Commentary

A new kind of economy is born

A new kind of economy is born
Photo: Bloomberg
Published: October 8, 4:02 AM
Updated: October 8, 6:00 AM
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The Internet and social media have changed our way of decision-making. We are no longer the independent decision-makers we used to be. Instead, we have become networked minds, social decision-makers. This has several fundamental and dramatic implications — both for economic theory and for the way we need to organise our economy.

As we are more and more connected with others, the “homo economicus” — the self-regarding decision-maker and perfect egoist that is the main pillar of economic theory — is no longer an adequate representation, or even a good approximation, of human decision-makers. Reality has changed. Laboratory experiments show that the perfectly self-regarding decision-maker is not the rule but the exception.

They also show that markets, as they are organised today, are undermining ethical behaviour. Our application of an outdated theory is what has made economic crises more severe. Our economic institutions must be adapted to support the social decision-maker, the “homo socialis”.

Latest scientific results from my research group have shown that a “homo socialis”, with other-regarding preferences, will eventually result from the merciless forces of evolution. Another independent study was recently summarised by the statement “evolution will punish you, if you’re selfish and mean”.

Is this really true? And what implications would this have for our economic theory and institutions?

DO NICE GUYS FINISH LAST?

In fact, the success of the human species (as compared to other species) results mainly from its social nature. There is much evidence that evolution has created several different incentive systems in humans: Besides the desire to possess (in order to survive in times of crises), there is sexual satisfaction (to ensure reproduction), curiosity and creativity (to explore opportunities and risks), emotional satisfaction (based on empathy), and social recognition (reputation, power).

Recent experimental results suggest that the majority of decision-makers are of a “homo socialis” type with a preferences for equity- or equality-oriented fairness. The “homo socialis” is characterised by two features: Interdependent decision-making that takes into account the impact on others and conditional cooperativeness.

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