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Symposium 2015

Virtual Library File - From Homo Economicus to Homo Sapiens

The Challenge

Most human thinking is automatic, not deliberative. It is based on what effortlessly comes to mind. Human thinking is also socially conditioned.  Beliefs about what others are doing and expecting sha ...

Most human thinking is automatic, not deliberative. It is based on what effortlessly comes to mind. Human thinking is also socially conditioned.  Beliefs about what others are doing and expecting shape an individual’s own preferences. And humans don’t face situations as “tabula rasa,” but instead interpret situations against the backdrop of their own understandings shaped by culture and existing social patterns.

This short article discusses the future of economics. Research in psychology has already identified several biases (including but not limited to optimism, overconfidence, the false consensus effect and the curse of knowledge) that make the concepts underlying Homo Economicus implausible. Thaler predicts that the new Homo Sapiens will take its place, which will be (partly) irrational, more heterogeneous among individuals, more emotional, and overall closer to the true cognitive processes that govern our behavior. Policy recommendations have relied heavily on the assumptions of Homo Economicus. With behavioral economics providing evidence and theories for a new foundation of decision-making, different policies have to be cautiously designed.