Wednesday, November 17, 2010

Cultivating Conscience 1: Containing Homo Economicus

Lynn Stout, a law professor at UCLA, has written a very interesting happy society book, Cultivating Conscience. I will blog it over the next few days.

Her main point is that law, and many other social science and social policy disciplines, have been infiltrated by the idea that people are like the imaginary homo economicus - selfish profit-maximizers who only care about others or about society only if they rationally calculate that their self interest is involved. Stout says that law, especially, has been driven by Oliver Wendell Holmes, Jr.'s, theory that law should be made from the perspective of the "bad man" who does not care about others or the common good.

Stout argues, though, that most people are, in fact, driven by conscience, not a relentless rational selfishness. She demonstrates this through many psychological and economic experiments. She also argues that the major areas of law only make sense if we assume that most people are, in fact, "good men."

This leads me to see that when making social policy for the happy society, we can not ignore homo economicus. As Stout points out, some people are primarily self-interested profit maximizers, to the point of cheating and exploiting others. Some are just psychopaths, and others have taken too many classes in which they were told that rational people ought to be selfish. But most people are conscientious. Most people are at least "passive altruists."

Social policy, therefore, should be built to contain and discourage homo economicus.


Benjamin said...

I wonder about what % of the public (at least in the U.S.) are the profit maximizers, psychopaths, the socialized homo economicus, and "good men". I also wonder if we all act in each of those hats at different points in our lives, depending on the nature and gravity of the decision that's being made. How might that affect the role and purpose of government???

Whit said...

I think you need to make a distinction between "profit maximizer" who, in the aggregate lead to the most efficient allocation of resources and greatest individual effort at creating wealth -- all of which leads to the greatest aggregate sociatal wealth -- and the crooks, lawbreakers, fraudsters, slackers and others whose selfish actions decrease sociatal wealth. Both groups are acting in their own percieved self-interest. The former adds to sociatal wealth while the latter detract.

Your post buys into the underlying assumption that acting in ones own self-interest is necessarily bad for others. In fact, there can be little long-term profit unless the people you deal with (customers, suppliers, employees, etc.) are treated fairly. And it is the very economic self interest (having skin in the game) that makes the market work.

And, frankly, I don't see any role for government in "discouraging homo economicus". Quite apart from the fact that such a policy would make us all poorer, I see no role for government in trying to change human nature to what the governing class, dare I say the elite, thinks we "ought" to be.

Gruntled said...

Stout's point is that most people do, in fact, act conscientiously, and are not primarily selfish egoists. The theories of human behavior, especially in law, that presume that people will usually act as selfish egoists are empirically false.

Benjamin, Stout cites the standard statistic that only 1 or 2% of the population are actual psychopaths. She also cites the well-known studies that find economics majors are more selfish than other people.