From neoclassical economic theories it is inferred that economic man is a simple model of human economic behavior based on principles such as complete personal interest, complete rationality and economic decision-making based on complete information. Economic man is a particular attitude that economists espouse to varying degrees. Some accept it as a semi-strong form. In this type, economic rational behavior is not perfect, but there is a degree of possibility of abnormal behavior. Others support the weak form of economic man, in which case there are rational behaviors but not very powerful.
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In all of these species, the basic premise is that man wants to be as rational as possible, maximize his own self-interest, and make perfectly rational economic decisions. Economists are interested in the concept of the economic man for two main reasons:
- Economic man makes economic analysis relatively easy.
- Economic man makes it possible for economists to quantify, better process, and simplify their findings. Because only when human beings behave in a completely rational manner and make decisions based on complete information in order to maximize benefits, it is possible to minimize their behavior.
On the other hand, critics of economic man continue to confront the three fundamental assumptions of complete rationality, complete self-interest, and complete information.
- Perfect rationality: When human beings are rational, they have sufficient reasoning ability and their judgments are based on utility. But rationality is not the only motivator of human behavior. Rationality may not even be the main motivator of behavior, as psychologists believe that man’s perceptive power depends on his emotions. In other words, they believe that human behavior is derived from mental stimuli such as fear, love, hate, pleasure, and pain rather than the product of logic. Humans use their intelligence only to achieve or avoid emotional results.
- Complete self-interest: Many studies have shown that people are not completely self-interested. If this were not the case, then there would be no sense of altruism. Also, religious beliefs and schools of thought that value phenomena such as sacrifice, self-sacrifice, and compassion for others could not be sustained for centuries. Even negative behaviors such as suicide and کاملا are completely at odds with self-interest.
- Complete information: Individuals may have complete or almost complete information on certain topics. A doctor or dentist is expected to be well versed in their field and profession. However, it is not possible for everyone to have complete knowledge of any subject. In the world of investing, there are many things to know and learn that not even the most successful investors can master.
Many economic decisions are made in the absence of complete information. For example, some economic theories assume that individuals adopt purchasing behaviors based on the Federal Reserve’s monetary policy. Of course, some people are well aware of the source of this type of information and how to use it in interpretation, but many people either do not know anything about these policies or do not know at all. They do not care or believe.
It is noteworthy that this type of information inefficiency affects the decisions of millions of people around the world, so the notion that all actors in the financial markets have complete information seems incorrect.
Despite the efficiency of the market, people’s rationality is seldom formed in the black or white zone, but real modeling is formed in a gray spectrum. People are neither completely logical nor devoid of logic. Humans generally have a variety of combinations of logical and irrational characteristics and enjoy varying degrees of intelligence in various subjects.
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