Surveying Financial Decisions? From Homo Economicus to Historical Specificity and J.S. Mill’s Cultural–Institutional Individualism

Manolis Manioudis,Dimitra Giardoglou

doi:10.35995/jbafp3010006

Abstract

The aim of this paper is to evidence that non-economic factors, such as culture, emotions and ethics, can be seen as an important force in influencing human economic behavior and human action. This is conducted by putting the homo economicus notion into the perspective of the history of economic thought and, more specifically, of John Stuart Mill. More specifically, Mill’s institutional individualism, as is presented in his System of Logic (1843), and his relativity of economic doctrines construction, as is included in his Principles of Political Economy (1848), are synoptically delineated. Through Mill’s analysis, it is supported that cultural differences between different states of societies are determinant in understanding different behaviors. The paper concludes that Mill’s historical specificity and his more pluralistic version of cultural–institutional methodological individualism are more compatible in understanding human decision making.

Highlights

According to the mainstream neoclassical economic theory, financial decisions are driven by rational human beings who either maximize their utility, as consumers, or their profit, as producers–investors
In manifold historical situations, the behavioral axiom of wealth maximization is historically violated. In these situations, according to Mill’s epistemology, the science of political economy requires the science of ethology, as he defines it, to understand the influence of culture, traditions, habits, thoughts and mores of a given society
The aim of this paper was to show that Mill’s historically specific political economy and his version of cultural and institutional individualism are tightly connected with his relativity of economic doctrines construction

Summary

Introduction

According to the mainstream neoclassical economic theory, financial decisions (and capital markets) are driven by rational human beings who either maximize their utility, as consumers, or their profit, as producers–investors. This association impelled Mill to note that a (new) social science, ethology, is of crucial importance in understanding social and economic phenomena. In manifold historical situations, the behavioral axiom of wealth maximization is historically violated In these situations, according to Mill’s epistemology, the science of political economy requires the science of ethology, as he defines it, to understand the influence of culture, traditions, habits, thoughts and mores of a given society. This understanding is crucial as long as these factors determine people’s decisions and actions. In his own interesting verba: The more highly the science of Ethology is cultivated, and the better the diversities of individual and national character are understood, the smaller, probably will the number of propositions become, which it will be considered safe to build on as universal principles of human nature (Mill, [1843] 1889, p. 591)

Cultural–Institutional Individualism

Conclusion