In this post, I seek not to defend the actions or priorities of a non-existent misanthropic being, but to defend the practice of analyzing models that assume human behavior mirrors that of Homo Economicus. (I hope you’ll forgive me for choosing a slightly misleading title in order to preserve space.)
It’s easy to criticize those who assume that human beings are ultra-materialistic, narrowly self-interested, willing to collect all available information (and perhaps in possession of information that isn’t available), and immune to mistakes. I have never met such a creature and hope that I never do. So why would anyone try to understand the world we live in by analyzing models where people are assumed to behave this way?
I’ve discussed the role of assumptions before, but it’s a point that bears repeating — assumptions need not be true in order to be valuable. If the map metaphor doesn’t work for you, consider the example of disphan climate models, described so eloquently by Paul Krugman. With a dishpan, a turntable, and Bunsen Burner, one can reproduce 
many of the essential features of the planet Earth’s climate system, including trade winds, storm systems, and the Gulf Stream. This doesn’t tell us everything we want to know. Your local weather forecaster is relying on far more sophisticated models. But it’s a useful baseline.
We’d all like to produce work that achieves a 10 out of 10 in terms of explanatory power. But, all else equal, we’d also like our analysis to score a 1 out of 10 in its level of complication. If you add the constraint that you want to be able to say with great confidence that your conclusions actually follow from your assumptions, you’re going to have to accept certain limits on the second scale. And if the only way to get to 10 on the first scale is to go to 1o on the second, we might think twice about attempting such — particularly if we can get to 6 on the first scale while only going up to a 2 or 3 on the second. Reasonable people can disagree about how heavily to weigh each concern, but the point is that we shouldn’t simply criticizing people for failing to achieve a 10 on the first scale. That’s an impossible standard to to meet. We should pay attention to how much bang for the buck we’re getting — how discrepant from reality the outputs of our models are, relative to the inputs. (And that’s true whether we’re working with empirical models or theoretical ones; mathematical or informal.)
I don’t think human behavior is identical to that of Homo Economicus. Neither does anyone else. But one could argue that the degree of similarity between human behavior and that expected from Homo Economicus rates about a 6 out of 10. I won’t call that something it’s not — simple theoretical models based on unrealistic assumptions do not achieve perfect explanatory power.* But if your goal is to see how far you can get with a model simple enough to allow you to be very confident that your conclusions actually follow from your assumptions, you can do worse than we’ve done by focusing on Homo Economicus.
What makes me say we’ve achieved a 6? Well, there’s obviously room for disagreement here. I wouldn’t argue too much with someone who thinks that 5 would be more accurate. But the only way to say that there is minimal similarity between human behavior and that expected from Homo Economicus is to ignore the available evidence.
Consider, for example, one of the most influential papers demonstrating the failures of Homo Economicus. In no uncertain terms, the authors inform us that the predictions of the Ultimatum game are not born out any of the 15 small scale societies they studied. But how far removed from reality are the predictions of this model? When I first describe this game to my students, I ask them what they expect the results to be. A large number of them tell me that they expect most people to propose equitable divisions — to propose half of the money. And some people do just that. In some societies, such behavior is even typical, at least according to these experiments. But it’s not in most of the societies the authors studied.
The following table gives the mean offers for each of the 15 societies the authors studied (click to enlarge).
In almost every society, the person designated as the proposer offers less than half of the money, contrary to many people’s intuitions. And that’s with face to face experiments. One study of the closely related Dictator game (where the receiver doesn’t have to approve the division) found just under half the participants giving away least $3 of a $10 pie under normal experimental conditions, but only 15% under anonymity.
Perhaps more striking, if you give people the choice between dividing $10 between themselves and another person or taking $9 without anyone ever getting designated as a potential recipient, a good number take the $9. That’s not what Homo Economicus would do, which would be to play the Dictator game and keep all $10. But it sure as heck ain’t altruism or a concern for fairness or anything like that. Moreover, if you but offer people the option to take instead of give, most will take. They don’t take everything, a Homo Economicus would, but the fact that they take at all is quite telling.
As Levitt and List forcefully argue, much of the putatively pro-social behavior we’ve discovered through laboratory experiments appears to be an artifact of the laboratory setting. We haven’t learned that people aren’t selfish — we’ve learned that they don’t want people to think that they’re selfish.
When people play the Trust Game, they usually transfer about half the pile of money, and receive about half of what becomes a larger pile back. This seems to indicate that people are happy to take advantage of opportunities for mutual gain by lending money to those who will use it productively because they trust that they will receive back more than they loaned out. Great! So why do we have banks, and why is it necessary for the federal government to backstop those banks through the FDIC? Where’s all the trust? The spontaneous cooperation with total strangers in the absence of legal institutions protecting them against exploitation?
Again, no one is arguing that Homo Economicus is anything but a mythical creature. Real people are not so narrowly self-interested. But the behavior we observe in the real world bears more than a little resemblance to what we’d expect from Homo Economicus. Reasonable people can disagree about how much complication we should accept in pursuit of greater explanatory power. I myself choose different assumptions for different projects, sometimes accepting more complication and sometimes keeping things more simple. I’m not trying to say that we should always assume that human behavior is similar to that of Homo Economicus. What I’m saying is that it can be useful, at times, to do so. That it’s pretty amazing that we can reproduce trade winds, storm systems, and the Gulf Stream with a dishpan, a turntable, and a Bunsen Burner.**
*To those who keep pointing this out as if anyone who studies such models is unaware, let me say as clearly as I can: we’re perfectly aware of that. No, really, we are. Seriously. Thanks for pointing out the obvious, though. Much appreciated.
