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LIU FENGYI: Hypothetical theory of 'economic man' excessively used as instrument of analysis

| 2015-07-29 | Hits:
(Chinese Social Sciences Today)

When Adam Smith coined the term "economic man," he used it to describe the characteristics of human behavior in the exchange of commodities. Neoclassical economics, however, developed the concept to refer to a hypothetical individual who acts rationally and has the ability to make choices that can maximize self-interest.

Objectively speaking, the hypothesis is divorced from concrete productive relations and has received much criticism. Mainstream Western economics based on the hypothesis is nicknamed "blackboard economics." However, some Western economists assert that the hypothesis conforms to human nature and continue to put forward various defensive arguments.

Nonetheless, as far as I'm concerned, the economic man theory has narrowed the scope of research and made economic studies superficial. Moreover, its role as an instrument of analysis has been exaggerated. First, the hypothesis only depicts human behavior in exchange relationships, which, however, is just a superficial phenomenon among economic relations. The microscopic theory of Western economics centers on the problems in the exchange. And the production theory does not study the productive process but assumes the firm’s status as an economic man while neglecting the productive relations within the firm.

In addition, there exists a paradox. The economic man holds that each actor in the exchange can make rational choices to maximize self-interest and that the relationship between capitalists and workers is a free and equal contractual one. However, the theory of the firm indicates that only the capitalist, with all kinds of means of production at his disposal, can act as an economic man, while workers, like capital and land, are just regarded as factors of production that serve the goal of profit maximization. In particular, the dominant role of workers as human beings in the process of production is completely ignored.

Therefore, the economic man in Western economics, in essence, represents the image of capitalists. With such prejudice, Western economists fail to probe into the process of laboring, production and reproduction and discover the structure, contradiction and operational law within capitalist productive relations. Instead, they stick to the abstract logic that individual rationality would maximize social welfare. When dealing with real problems, like economic crisis and wealth gap, they can only give lame excuses such as "external shocks," "contribution margin" and "factor endowment."

Second, in addition to economics, the economic man concept has been used to analyze other fields. For instance, in politics, officials are regarded as economic men, which is called public-choice economics, and in sociology, family members are regarded as economic men, which is called family economics.

What's worse is that the economic man hypothesis has become a social value. To be more specific, self-interest in economics has degenerated into selfishness in real life. In China, some scholars think highly of the hypothesis, holding that developing a market economy necessitates shaping everyone into a rational economic man. However, this could exert great impact on correct social values and even lead to money worship, a distorted view of right and wrong, and decreased credibility.

As a result, it is vital to abandon the hypothetical mode of thinking, whether in economics or in social values. To this end, Marxist economics has provided a scientific way.

Marxist economics does not deny there is some truth in the behavior of the economic man but discredits any model based on abstract human nature divorced from concrete productive relations. Marxism stresses that man is an ensemble of social relations and that we cannot simply use physical nature to reveal the content and operational law of social economic relations. The human behavior of pursuing self-interest is founded on certain social conditions, and individual interest must be analyzed in line with concrete historical conditions and social relations.

Therefore, it is vital to analyze the behavior of the economic man in the context of specific productive relations in order to get to the root of problems of complicated economic relations in reality.


Liu Fengyi is a professor from the School of Economics at Nankai University.