Has Economic Modeling Overemphasized the Individual?

Is rationality selfishness? Does being rational require putting aside social and ethical values? In Adam Smith's Wealth of Nations, Alfred Marshall's Principles of Economics and Paul Samuelson's Economy, was man a rational being with values based on selfishness, as a decision-making element in the economy? Is this selfishness-based rational man the fundamental element that has led us to today's crises?

In the application of the economic philosophy supported by the neoclassical school and the neoliberal movement, an important result emerged as income inequality increased with increasing incomes. On a global scale, there was a great increase in both the economic and political power of very large corporations and the concentration of power in a few hands. Thus, a system that claimed to derive its fundamental power from democratic freedom became a reason that weakened the functioning of democracies. The negative effects of the economic system on the environment and the functioning of the natural order that enables human life were threatened.

The economic goals of people are shaped by their behaviors. Not only the goals but also the behaviors affect the results. When growth is the sole goal and distribution is not taken into account, growth also stops after a while. Increasing income inequality causes class conflict. The market can exhibit a monopolistic behavior and disable the optimality element. In other words, the market may not be a perfectly functioning mechanism as claimed by the neoclassical and neoliberal movements.

The understanding that sees selfishness as the same as rationality, the desire to make unlimited money as the natural human character, and economic success as the power to consume more and more leads to unethical consequences such as tax evasion, child labor, and the use of economic power to gain political power.

Isn’t the way to maximize social interest now through people who want to maximize their economic interest? When sociocultural norms and human psychology are considered together, we enter the field of behavioral economics. Emotions come into play at the point of revealing goals and decisions. In other words, emotions intervene in the field of logic. According to the traditional assumption, a rational person is a person who tries to maximize his own interest. In the 1970s, it was added to the assumption that a rational person is also equipped with all the information necessary for his decision while making a decision. It is possible for the process of acquiring information to continue until the estimated cost of acquiring information is equal to the estimated return of the information.

In the decision-making process, past experiences related to the decision are as important as logic, emotions and knowledge. Today, due to the rapid spread of information, the influence of other social environments and the spread of herd mentality cause decision-making mechanisms to take action much faster than in the past.

It is not possible to create a well-functioning economic order with today's economic models that propose a system that works only on people who think only about themselves. Because the economic model built on the model of people who think only about their own economic interests has created great economic, environmental and social damage.

The new models' proposition of rationality based on selfishness, their failure to see humans as social capital, their view of humans who only think about themselves as the basis of the model rather than as one of the many elements of social development, and their proposal to increase gross national product by ignoring environmental factors will henceforth mean the collapse of economic theory. The social development model based on rationality based on selfish human behavior is doomed to collapse.

In the economic behavior model, what others do and think must now be taken into account. The behavior of an individual expresses a social identity. Individuals have many purposes. Purposes are shaped not only by the individual's preferences, but also by the decisions the individual makes for himself, his family, and his social environment in line with his values.

The rational individual recognizes the existence of an individual who determines, achieves and focuses on new goals based on the behavioral model that explains how goals are created in the previous paragraph. The rational individual does not try to achieve his goals at all costs, but tries to achieve success towards the goals he expects to be realized. Incomplete information, conflicting emotions, and influences that create incompatibility with the goals in reaching the goals can distance the individual from the state of reaching the better and from his goals.

Decisions are not made solely on the principle of maximizing interest. Economics has always taken into account the individual dimension of the individual, but has tried to analyze the social dimension with a very dominant emphasis on the individual. Should it have developed its models by looking at humans from a more social perspective? Is the problem in the neoclassical and neoliberal approaches that claim to be compatible with human nature, in the nature of humans, in the excessive number of humans, or in the way the economic order is structured?

If answers to these questions cannot be found and approaches that will pave the way for social and economic development are not developed, we will witness the collapse of theory and our ability to find solutions to increasingly increasing problems will weaken.

In the meantime, what we call information is spreading very quickly. However, with the information revolution, we can have the chance to access information that has always existed. Otherwise, no one is pouring out useful information. We don't know what we didn't know before. What has changed is that we have the chance to access information that is already known elsewhere, right from where we sit. Information is not something that can be shared so easily.