Homo Economicus,Moral Sentiments,and the Challenges of Individualism

1. Introduction

Despite continuing global crisis and relentless criticism from sources as diverse as heterodox economists and religious leaders, homo economicus remains apparently unassailable as a fundamental concept of orthodox economics teaching, research, and policy formation. This concept of the self-interested, goal-oriented, utility-maximizing individual is subjected to painstaking analysis, from differing directions, in each of these three books. Together, they provide a valuable set of resources for developing a more complex, socially and biologically grounded basis for explaining human behavior – principally cooperation, altruism, and morality – that defies the narrow, albeit obdurate, precepts of homo economicus. A particularly important aspect of the two books by first Hodgson, and second Bowles and Gintis, is that they emphasize how moral patterns, practices, and expectations (moral sentiments) have evolved historically, both biologically and socially, through human relations, institutions, and actions, while O’Flynn lays bare the inadequacies of individualism as expressed by a series of theorists stretching back to the seventeenth century.

2. Challenging Homo Economicus

Hodgson announces the death of “economic man” and his “one-dimensional objective of utility,” to be replaced by the concept of a socially situated individual with moral motivations and commitment to a social code of behavior. Hodgson’s principal argument against homo economicus, perceived as “the purely self-interested individual,” is that not only do individuals have “other-regarding” qualities, but that “humans are generally morally motivated as well as self-interested” (ix). He links morality – neglected not only by orthodox economics but also by several heterodox traditions – to human needs, as integral to all societies and their evolution (ix-xiv). The utility-maximizing individual is viewed as conceptually inadequate to understand the complex problems of human societies, such as financial and economic crises. Instead, Hodgson presents his own interpretation of the individual as multidimensional, with socially and biologically evolving moral motivations. This interpretation of morality as a social phenomenon, within an evolutionary framework, provides a consistent theme for the book.

He goes on to critique methodological individualism, on the basis that society is always more than the sum of individuals, who are always located within social relations. Interpretations of rationality as goal-oriented, utility-maximizing, or preference-seeking behavior are insufficient to capture the complexities of human altruism, cooperation, and individual personalities. This requires a concept of morality, interpreted (following Darwin) as evolving from the natural selection of groups to govern social relations and to counter self-centered individualism. Morality, as a “near-universal” aspect of human societies, both different from and irreducible to altruism, is integral to human cooperation (25-26). Social phenomena require examination of the relations between individuals and social structures, conceived (drawing on Weissmann 2000) as “essentially relations within groups of interacting social individuals, possibly including social positions, and with emergent properties resulting from this interaction” (42). Morality, then, can be understood adequately only as a group and relational phenomenon, rather than as a characteristic of individuals. He embraces a notion of human needs at odds with neoclassical, utilitarian precepts. For example, healthcare workers are motivated by moral rather than simply financial motivations, with health constituting a fundamental need (27) while, with respect to environmental issues, policies on climate change should take account of enduring moral issues. Thus Hodgson’s objective is a shift from a neoclassical model oriented around homo economicus, towards a renewed economics as a moral and political science, affirmed through, in John Dewey’s phrase, the “moral authority of democratic institutions.” He then provides an examination of corruption as moral failure, with a particular emphasis on the private sector (rather than confining his definition of corruption to the misuse of public office for private gain).

For Hodgson, the idea that human action is governed by rational calculation of interests or preference functions (the “pleasure machine”) lacks convincing scientific support. He argues instead that morality sustains social cohesion through individuals making decisions on competing and conflicting alternatives. Morality, therefore, is irreducible to utility while human cooperation cannot be explained adequately through preferences or utility. Mainstream economics downgrades both ethics and morality in two senses: by reducing both to matters of personal preference or taste; and by excluding any possibility that one moral system could be superior to another. Morality denotes a distinctively human quality: the ability to distinguish between right and wrong, which is irreducible to personal preferences, and an associated sense of duty (73-79). It conveys a sense of universal values and judgments, where some acts are regarded in all cultures as abhorrent and others as virtuous; moral relativism, in contrast, can descend into moral nihilism or amoralism. Drawing again on Darwin, Hodgson argues that certain principles, through the evolutionary selection advantage they confer, have become embedded in human nature across cultures (81-85). Morality is thus a biologically influenced social process, formed through interaction and communication, within a range of institutional settings (101, 109-113). We “are born with the capacity to develop a moral sense and to act morally,” our personalities forming through the relationships between biological inheritances and moral frameworks, as we “combine morality with self-interest” (124-145).

