Homo Economicus and Theories of Economics †MyAssignmenthelp.com

Question: Discuss about the Homo Economicus and Theories of Economics. Answer: Homo economicus or the economic man can be referred to the concept of many theories of economics. It portrays human beings as self interested and rational agents, who generally pursue optimally the subjectively defined ends. Basically, homo economicus maximizes the utility as the customer and profitability as the producer. The whole theory is compared to the different concepts of economic behavior, cognitive biasness as well as homo reciprocans. In the game theory, the homo economicus is related and associated through the assumptions of perfect rationality (Benera et al.). The essay throws light on the ways that institutionaleconomics challenges the neoclassical assumptions about homo economicus. It gives a brief explanation regarding the economic relationship between the community members and the police in Ferguson. In addition to this, it includes the relationship between bias, economic status and law. The neoclassical economic theory has dominated over the past. Some critics have argued that strong assumptions of people have made them hyper rational, utility maximizing and all knowing beings. Critics referred to all these hypothetical people as different species, which altogether came to be known as homo economicus. Other critics claimed that these assumptions about the efficient equilibrium and markets given demand and supply do not reflect the reality. Here is an overview of theinstitutional economics challenges of the neoclassical assumptions about homo economicus (Berggren). Firstly, the imperfect markets; it refers to the economic markets that doesnt meet the standards of any hypothetical competitive market. Imperfect market rises, at the times, when any individual sellers and buyers can influence the production as well as prices. Moreover, when the perfect information is unknown to the market actors, such situation arises. In addition to this, when too less sellers control many markets, or when the prices fail to adjust the materialistic changes in the market conditions. Majority of the economic debates originates from all these instances. For instance; when too much of stuffs are on sale and the demand is less, sellers experience recession as the price levels decline (Hodgson). Secondly, the behavioral economics; it refers to the people who often fail behaving in a rational manner or predictable ways, in all financial situations. The behavioral psychologists found that the people are not utility maximizing and moreover, their economic behavior can anytime be manipulated. Social psychologists, namely Daniel Kahneman and Amos Tversky have shown instead of being disinclined to take risks as per the predictions of the neoclassical assumptions, people are losing interest of things. In simpler words, people are hurt by the loss rather than the utility they are receiving from any gain, that is, losing hundred dollars is more painful than the pleasure of gaining hundred dollars. The social psychologists have recognized that the emotions of human beings play a major role in the economic behavior (Justice.gov. 2017). LatCrit theory and critical race theory have made a tremendous step in the deconstruction of the racial powers operation as well as the processes that provide the individuals with exercised and concentrated power. While constructing, the critical movement relies on the sources which are interdisciplinary. Moreover, critical scholars formulate the appropriate methodologies, which have been limited by the conflicts between all the competing schools of legal studies, economics and law. Orthodox economics and law based on neoclassical paradigm of economics has corrupted all the legal processes. It removed the genuine considerations of morality and ethics. The critical race theory creates a long lasting change by reaching the roots and hearts of subordination projects, by overcoming the resistance to the economic analysis of interdisciplinary (Madra and Fikret). Economic concerns and economics have helped in infiltrating the laws, which is difficult in discussing without any consideration of utility, efficiency, rationality, goals, values, processes and more linked to conservation of present allocation of resources, opportunities and assets. All these discussions must be embraced, to engage in the effective praxis revolving the issues of assets distribution. The development of the critical economics is based on the institutional theory of economics, in order to provide with ultimate supplant and confrontation of the neoclassical economic paradigm, as being the economic instrument or tool of the critical theorists. The basis of institutional political economy is the evolutionary analysis of institutions mediating exchange, production and distribution in the society (Pouncy). The neoclassical paradigm has however, limited the ability of addressing the racism issues because of the analytical focus in the methodological individualism. The methodological individualism assumes the individual is an appropriate unit for the examination and analysis. Moreover, the neoclassical paradigm also understands the economic behavior by summing up the individuals activities. The social activities are understood by referencing the economic rationality as well as individual motivation and encouragement (Schneider and Dominik). As per the neoclassical theory, the main focus upon the individuals as well as their processes, the issues which involve the group activities, the behaviors resulting in the class interests or the ethnic and racial interests are all theoretical boundaries of neoclassical paradigm. However, without any group processes appreciation, the concept of racism, or exploitation or subordination of a group, has no valid point of entering the analysis of neoclas sical economic concept (Richter). To conclude, the praxis is regarded as the call of changing the whole world. Jobs of any kind or sort can be actively accomplished, if right tools are available. Institutional political economy is fully based on the evolutionary analysis of mediating production of all the institutions. This factor as well as other economic theories helps in providing the scholars with tools that is needed to surpass the barriers between the praxis and theories. In addition to this, unlike neoclassical paradigm, which is dubious to the mathematical symbolism, the institutional theory has high accessibility, as any political economic theory. These can be reconstructed in order to eliminate the impacts of racism, by taking into consideration the race and its role in transaction. The economics which identifies the racialization, racism and race is highly used to address all the issues. The theory which ignores all these issues is the racisms institutional foundation. References Benera, Lourdes, Gnseli Berik, and Maria Floro.Gender, development and globalization: economics as if all people mattered. Routledge, 2015. Berggren, Niclas. "Time for behavioral political economy? An analysis of articles in behavioral economics."The Review of Austrian Economics25.3 (2012): 199-221. Hodgson, Geoffrey M.From pleasure machines to moral communities: An evolutionary economics without homo economicus. University of Chicago Press, 2012. Justice.gov. 2017, https://www.justice.gov/sites/default/files/opa/press-releases/attachments/2015/03/04/ferguson_police_department_report.pdf. Madra, Yahya M., and Fikret Adaman. "Neoliberal Reason and Its Forms: De?Politicisation Through Economisation."Antipode46.3 (2014): 691-716. Pouncy, Charles RP. "Institutional Economics and Critical Race/LatCrit Theory: The Need for a Critical Raced Economics."Rutgers L. Rev.54 (2001): 841. Richter, Rudolf. "New economic sociology and new institutional economics."Essays on New Institutional Economics. Springer International Publishing, 2015. 51-75. Schneider, Friedrich, and Dominik H. Enste.The shadow economy: An international survey. Cambridge University Press, 2013.