Homo economicus
Also called: Economic man, Rational economic man · Topic: Schools of Economic Thought and Economic Laws · NCERT: Beyond NCERT
Meaning
Homo economicus, or "economic man", is the imaginary agent in traditional economic models. This person is perfectly rational and self-interested, has full information, and always maximises utility (satisfaction). The assumption keeps models simple and is central to neoclassical economics. Behavioural economics later attacked it, showing that real people have limited information, use mental shortcuts and make systematic mistakes.
Example
Homo economicus would always take ₹110 tomorrow over ₹100 today, since waiting one day for ₹10 more is clearly better. Real people often take the ₹100 now. Yet they choose ₹110 in 31 days over ₹100 in 30 days. The Economic Survey 2018-19 titled a chapter "Policy for Homo Sapiens, not Homo Economicus".
Don't confuse with
- Bounded rationality (Herbert Simon): real people are rational only within limits of information, time and brainpower, so they satisfice, which means settling for a "good enough" choice. Homo economicus always finds the single best choice.