homo economicus

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Are We Pure or Impure Altruists?

In economics, altruism is traditionally taught as an exception to the rational traits of the Economic Man, homo economicus. And while altruism rarely receives a tribute in the textbooks because of its apparent non-belonging in classic economics, it has strikingly important implications for public economic policy.

I have previously discussed the topic of nonprofits and the effects of changes in fundraising on charitable individuals. This week, I want to delve into a discussion of the phenomenon of ‘crowding-out’, community diversity, and touch on the differentiation of altruism between ‘pure’ and ‘impure’.

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Irrational Strategies: Dealing with an Altruistic Prisoner

So you are presented with the following prisoner’s dilemma game. What is your choice? Most economics freshmen will have learnt that when presented with the choices of cooperation or finking, finking is the dominant strategy, and an all-fink nightmare is the only pure strategy Nash equilibrium. Against homo economicus, the cold and rational decision maker, your best bet would certainly be with finking. But against the average Joe, would you be able to assume rationality? Does the decision to cooperate necessarily imply irrationality on his behalf?

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Someone Give this Rational Agent a Heart!

Economics as a discipline is a victim of huge misunderstanding. We are seen to be obsessed about utility maximization, profit maximization, efficiency and equilibria (to name a few among the many words in the economist’s vocabulary that appear to degenerate human behavior into some egotistical mathematical equation!). These perceptions are mostly true; however, the misunderstanding lies within the economist’s relationship with the homo economicus. Most people would think that economists are in love with the rational but fictional economic man.  However the truth is that economists are in some twisted love-hate relationship with this agent.

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