He argues that morality and cooperation are even essential to the operation of firms, through which people develop long-term, value-based relationships promoting extrinsic and intrinsic motivation and increased productivity (26). It is, therefore, “analytically unsound to treat business agents as totally amoral” (130), since “all business deals have in part to rely on fragile mechanisms of honesty and trust” (133) and business strategies are “touched by ethical impulses of some kind,” with capitalism being dependent on “significant residues of morality for its very existence” (130). He describes “shared values” as essential to capital accumulation while “the economic agent is a person of significant integrity” (134): “a firm that cultivates a suitable moral culture among its managers and employees is likely to enjoy greater commitment and cooperation among its workforce” (140). Thus individuals are viewed as inherently moral beings within complex biologically and socially constructed settings that defy a simple, one-dimensional concept such as homo economicus. For Hodgson, the assertion of fundamentally moral principles such as social solidarity can enhance the viability of capitalism, in contrast to what he sees as a Marxist suspicion of all morality whereby theft, for example, is “blamed on poverty rather than a crumbling social morality” (238). Hence he envisages a morally infused capitalism rather than a post-capitalist future.

3. Cooperation, Reciprocity, and Altruism

Like Hodgson, Bowles and Gintis present a fundamental challenge to the concept of homo economicus, although adopting very different methods and sources of evidence. They situate themselves within the long-running cross-disciplinary debate, to which they have been significant contributors, on the origins of cooperation, reciprocity, and altruism and how these have been developed and reconfigured down to the present (for example, Bowles and Gintis 1993; Gintis 2000). Their diverse array of methods and sources includes: laboratory experimentation, such as computer simulations of cooperation in the earliest of human societies; historical evidence taken from peoples who lived 75,000-90,000 years ago at the mouth of the Klasies River in what is now modern South Africa; field research among hunter-gatherers; and several conceptual models and theoretical approaches, including game theory. They seek to demonstrate that human cooperation occurs not only through self-interest, as presented in orthodox economics and biology, but also through concern for others, the maintenance of moral and ethical codes (or moral sentiments), and altruism understood as acts individuals perform for the benefit of others but at a net cost to themselves.

For Bowles and Gintis, human beings are the only species, with the exception of social insects, for whom cooperation occurs on an extended scale well beyond immediate kin. Despite the rigors of natural selection, individuals in a multitude of historical situations have been prepared to subordinate their own immediate interests to longer-term social cohesion, group success, and the maintenance of moral and ethical standards. These altruistic actions cannot be explained adequately in terms of the pursuit of individual economic self-interest. Participation in activities with others (which can range from war between groups in ancient societies to university students working together on lab projects) provides a source of pride and satisfaction, while non-participation can lead to personal guilt and shame.

Historically, human beings developed moral sentiments through living in natural and social settings that encouraged the survival of those groups that practiced cooperation and the maintenance of moral and ethical values. Thus in zero-sum competition between groups in ancient societies, those groups with more altruists (defined as those willing to risk their lives in war) were victorious. This outcome led to the losing group disappearing and the winning group increasing its numbers, while maintaining the proportion of altruists constant, thereby promoting other-regarding beliefs and actions over the longer term and fostering the success and proliferation of those groups that upheld them. Human individuals, then, have developed as inherently cooperative beings, with a sense of fairness and readiness to punish those who offend against deeply-held moral and ethical values. Cooperation, reciprocity, and altruism have consequently become embedded within networks of strong reciprocal relationships (19-42, 133-166).

