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Rethinking Homo Economicus: The Flaws of Conventional Economic Assumptions

This piece critiques the traditional concept of Homo Economicus, highlighting its unrealistic assumptions, such as perfect information and an absence of complex emotions. It argues that business executives and civil servants often uphold these flawed ideas more than economists do. Introducing David Rock's SCARF model—comprising Status, Certainty, Autonomy, Relatedness, and Fairness—this discourse encourages a fresh perspective on decision-making and strategy in economics. It advocates for recognizing the emotional and relational dynamics that influence human behavior.

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Rethinking Homo Economicus: The Flaws of Conventional Economic Assumptions

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Presentation Transcript

  1. Beautiful theory. Wrong species.

  2. How it should work.

  3. How economists* pretend it works * Business executives and civil servants are more guilty than economists in this respect

  4. Homo Economicus • Operates in a world of complete trust • Has perfect information • Perceives the world objectively in ways which are always mathematically expressible • Considers every available option • Is free of complex emotions such as fear, regret, spite, anger, resentment and mistrust • Is a-social: has no understanding of relationships

  5. “Thus, the conventional view that natural selection favors nervous systems which produce ever more accurate images of the world must be a very naive view of mental evolution” (Trivers 1976/2006)

  6. The sweet spot Psychology Technology Economics

  7. David Rock's SCARF model • Status • Certainty • Autonomy • Relatedness • Fairness

  8. The narcissism of small differences

  9. Strategy hints • Optionality not optimality • The sweet spot • Spot the dumbest "rationalist" economic assumption of your competitors, and ignore it. • Dare to be trivial

  10. @rorysutherland Thank you.

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