The Legacy of John Nash and His Challenge to Homo Economicus: Why Now Is a Good Time to Study Economics
by Dominic Burbidge
Economics takes for granted the problematic view that everyone acts in their self-interest, and that this is the best way of understanding the world. The latest research within the discipline is, however, transforming these fundamental assumptions.
On Saturday, May 23, John Nash died in a tragic car crash, which also killed his wife, Alicia. John Nash completed his doctorate in mathematics at Princeton University in 1950, and worked there as a senior researcher from 1995 until his death. Nash’s profound contribution to game theory should be seen as part of a broader evolution of the discipline of economics into a more holistic social science, something for which he should be commended.
Anyone holding an economics degree has undergone the strange experience of sitting in a beginner’s class and being told to assume that we are all completely self-interested. I suffered this fate studying economics at Queen Mary, University of London, and then I suffered it all over again taking a class in formal modeling at the University of Oxford. If there is ever such a thing as brainwashing, this ritual is a good example.
Like many students, I questioned the assumption that man is simply homo economicus. Surely, I protested, people are sometimes capable of seeking the good of others. As any economics student will be able to tell you, the reply I got was not that I was wrong, exactly. Instead, I was told, “we just have to make this assumption before going further.” Teaching economics this way is like ushering students into Plato’s cave and then telling them that if they don’t assume the shadows on the wall are real, they will have nothing else to go by.Homo economicus is the only robust, repeatable model of human behavior, it is explained—the only consistent measuring tool for the social sciences and its best starting point.
The assumption that we all act in our self-interest is normative, making it the most consistently taught ethical theory in the three to five years of an undergraduate economics degree. This has had its effects. In a 1993 article inThe Journal of Economic Perspectives, Frank, Gilovich, and Regan review numerous studies of economics students and conclude that over the course of their studies they become less-generous individuals. Economics students are, for example, more likely to free-ride when it is time to make a group contribution to something that will benefit all. As their studies proceed, economics students are progressively less likely to return a wrongly sent envelope with $100 inside to the sender (a test of honesty). And it is not only students who seem to have been negatively affected: economics professors also have been found to give less money to charity than professors of other disciplines. They’re as much as twice as likely to give nothing at all.
So, not only has economics been guilty of brainwashing students into viewing the human person as self-interested, that brainwashing seems to work.
Imagine my unease, then, at finding myself seated for an interview in front of four Oxford economics professors after writing a funding application to study the connections between virtue theory and economics. And then imagine my dizziness at receiving the award.
Something has shifted in the discipline of economics, and this is due to the work of Nash and others. Now the best response to those worried about homo economicus assumptions is: yes, the assumptions are backward, and that is why they are being thrown overboard.
A Changing Set of Assumptions
Behavioral Economics, Game Theory, and the Break with Utilitarianism
Three Recent Economists Refuting Homo Economicus