How Homo Economicus Went Extinct

by Carol Tavris

Wall Street Journal
May 15, 2015

As a social psychologist, I have long been amused by economists and their curiously delusional notion of the “rational man.” Rational? Where do these folks live? Even 50 years ago, experimental studies were demonstrating that people stay with clearly wrong decisions rather than change them, throw good money after bad, justify failed predictions rather than admit they were wrong, and resist, distort or actively reject information that disputes their beliefs. In recent years, a new field has emerged—“behavioral economics”—to propose an alternative to the rational man of traditional economics. A spate of popular books and empirical studies have been published exploring human irrationality—in decision making, beliefs and actions. Researchers in this field are making up for lost time, or perhaps realizing that they are social psychologists after all.

As the offspring of traditional economics and experimental social psychology, behavioral economics shows remarkable hybrid vigor, and Richard Thaler, one of the new field’s founders, acknowledges its debt to psychological science throughout his highly enjoyable intellectual autobiography, “Misbehaving.” Indeed, his opening aphorism is Vilfredo Pareto’s 1906 claim that “the foundation of political economy and, in general, of every social science, is evidently psychology. A day may come when we shall be able to deduce the laws of social science from the principles of psychology.” That day is here, as Mr. Thaler explains.

For all of his creative career spanning 40 years, Mr. Thaler, who is a professor of behavioral science and economics at the University of Chicago Graduate School of Business, has been studying “the myriad ways in which people depart from the fictional creatures that populate economic models.” As human beings who arrogantly and often wrongly consider ourselves “sapiens,” we simply don’t match the model of human behavior favored by economists, one that “replaces homo sapiens” (whom Mr. Thaler calls Humans) with “a fictional creature called homo economicus” (whom he calls Econ). “Econs do not have passions; they are cold-blooded optimizers,” he says. “Compared to this fictional world of Econs, Humans do a lot of misbehaving”—thus the book’s title.

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Voting is irrational. Emotions always win

by Eyal Winter

Guardian
May 7, 2015

One of my father’s vivid memories of growing up as a Jewish child in Nazi Germany concerned the horrifying visit of his uncle Walter one evening in 1933. Pale as a ghost and shivering with fear, Walter entered the house crying: “I’ve been bewitched!” On his way home from the train station he had come across a Nazi rally. At first he feared the mob, but when he gained some confidence that his Aryan appearance would disguise his Jewish identity a strange feeling slowly took hold of him.

When the rally sang the Nazi party anthem, Walter joined in, mumbling the words to the song. Not long after that he suddenly noticed that he was actually getting swept up in the emotions. Along with everyone around him, he was shouting “Sieg Heil”. He completely forgot that the ideology he so much wanted to be part of regarded him as one of its most hated enemies.

When we talk about politics, we tend to pretend that voting is ultimately a rational choice. The works of the great rationalists Thomas Hobbes and Immanuel Kant are set texts in political science departments. On the doorstep, most campaigners still win over voters by logical argument, or at least try to, weighing up candidates’ pros and cons on different policies. James Carville’s famous phrase from Bill Clinton’s early 90s campaign, “It’s the economy, stupid!”, reflects a conventional wisdom that voting is primarily about spending money wisely.

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