Bowles and Gintis, again like Hodgson although via a very different approach, mount a substantial challenge to any assumption that human beings are simply self-interested agents seeking to maximize their own individual gains. Their evidence and analysis indicate the historical continuation of social practices whereby free-riders are punished in order to maintain collective values and norms, while altruistic behavior is rewarded and leads to personal satisfaction. Contrary to many explanations favored in the disciplines of biology and economics, human cooperation cannot be explained by a long-term self-interest or kinship ties (186-194).

Bowles and Gintis provide a coherent, persuasive argument that altruism, reciprocity, and cooperation evolved through competition between groups and the evolution of institutions and norms that favored altruistic, reciprocal, and cooperative behaviors. Their range of evidence, their analytical modeling, and the scope of their discussion are all extremely impressive, although they acknowledge the limitations of their search for the origins of cooperation, since “the best one can hope for is a plausible explanation consistent with the known facts,” while noting that any temptation to draw “strong conclusions” regarding the twenty-first century on the basis of evidence from the Late Plestiocene period should be resisted (199). While an entirely convincing explanation for the origins of human cooperation, reciprocity, and altruism may never be achieved, Bowles and Gintis provide a highly plausible explanation that performs a remarkable job of convincingly linking social practices, norms, and institutions in ancient societies to the present.

4. The Individual in Capitalist Development

Micheal O’Flynn focuses specifically on the concept of the individual and its uses under successive stages of capitalist development, providing an illustration of how individualism has been called upon to provide ideological justification for bourgeois property rights and capital accumulation. His argument, then, is simultaneously radical (predominantly Marxist-inspired) and functionalist, encapsulated in his core argument that: “Over the course of its development, the capitalist system has been defended according to a set of assumptions, principles and theories based on the perceived interests of the individual.” Individualist ideology is consequently “best understood when examined against its historical social function” (1).

Individualist principles and assumptions promoting individual freedom (within legal constraints) to pursue economic interests without government interference are seen as emerging with early capitalism, rather than as a product of classical liberalism (2). Primarily through a discussion of Hobbes and Locke, O’Flynn examines the development of individualist thought within early capitalism in relation to the emergence of post-feudal indivisible property rights, contract relations, and scientific knowledge. Both embraced an individualist morality of thrift, hard work, and self-reliance that O’Flynn describes as permeating both Puritanism and Enlightenment secularism. For Hobbes, individuals had obligations only to themselves; in his individualist contract society, distributive justice under the all-powerful sovereign was inconceivable (23-24). Locke, however, stressed the principle of government by consent (although restricted to bourgeois male individuals). Importantly, Locke saw labor power as entirely alienable, a commodity; hence, the owners of capital could be seen as the creators of wealth, while government’s essential role was to protect the rights of property holders (31-35).

Both morality and religion are interpreted by O’Flynn, as in his discussion of Max Weber (1905/1976), as functional to the defense of property rights, capital accumulation, and rational organization. Often expressed through Protestantism, individualist theorists also challenged traditional religious constraints on individual property rights and capital accumulation. Drawing on Descartes and the belief that scientific problems could best be understood through examination of their constituent elements, methodological individualism developed as a means of analyzing societies as reducible to an aggregate of individuals, contributing to the spread of rational calculation, allied to scientific methods, in business activities and across societies (14-15). Even Malthus, despite his aristocratic sympathies, developed arguments that were “entirely consistent with individualist demands for the maximization of private control over productive resources and the removal of regulations hindering accumulation” (3). The English poor relief system, for Malthus, had encouraged “individual immorality” and a lack of self-reliance (in contrast to Scotland, which lacked such a system). Therefore, bourgeois control should be asserted through public policy to achieve individual self-reliance, moral restraint, and commitment to a stringent work ethic (65-83).

