THE PHILOSOPHY OF ECONOMIC BEHAVIOR
WHAT IS IT?
The philosophy of economic behavior studies the effects of psychological, emotional, cognitive, and social factors that influence human beings in their economic and financial decisions and the consequences for the market, institutions, and public policies. From the studies and research of psychology of economics, behavioral finance, and behavioral economics, it lays upon them the philosophical foundations for analyzing what drives the individual in his actions and how they reflect on his economic life as a result of the choices he makes.
WHAT IS ITS BASIC ASSUMPTION?
The focus of the philosophy of economic behavior is on the individual and not on the markets, although it may be a useful tool to them. Depart from the basic assumption that economics, as belonging to the branch of the humanities and / or applied social sciences, has as its end and means the human being not only as an individual but also as a member of a social body looking for prosperity. However, each participant is relevant to the final result. For this reason, it takes the original concept of the economic man (homo oeconomicus) defined by Stuart Mill as a human being able to use reason to make the right decisions that bring him the greatest gain, but also under the influence of emotions due to the fact that he is driven by desire of wealth.
The effectiveness of the economic models and public policies proposed by scholars is based on predefined limits or “thin slices of reality,” as Uskali Mäki would say. If all assumptions taken within this narrow range are confirmed, the model is considered efficient. What happens is that when applied in real life, the models are put into operation by flesh and blood human beings who do not always act according to what has been postulated and, therefore, lead to unexpected disturbances. The balance of economics lies in the use of science to set the direction to be pursued for the development and wealth of society as a whole, but always with the focus and object on the individuals who put into practice the advice and directions pointed out by science.
Note: The term homo oeconomicus was never used by Stuart Mill, but by the economist Vilfredo Pareto (1848-1923) to identify the individual who performs actions exclusively in the economic field. Pareto argued that the human being is many in one: homo oeconomicus, homo religiosus, homo ethicus, etc., depending on the angle at which it is considered.
To study the individual and social behavior of the human being in order to give him the tools to understand his action as a part of the market economy in order to result in more conscious choices that lead not only to his own wealth but also to the prosperity of society. This does not exclude, however, that the philosophy of economic behavior can also be an efficient tool for the market and government in order to make their planning and models more realistic in reflecting the tendency of the individuals’ choices.