We are no longer Homo sapiens—wise humans, which is what sapiens means. We have evolved into Homo economicus. These creatures are motivated by rational self-interest who seek to maximize their wealth and the “utility,” or satisfaction, derived from consumption of purchased goods. Homo economicus arose in the 17th-18th centuries in response to a dramatically altered environment where capital replaced land as the basis for wealth, and large scale production of goods in an industrialized landscape changed the living conditions of Homo sapiens.
The Wealth of Nations, published by Adam Smith in 1776 when market economies were emerging, is considered by many to be the progenitor of Homo economicus. This revolutionary work, offered at a tumultuous time when capital markets and democratic uprisings where transforming human life, offered a radically new way to understand wealth and government. Although he did not use the term, Homo economicus, Smith’s analysis hinges on the revolutionary assumptions that characterize Homo economicus: individuals, motivated by rational self-interest, seek to maximize their profit.1
The Wealth of Nations has become a sacred text, often quoted chapter and verse by contemporary economists whose dizzyingly complex, mathematically based analyses typically begin with the assumptions of Homo economicus. The reach of these assumptions is not confined to economic concerns, but are presumed to motivate all human actions, behaviors, and habits. Here is what Nobel Prize winning economist Gary Becker has to say: “All human behavior can be regarded as participants who maximize their utility from a stable set of preferences and accumulate an optimal amount of information and other inputs in a variety of markets.”
Becker articulates, in the jargon of his profession, what is often presumed by many Homo economicus supporters, and these assumptions have guided analysis of almost all areas of human life, from the most intimate matters of love and family to government policies and practices. His analysis of the family, for example, addresses “marital-specific capital” (i.e., children) and argues that child services are “the commodity that provides the utility a couple receives” from this “marital-specific capital”. And here is an example of an analysis at the institutional level: A World Health Organization initiative to end river blindness in Africa prevented hundreds of thousands of people from going blind. The World Bank’s cost analysis of the program, however, concluded that these benefits were not measurable; the benefits were conferred to people so poor that there was no measurable profit from the treatment.2
These analytic, quantitative appraisals and balance-sheet conclusions of human endeavors clearly and unambiguously state the value, or profit, to be derived from them. Debate, then, centers on whether the profit justifies the cost. But is this a success, or a reason for concern? When children become “marital-specific capital,” and a wildly successful intervention that prevent blindness in hundreds of thousands of people is questioned because the recipients are poor, then maybe this is evidence that something is amiss. Perhaps Homo economicus is a mutation that needs to be modified or eliminated.
The central value of Homo economicus is profit. The balance-sheet determines worth. But why, for example, was a major initiative, at considerable cost, undertaken to prevent river blindness in impoverished areas of Africa? Certainty not to gain a profit on investments. And children are more than capital goods for most parents. Other values are at play.
Adam Smith would certainly agree. He considered himself a moral philosopher, and in his first book, The Theory of Moral Sentiments, he argues that we are inherently social and moral beings. We care about others and this social-moral sense is essential if we are to live together without destroying each other. Adam Smith’s self-interest is not greed. It is in everyone’s self-interest to conduct commerce and exchange within a moral framework of trust and honesty, which are essential for a successful society. Theory of Moral Sentiments, established the foundation for The Wealth of Nations; wealth is built within a social-moral framework.3
Economic, social, and moral values differ starkly in the kind of exchanges and relationships presumed, and the expected benefits.4 Economic values are individual and impersonal, and economic analysis treats families, communities, and societies as a collection of individuals. Exchange is contractual and who the other person is in the transaction does not matter. Economic values are instrumental; you expect to get something of equal or greater value in return. If it has no profit, it has no value.
Social values are personal and depend on the relationships involved. Our relationship with our children, spouse, or friends may be the most important thing in our life. They have no economic value, as we cannot buy, sell, or trade it. And social relationships are reciprocal, not instrumental. Each participant gains from it, but there is nothing definite about what we will gain, when we will gain it, or even if we will get anything tangible from it.
Moral values are altruistic; things are done for their intrinsic worth with no expectation of getting anything in return. They are neither individual or relational. They are universal. We do things for others because it is morally the right thing to do. These values are not proved or supported by evidence or analysis—they are axiomatic.
The lack of proof or evidential support for moral values does not diminish their importance. Quite the contrary. Their universality can give them the animating power of ideals. People commit their lives to fulfilling these values; care for others at great personal cost, risk their safety and well-being, even give their lives for a just cause and, too, commit unspeakable atrocities in the name of the good.
The Declaration of Independence embodies foundational moral values upon which our nation stands. Axioms:
1. “All (men) people are created equal.”
2. “They are endowed with unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”5
No justifications or proofs are provided, as “these truths are self-evident.” Moral and social values provide the grounding assumptions for how we govern ourselves; they embody our values of who we are, who we want to be, and how we define our relationships with each other. Commerce, economic transactions, and trade are conducted within the framework provided by the moral and social values that are the basis of our governance.
It is an inherently destructive act to treat all human life as some sort of financial transaction. Preventing river blindness is a moral and social value, not an economic one. Children, family, and friends are not commodities of exchange. Economic analysis should be used in the service of our social and moral values, not the determiner of them. Homo economicus hollows us out. If we do not harken the call of our foundational social and moral values, if we allow Homo economicus to become who are, we surrender our wisdom. And our humanity.
- His theory, of course, encompasses much more, including the importance of free markets, limiting government influence in free markets, and the power of the “invisible hand” to most efficiently achieve the best interests of society.
- The above quotes and these examples are taken from John Lanchester’s insightful New Yorker article, “It Doesn’t Add Up”; July 23, 2018.
- Adam Smith’s use of the term morality also encompasses ethics, and I follow his usage to mean moral-ethical values.
- The following discussion of these differences is almost a direct transcription of the words of John Ekerd, a noted economist, from his inspirational presentation at the Ethical Society of St. Louis on April 17, 2022, which I urge you to view: https://www.ethicalstl.org/the-ethics-of-economic-sustainability-earth-day-celebration-john-ikerd-phd/
- “Rights”, “Life”, “Liberty”, and “Happiness” all are capitalized, underscoring their endowed, given nature.