Thus ideological appeals to individualism and freedom have been deployed historically to consolidate bourgeois dominance, property rights, and intensified capital accumulation; for example, Social Darwinists claimed to be individualists and opposed to state intervention, while supporting legislation that promoted bourgeois interests (102). Similarly, the democratic reforms of the nineteenth and early twentieth centuries were limited so that they did not seriously threaten the individualist freedoms of capital accumulation; hence the twentieth-century individualist distinction between liberalism and democracy and the readiness to accept authoritarian but liberal forms of government (117-118); democratic government provides merely “the most efficient form of capitalist rule” (183). Individualist demands such as those of Hayek “can generally be reduced to the demand for freedom on the part of the owners of capital to invest without inconvenient conditions and to buy and sell labor power as a commodity without interference” (141). Contemporary neoliberalism is accordingly interpreted as the most recent incarnation of this individualism, whereby unprecedented opportunities for global accumulation are pursued through policies to remove constraints on capital: in order to bring economies closer to a “free market” ideal, privatization, deregulation, and reduced public spending are required: the “Friedmanite shock strategy.” As O’Flynn notes, big business has supported “free market” policies only when they perceive advantage, happily accepting corporate welfare while demanding massive reductions in social welfare spending (145-158; see also Crouch 2011, Duménil and Lévy 2011). O’Flynn concludes by arguing that “the individual” is just a “convenient tool” employed by “bourgeois ideologues to legitimate the processes of capital accumulation”: “The focus on the freedom of the individual has always been a means to an end and never an end in itself” (185).

5. Conclusion: Reconstructing a Moral Economy, Contesting the Individual

Individualism, including the concept of homo economicus, has displayed remarkable resilience over centuries, particularly in providing ideological justifications for unrestrained capital accumulation and the defense of private property rights. Yet each of these books successfully portrays its huge limitations, most notably the failure to provide sustainable explanations for different forms of cooperative, altruistic, and moral conduct that are irreducible to self-interest. They also raise a range of issues meriting further serious debate, such as Hodgson’s evocation of the moral firm and the “economic agent” of “significant integrity.” Echoing Durkheim’s concept of organic solidarity as well as practical examples such as the benevolent paternalism of nineteenth-century industrialists such as George Cadbury and even the intense work-discipline of early Fordism (Bryson and Lowe 2002; Durkheim 1893/2014; Hunt 1997), this belief begs several questions regarding the historical contingency, repressiveness, and potential one-sidedness of moral codes or cultures. Apparent moral obligations can disintegrate rapidly in the face of the imperatives of capital accumulation, as with the mass layoffs of the Great Depression or the ongoing global crisis.

As O’Flynn illustrates, the rhetoric of individual rights and freedoms has been harnessed historically to the pursuit of capital accumulation. In contrast, individual rights and freedoms have often posed dilemmas for left traditions based on collective rights and solidarity. Over recent decades, neoliberal proponents have effectively linked the ideology of individualism to a ruthless, market-driven morality of “winners” and “losers” in which just outcomes are viewed as those which result from dispassionate market decisions. The challenge for any progressive politics is to maintain the emphasis on collective solidarity and rights, while asserting a coherent program of individual rights, responsibilities, and freedoms (for example, sexuality, abortion, or euthanasia) within a reinvigorated moral economy. The individual, therefore, remains a site of ideological and political contestation, which requires the kind of challenge to the means-end rationality of homo economicus presented by Hodgson and by Bowles and Gintis, demonstrating the possibilities afforded by interpreting rationality in social terms that are irreducible to the acts of individuals.

Notable examples of such a social rationality would include Weber’s reference to substantive, values-based, collective rationality (see Kalberg 1980) and Habermas’s exploration of the democratic, emancipatory potential of communicative rationality (Habermas 1984). For instance, the substantively rational idea of a “moral economy” conveys a sense of beliefs and practices that situate economic relations within a broader and deeper context of social obligations, as in Polanyi’s concept of an inclusive “community of morally responsible persons” (see Dale 2010). Rather than a traditional, pre-capitalist moral economy based on paternalism, tradition, and custom, a contemporary moral (or social) economy can be identified in principles and practices of social justice, equity, and inclusion. Therefore, progressive taxation systems, the universal provision of public health care and education, decent housing, pay and working conditions, citizenship rights and freedoms, and environmental protection might be seen as moral indicators that can be used to differentiate and compare societies, and their prevailing social and political norms. A radical-democratic counterpoint to homo economicus, then, could be conceptualized not as a reconfigured individual but as an oppositional, radical-democratic form of social and economic organization, against which societies can be measured.