**Yes, I am using that as a metaphor.
This is a pretty reasonable approach to take, if what we are interested in is the likely behaviour of completely isolated individuals. But is that really what social scientists are interested in? (stress the word ‘social’). The fact that people may be tempted to screw others, but also don’t want to look like they are doing so, is pretty fundamental in a world in which we have repeated interactions and mostly don’t like to be cut off from others. I don’t think it tells us much to say that in certain conditions, humans behave rationally and selfishly. What we need to understand better are the conditions – how they come about, how they vary, and how they change.
Excellent point. I agree that it’s important to understand better the conditions under which people behave selfishly and how they vary.
I’m not sure this only tells us about how people behave in isolation though. Overcoming the temptation to screw others isn’t a trivial issue. The opportunities for mutual gain that go unrealized each and every day are numerous, and thinking about the incentives facing narrowly self-interested actors can often help us understand why.
I think there are two varieties of rational choicers. I think the pragmatic ones are more common, but the ones who actually believe the models are the ones that sociologists (which is what I’m trained in) tend to criticize and love to rag on. but i agree with the defenses of rational choice like yours, and I actually believe that puportedly more ‘realistic’ theories like sociological ones are also just useful models (I use both rational choice and normative theories)
Fair points, both.
Interesting post Phil. I’m actually curious as to the extent that rational choice scholars integrate social and cognitive psychology into their model or use this research to buttress their assumptions (I’ve heard about prospect theory, but nothing else). From the way you’ve laid it out above it sounds like there isn’t that much common ground. But if pro-social behaviour is an artifact of experimental design shouldn’t it be possible to adjust the design to demonstrate confirming patterns of homo economicus? Or is this one of those ‘easier said than done’ things.
Also, I’ve noticed that many sociological and even post-structural approaches to IR are increasingly turning to cognitive and social psychology, and even neuroscience (Ross, 2006), to help ground their research. Even the practice turn does this now with Pouliot (2011) drawing on the work Kahneman. What do you think it means for the discipline to see post-positivists turning to experimental psychology at the same time positivists attempt to distance themselves from it? (if the latter is a fair interpretation)
Glad you enjoyed the post, Eric. Excellent questions.
First, you could probably say that there’s no room for social or cognitive psychology in models that assume human behavior is analogous to that of Homo Economicus, but there’s a lot of “rational choice” work that does not make that assumption.
At least, I think there is. I’m not sure, because I honestly don’t even know what that term means. As best I can figure, it refers to all game theorists plus anyone who couches their work in the language of costs, benefits, and utility. If that’s the case, then the Homo Economicus assumption is found only in a subset of “rational choice” work. But if we define “rational choice” as the body of work built on the Homo Economicus assumption (and some people seem to implicitly be doing that), then I guess there isn’t much “rational choice” work that incorporates social or cognitive psychology.
I’ll talk more about this in a future post where I’ll discuss what assumptions are absolutely required by game theory. They’re much more minimal than many people realize. There are game theoretic models that incorporate social preferences, models that assume players are uninformed and may prefer to remain that way, and even models that include two aspects of the person’s mind as separate players. These “dual-self” models are used to study impulsive behavior and so forth.
As to your second point, if it’s a fair interpretation (I’m not sure if it is, but it could be), I’m not really sure why that might be.
Sorry but what is the 2006 Ross article that incorporates these approaches? or is the citation in reference to the psychological/neuroscientific work that poststructuralist scholars are employing?
2006 is Andrew Ross in EJIR
Phil, nice post. I agree on the whole, but:
1. It strikes me that “explanatory power” here silently implies “across a large number of cases.” This should be made explicit. Explanatory power for analyses of crucial cases or in “configurational” or mechanism-focused research design comes in my view from empirical richness/theoretical complexity which usually cannot be captured by bare bones homo economicus perspectives. There should be a well-argued conversation between these different types of research goals, but that is a huge debate, best left for later.
2. One ought to try to clarify what is mean by “pro-social” behavior, and to distinguish that from _other_ types of “social” behavior. The fact that I, as a putatively rational actor, am forced to change my public conduct because what others might think and say, makes me neither a pure rational type nor a self-less/altruistic character. It means though I privately continue to hold my preferred view, I was coerced to adopt a non-ideal public position because of social pressures/fears of social costs (looking “bad,” out of step with a consensus, etc.) These are crucial differences that are rarely seriously debated in Political Science/IR, where most are still content to have simpler caricature discussions about selfish and selfless actor types.
Excellent points, GM.
You are absolutely right that I meant “across a large number of cases”. In fact, I should have added the additional caveat — human behavior more closely approximates what would be expected of Homo Economicus when the link between actions and outcomes is direct and immediate, when the material incentives at stake are non-trivial, etc. Put differently, people behave more like Homo Economicus when they act as consumers than they do as voters, and that’s not at all surprising. I apologize for omitting this important qualification from the original post.
You are also right that “pro-social” does not mean “altruistic”, and this distinction is not drawn often enough in political science/IR.
I just typed a reply, but it looks like Disqus ate it.
Excellent points. I agree with you on both counts. I apologize for not being clearer about both issues in the original post. In fact, I should have further clarified that human behavior bears a stronger resemblance to that of Homo Economicus under specific conditions (and even then, only as a first order generalization). People behave more like Homo Economicus when they act as consumers than as voters. The more direct the link between actions and outcomes, and the stronger the material incentives involved, the more reasonable it becomes to use Homo Economicus as a baseline.
For this reason, it is hard to justify such assumptions for voters, but it may be reasonable to assume that elite actors (governments, opposition parties, MNCs, etc) behave somewhat similarly to Homo Economicus.
And now both comments are here. Oh well. Lucky for me, I enjoy having egg on my face.