Tuesday, February 19, 2008

Homo economicus Evolves

This is the title of an article in this week's Science, by Steven D. Levitt and John A. List, on economics (for once), which resonates in the beginning with the books by Bernard Maris I am reading, and shows that economists are indeed working toward improving the very crude model on which capitalism is based, but shows in the end that they may not be that wrong...
I like particularly the introduction:

"The discipline of economics is built on the shoulders of the mythical species Homo economicus. Unlike his uncle, Homo sapiens, H. economicus is unswervingly rational, completely selfish, and can effortlessly solve even the most difficult optimization problems. This rational paradigm has served economics well, providing a coherent framework for modeling human behavior. However, a small but vocal movement in economics has sought to dethrone H. economicus, replacing him with someone who acts "more human." This insurgent branch, commonly referred to as behavioral economics, argues that actual human behavior deviates from the rational model in predictable ways. Incorporating these features into economic models, proponents argue, should improve our ability to explain observed behavior."

All of this is well known since the beginning of economical science (but most people seem to have forgotten it and view the ensuing theorems as universal truth). The point of the article is to warn behavioral economists to draw too general conclusions as well simply from lab experiments, since the latter prove to give often different results than in real life situations:

"Perhaps the greatest challenge facing behavioral economics is demonstrating its applicability in the real world. In nearly every instance, the strongest empirical evidence in favor of behavioral anomalies emerges from the lab. Yet, there are many reasons to suspect that these laboratory findings might fail to generalize to real markets.[...]
Recognizing the limits of laboratory experiments, researchers have turned to "field experiments" to test behavioral models. Field experiments maintain true randomization, but are carried out in natural environments, typically without any knowledge on the part of the participant that their behavior is being scrutinized.[...]
Some evidence thus far suggests that behavioral anomalies are less pronounced than was previously observed in the lab [...]. For example, sports card dealers in a laboratory setting are driven strongly by positive reciprocity, i.e., the seller provides a higher quality of good than is necessary, especially when the buyer offers to pay a generous price. This is true even though the buyer has no recourse when the seller delivers low quality in the lab experiment. Yet, this same set of sports card traders in a natural field experiment behaves far more selfishly. They provide far lower quality on average when faced with the same buyer offers and increase quality little in response to a generous offer from the buyer."

Interesting ! Is Homo economicus not so far from Homo sapiens after all ?
I cannot resort to believe that...

4 comments:

hWhBBXl3ipzynOrOYiGCHc7e9vo- said...

Interesting but you canfind other experiments proving the exact "contrary"...

Cedric said...

Ah, good to know ! Do you have some exemples ?

Davy said...

I read a book dealing with the prisoner dilemna where there were a lot of examples of the application of this theory with people acting more economicus or more sapiens. It is a continuum, people will always have "selfish" touhghts in mind when making choices, but sometimes they make social decisions that will benefit to the majority even if the pay for it.
I don't think I am really clear...

Cedric said...

Yes, that's why I believe that even in real life, not just in lab experiments, people can behave less selfishly than Homo economicus, and why I think it is important to have an economic system which favors this kind of behavior, instead of rewarding only the selfish one, like our present version of capitalism.