Homo Economicus, or “economic man” is the characterization of man in some economic theories as a rational person who seeks wealth for their own gain. Economic man is described as one who avoids unnecessary work by means of rational decisions. The assumption that all people behave this way is a basic prerequisite for many economic theories.
The history of the term dates back to the 19th century, when John Stuart mill first proposed the definition of Homo Economicus. He defined an economic entity as a “person who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained.”
The idea that people acting in their own interests, often attributed to other economists and philosophers, like economists Adam Smith and David Ricardo, who believed man rational, self-interested economic agents, and Aristotle, who discussed men’s selfish tendencies in his work politics. But the Mill is the first fully defined the economic man.
The theory of the economic man dominated classical economic thought for many years, before the advent of formal criticism in the 20th century, economic anthropologists and neo-classical economists. One of the most notable criticisms can be attributed to the famous economist John Maynard Keynes. He, along with several other economists, argued that people do not behave like economic man. In contrast, Keynes argued that people behave irrationally. He and his companions suggested that economic man is not a realistic model of human behavior because economic actors do not always act in their own interests and not always fully informed when making economic decisions.
Although there were many critics of the theory of Homo Economicus, the idea that economic actors behave in their own selfish interests, still remains the fundamental basis of economic thought.