Economics is a unique subject of study. It intertwines with nearly every aspect of humanity and draws upon aspects, concepts, & principles from different ontological & academic disciplines. Modern economic theories combine ideas from nearly every aspect of the human socio-cultural fabric to understand, monitor, and predict certain critical aspects of human behavior & actions.
As a student of economics (or as an economist), you look into myriad activities that provide a semblance of social order at every level. You will have to dwell upon barter systems, supply & demand, scarcity, livelihood, resource allocation & consumption, human behavior, the concept of wealth, and several tangible & abstract aspects and phenomena central to the human way of life. No doubt studying all such vastly intricate concepts & phenomena is challenging, compelling many students to seek help with economics homework, assignments, & problems from professional Tophomeworkhelper.com services.
In this article, we will take a concise look at a particularly prominent & complex subject: the relationship between human behavior and economics. Let’s begin.
Economic Behavior of Human Beings
Economics is a social science. How humans gather and consume resources for survival, how they acquire & spend wealth, how societal behavior influences individual economic behavior, how different forces & phenomena affect economic phenomenon across all levels — all the different approaches, theories, concepts, & models in economics takes a close look at how we humans think & act as we strive to etch out a living (or live lavishly) on Earth.
Classical economics puts forth several concepts & theories for understanding the impact of human behavior on economic systems.
Classical Views of the Behavioral Economics
The concept of the Invisible Hand by Adam Smith is one such idea that states that people acting in their self-interest eventually promote general welfare. Smith’s vision of economic behavior amalgamated self-interest and moral & social motives as the motivating factors. He states that a person’s economic behavior can be understood better and more clearly by considering the social & cultural context upon which economic decisions are made.
Economists & philosophers such as David Ricardo and John Stuart Mill followed Smith’s outlook on human economic behavior. Later, Alfred Marshall codified and presented similar ideas in one of the 20th century’s most influential textbooks on the subject, Principles of Economics. Marshall idealized human motivations in society, assuming that every human strives for the individual and the greater good.
The Neoclassical Model
The neoclassical view of economic systems & processes dominated the domain in the latter half of the 20th century. The neoclassical approach was much more specific and focused specifically on the actors & social constructs in civilization.
The neoclassical model segregates society into two primary economic actors/entities – profit-maximizing firms and utility-maximizing households. Firms look to maximize profits by supplying goods & services, while households consume supplies to maximize utilization and satisfaction.
All economic actors in the neoclassical model are capable of making rational decisions. They are self-motivated and make economic decisions that provide the best possible outcome. Also, firms and consumers/households are assumed to interact in a perfectly competitive market.
The neoclassical model had many benefits for understanding human behavior in an economic context.
- The model reduces the complexities of the economy, making things easier to analyze.
- The neoclassical model aids in the easier assessment of prices, price changes, trade volume, market efficiency, etc., in particular cases.
- One of the most infamous books in the domain, Economics: An Introductory Analysis, was the first to introduce the neoclassical model. The book also emphasized positive, deductive analysis rather than a normative approach.
- The neoclassical model’s emphasis on profit & utility maximization came to be considered rational economic behavior.
Neoclassical economic models still play a significant role in economic analysis and systems. Yet, advances in analytical frameworks and technology allowed us to dig deeper and consider the effect of various complex human behaviors on rational economic behavior & decision-making.
Behavioral Economics – The Modern Perspective
Behavioral economics eschews the neoclassical model’s overly simplistic outlook as it considers the different intricacies of the human psyche when analyzing economic decisions.
Modern behavioral economics employs concepts, principles, and models from different disciplines, including psychology, sociology, anthropology, neuroscience, biology, etc., to understand & predict human interactions with the economic machinery. The behavioral approach uses data and insights from empirical studies. Behavioral economics has proven to be highly effective in understanding seemingly irrational economic behavior and how do people sometimes tend to act against their self-interest.
The modern perspective is capable of placing & analyzing decisions & how people tend to think in different contexts. Availability heuristic is another key idea in behavioral economics that looks into how information availability affects processing & decision-making in us human beings.
And, with that, we wrap up this write-up. Hope this quick peek into the relationship between economics and human behavior. Economics can be an extremely educative & interesting subject if you put your mind & effort into it. Work hard, ace your assignments & homework, and if need be, get expert help with economics homework from Tophomeworkhelper.com, the most trusted place to get help with economics homework.
