User:Jacky.isidro/Homo economicus

In Kahneman-Tversky’s criticism of the Homo Economicus model, many mainstream economists had utilised deductive logic to further progress the Homo Economicus idea as opposed to Daniel Kahneman and Amos Tversky in which they had applied inductive logic. Further findings of their experiments that opposed Homo Economicus had found that individuals will constantly adjust their choices according to changes in their income and market prices. Furthermore, Kahneman and Tversky had conducted experiments exploring prospect theory where results from several experiments concluded that individuals will generally put higher importance on avoiding loss over making a gain.

The early role of Homo Economicus within neoclassical theory was summarised to include a general objective of discovering laws and principles to accelerate further growth within the national economy and the welfare of ordinary citizens. These laws and principles were determined by two governing factors, natural and social. It had been found to be the foundation of neoclassical theory of the firm which assumed that individual agents would act rationally amongst other rational individuals In which Adam Smith explains that the actions of those that are rational and self-interested under homo economicus promotes the general good overall which was understood as the efficient allocation of material wealth. However, social scientists had doubted the actual importance of income and wealth to overall happiness in societies.

The term had initially been used to criticise the nature of economic agent that Smith and Mill had illustrated heavily in their writings. It had been stated that from an analytical perspective, Mill’s contribution to the development of Homo Economicus was one of great importance where he was able to define the political economy with differing aspects of production and the distribution of wealth. However, Adam Smith had been the first to demonstrate that under appropriate policies and an economic system that national prosperity could occur due to the selfishness of individuals.