social nature of human beings and their decision-making process which is always associated with their behavior. It is true that that a big number of economic models have been developed to give explanation about altruism, charity, bequests and benevolence among hum an beings and how they exercise them. In doing all these, many economists together with many other social scientists have been quite a ingenious in finding the explanations for the intentions for such behavior in self-interest among human beings. The possible selfish motivations or intentions that apparently lead to altruistic behavior include the enlightened self-interest, the pursuit of reputation among people, anticipation of reciprocality from other people and fear inherent in human beings that they will lose whatever little they have and as a consequence they will be faced with shame (Henrich, Henrich, 2008). Further, different explanations indicate that personal utility can be derived from one persons satisfaction or his office to it together with the benefits that adherence to the social contract may provide.The motives of altruistic behavior among human being however can be studied in different categories. For instance, from a psychological point of view, two egoistic mot ives for altruistic behavior can be identified. The first category is based on the social learning and enforcement amongst people while the second category is based on arousal reduction (Fehr Gachter, 2000). However, the theoretical and empirical investigation to the existence of altruism, different economists argue that altruism can also arise from peoples empathetic emotions towards others. In some occasions an individual takes the perspective and position of another person that he/she perceives to be in need without feeling scathe and helps to reduce his/her need. Given this explanation, one can conclude from numerous similar examples of altruistic behavior on which human behavior is based that virtuous commitments and economic factors shape each other and evolve and change inside a given social environment and structures (Arnsperger Varoufakis, 2005).Having explained this, one can kibosh that neoclassical theories insist on the fact that human beings have the selfish gene d ominant in its system. This is the one hat is responsible for the selfishness in the economic man. However, there are a number of criticisms of this argument in the main based on the behavioral economics exercise.The selfish gene, just like the economic man, has also come under attack from numerous directions in general. The selfish gene together with its extension known as the extensive phenotype has for a long time been criticized based on the fact that phenotype-distinction is not as clear as its proposers supposes. According to the explanations by the widen phenotype ideas, changes in the genes are reflected in the phenotypes and phenotypicalal effects determines the selection of genetic replicators (Henrich, Henrich, 2008). Therefore, the phenotypical effects preserve or replicate themselves by means of their extended phenotypes. These phenotypical effects may be morphological or behavioral. For example, a phenotypic expression of the beaver genes is the dam it builds. Howe ver, the phenotypical transformations are not exclusively triggered or induced by the changes of the genetic replicators but can as well result from the changes in the elements of the environment (Rabin, Loewenstein, Camerer 2003).On a very close examination and scrutiny, the proponents of the selfish gene idea are not dogmatic enough as popularly believed by many people especially the economists. Some people argue that higher properties of career are emergent in virtually all situations. In addition, it is argued that the pass judgment explanations of causality from genes to culture just the same as from genes to any other products of life, are not heredity alone. Equally, they are not environmental alone. It is mainly the interaction between the two. Therefore, all possible expressions of phenotype are always encoded in genes though particular attributes which express themselves depends on the triggers from the surrounding environment (Dasgupta, 2002). These phenotypic expressi ons may as well depend on how an individual integrates in spite of appearance a group.The controversy over the selfish gene is very important to the economists and economics in general because of its implication that competition is of much more complicated sort as compared to that which is assumed by the economic man (Fehr Gachter, 2000). This competition is much more complicated as compared to the isolated people competing for the immediate gain. Likewise, cooperation is complicated as compared to a simple tit-for-tat strategy. Not only does the economic mans model fail the test of realism but also fails to offer accurate predictions about the human behavior. Such failures are limpid in the recent empirical findings by numerous economists.In the standard theory, the economic man as showd by neoclassical economics lead to micro-foundations approach to the economic policy. Macro economies are assumed to ensnarl by the similar rules of constrained optimization which are used to d escribe individual organizations as well as households together with their people (Varoufakis Hargreaves-Heap, 2004). Normally, a representative human being whose behavior is indicated and outlined by a well-behaved utility function and a representative organization outlined by a well-behaved production function are made use of to model some real-world phenomenon such as the global mode change or foreign trade. Without the assumptions of economic man and perfect competition such optimization models cannot reach a unique and stable equilibrium. Neoclassical models assume a strictly rational behavior in human consumption with constant returns in production and rely on the prices to dynamically adjust demand and supply.In relation to behavioral economics, the existence of pure altruism and other forms of pro-social behaviors has much more implications to the economic policy. The first policy implication is that the impersonal markets are not and not anticipated to be the best vehicl es for the expression of human preferences (Fehr Gachter, 2000). Whenever economic decisions do not conform or tally with the axioms of consumer choices, market outcomes are not rational and therefore, there is no any reason to believe that a competitive equilibrium can represent social optimum. In as much as the market restricts choices to individuals then such choices exclude the richness of human behavior (Thaler, 1991). Equally, depending on who among peoples ancestors is considered human, people have been making decisions for many years based on personal interactions, direct negotiations and imposition of rewards and punishments so as to facilitate cooperation. It is however true that people have difficulties in making social decisions especially in impersonal markets (Frank, 1988). Even then, the prevailing trend is toward button more critical decisions into the market framework.In conclusion, behavioral economics rescues the economic man from the notion that he is selfish. It is true that human being s are always pursuing their self interests and goals given their human nature, but it not true that they are totally engulfed in their selfishness (Wansink, 2006). The neoclassical economics theories explain well about the economic man and his interests but it should not be generalized that human beings are selfish beings ever in the world (Fehr, E. Gachter, 2000). Human behaviors rescue man from the aforesaid selfishness because thee are many other human beings that sacrifice themselves to support other people in their society. This takes them out of the selfness that the neoclassical economics advocate. Human behavior is therefore not always selfish as is can be portrayed by the neoclassical economics (Harbaugh et al, 2002).Many people have been influenced by pietism and molded in a way that they value human life and fellow human beings to an extent that even if they are seeking self interests, they go out of their way to help others achieve they nee ds. For instance, doctors world over might have their intrinsic desire to posses a lot of money but they always help their patients to gain their health so as to continue working for their good. Equally, different countries can only prosper if every person or at least majority of the citizens works for the good of their nation rather than working for their own gain. Should such happen, that nation is damned to be poor. Therefore, human behavior explained in behavioral economics plays a great role in rescuing the economic man from the selfish gene.ReferencesAinslie, G. (1992). Picoeconomics, capital of the United Kingdom Cambridge University PressArnsperger, C., Varoufakis Y. (2005). Most Peculiar Failure How neoclassical economics turn theoretical failure into academic and political power. Erkenntnis, 59, 157-188.Rabin, M., Loewenstein, G., Camerer, C. (2003). Advances in the Behavioral Economics, impudently island of Jersey Princeton University PressDasgupta, P. (2002). Modern Economics and its Critics Models, Realism and Social Construction, capital of the United Kingdom Cambridge University PressFaruk, G. (2008). The Behavioral economics and the game theory. 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