Homo Economicus
The Basic Idea
The underlying distinction between traditional economics and behavioral economics is an assumption made about the nature of human decision-making. A classical economist might argue that people are rational: they act in their best interests, seeking to maximize their desired outcomes by applying reason and logic to a set of preferences. Conversely, while a behavioral economist might not necessarily say that people are irrational, they would argue that people are not always rational.
Homo economicus (Latin for economic man) is a term often used to describe a hypothetical figure who represents this concept of unconditional rationality. Behavioral economists often point to the absurdity of rationality assumptions in economic theory, highlighting the multitude of anecdotes and experimental evidence that supports the notion that beings often deviate from these assumptions. An idealized definition of behavioral economics is that it sets out to explore the decision-making processes of homo sapiens rather than that of homo economicus. The former being real people while the latter representing a personification of a theoretical concept.
The purely economic man is indeed close to being a social moron. Economic theory has been much preoccupied with this rational fool.
– Richard Thaler
About the Authors
Dan Pilat
Dan is a Co-Founder and Managing Director at The Decision Lab. He is a bestselling author of Intention - a book he wrote with Wiley on the mindful application of behavioral science in organizations. Dan has a background in organizational decision making, with a BComm in Decision & Information Systems from McGill University. He has worked on enterprise-level behavioral architecture at TD Securities and BMO Capital Markets, where he advised management on the implementation of systems processing billions of dollars per week. Driven by an appetite for the latest in technology, Dan created a course on business intelligence and lectured at McGill University, and has applied behavioral science to topics such as augmented and virtual reality.
Dr. Sekoul Krastev
Dr. Sekoul Krastev is a decision scientist and Co-Founder of The Decision Lab, one of the world's leading behavioral science consultancies. His team works with large organizations—Fortune 500 companies, governments, foundations and supernationals—to apply behavioral science and decision theory for social good. He holds a PhD in neuroscience from McGill University and is currently a visiting scholar at NYU. His work has been featured in academic journals as well as in The New York Times, Forbes, and Bloomberg. He is also the author of Intention (Wiley, 2024), a bestselling book on the science of human agency. Before founding The Decision Lab, he worked at the Boston Consulting Group and Google.
