Homo economicus, or economic human, denotes the idea of human beings a

Question

Homo economicus , or economic human, denotes the idea of human beings as rational, narrowly selfinterested agents who, given total information about opportunities and possible constraints, seek to obtain the highest possible well-being for themselves at the least possible cost. In the late 19th century, a host of economists built mathematical models based on conceiving of real humans as Homo economicus.

Exponents of Homo economicus tend to acknowledge that total information is not possible in the real world; thus, breakdown in models based on the concept are due to imperfect information held by the selfinterested economic actors. Amartya Sen has pointed out that Homo economicus ignores that people can and do commit to courses of action out of morality, cultural expectations, and so forth. Veblen and Keynes allege that Homo economicus assumes far too great an understanding of macroeconomics on the part of humans. Tversky put forth that investors are not rational: they are unconcerned by small chances of large losses, but quite risk-averse regarding small losses. Bruno Frey points out that humans are often intrinsically motivated, and that such motivation explains heroism, craftsmanship, and other drives that do not fit neatly into the model of a narrowly focused gain-seeker. Critics of the psychoanalytic tradition point out, somewhat obviously, that humans are frequently conflicted, lazy, and inconsistent.    1 
 1. Which of the following phenomena would exemplify Bruno Frey’s critique of  Homo economicus ?

I. A woodworker spends months on the delicate inlay of a door, knowing that his many hours of hard work will inevitably result in a higher price when he comes to sell the piece.
II. A television journalist often travels to dangerous countries all over the world because he is contractually obligated to do so, and his ratings are higher the more dangerous his exploits appear tobe.
III. An economist dedicates her career to illustrating a fundamental flaw in a particular theory, though she knows there will be no tangible reward for her efforts.

A. I Only
B. III Only
C. I and III Only
D. II and III Only
E. I, II, and III

2 
 2. Which of the following best describes the main idea of the passage?

(A)  Homo economicus  is a useful, if theoretical, actor to use in the formation of mathematical models.
(B)  Homo economicus  is a fundamentally flawed and thus theoretically useless construction, for a host of reasons.
(C)  Homo economicus  is often criticized by those who don’t fully understand its function in economic theory.
(D)  Homo economicus  is a problematic construction, because it simplifies human motivations and is overly optimistic about human understanding.
(E)  Homo economicus  fell out of favor with most economists in the 20th century due to its many incorrect assumptions about humanity.

3 
 3. Which of the following is a complaint leveled against the theory of  Homo economicus  posited by certain economists in the late 19th century?

I. It assumes that the average person knows a lot more about the general workings of the economy than he or she actually does.
II. It assumes that humans experience a proportional and linear emotional response to all risks and rewards.
III. It assumes that the primary impetus behind human decision-making is not predicated on ethics or cultural mores.

A. I Only
B. III Only
C. I and III Only
D. II and III Only
E. I, II, and III

RC Butler 2023  -  Practice Two RC Passages Everyday.   
Passage # 136 Date: 05-May-2023
 This question is part of RC Butler 2023 .  Click here for Details

Manhattan GRE 5lb.

pudu · Answer

is we get kudo for explanation for sure?

pudu · Answer

1. B

because Frey's said that instead of focusing on gains the individuals are motivated by heroism or other values or idea that is important for the person. Here the economist is not going to get any gain from her action, but still she is motivated to do so...Hence B

2 D) Homo economicus is a problematic construction, because it simplifies human motivations and is overly optimistic about human understanding.

Because it is simply assuming that every human being are smart enough to think rationally and take a decision that benefit him or her. The reality is not this much simple, where decision is a complex process affected by number factors like emotions. 
Hence D.

3. C ---I&III

I because the basic understanding behind homo economicus is that every human being are rational and they took only rational decision, but it is not correct according to the passage. 
III because it gave importance only on rational thinking . It didn't give any importance to emotions or motivations.

So I&II--C

Carolweszxdrcftvb · Answer

Can someone explain Q2 and Q3

Sajjad1994 · Answer

Official Explanation

2. Which of the following best describes the main idea of the passage?

Difficulty Level:   605

Explanation

Choice (A)  is incorrect because the passage never says that Homo economicus is a useful way to form mathematical models.

Choice (B)  is incorrect because the passage never says Homo economicus is a theoretically useless construction, only that it is a problematic one.

Choice (C)  is wrong because there’s no reason to believe that the people who criticize the theory  “don’t fully understand its function.”

Choice (D)   is correct because the second paragraph of the passage describes numerous problems with Homo economicus, all of which center around simplifying people’s motivations and assuming they understand more than they actually do.

Choice (E)  is incorrect because the passage never says that Homo economicus fell out of favor or whether the handful of critics cited is representative of  “most economists.”

Answer: D

Sajjad1994 · Answer

Official Explanation

3. Which of the following is a complaint leveled against the theory of Homo economicus posited by certain economists in the late 19th century?

Difficulty Level:   805

Explanation

The  first statement  is correct because Veblen and Keynes allege that  “homo economicus assumes far too great an understanding of macroeconomics on the part of humans.”

The  second statement  is incorrect (and too extreme) because, although Tversky says that people are  “unconcerned by small chances of large losses, but quite riskaverse regarding small losses,”  he does not imply that there is a broader linear pattern.

The  third statement  is correct because Amartya Sen says that people  “can and do commit to courses of action out of morality, cultural expectations, and so forth.”

Answer: C

VerbalBot · Answer

Automated notice from GMAT Club VerbalBot: 

A member just gave Kudos to this thread, showing it’s still useful. I’ve bumped it to the top so more people can benefit. Feel free to add your own questions or solutions.

 This post was generated automatically.

Homo economicus, or economic human, denotes the idea of human beings a

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Reading Comprehension (RC) Questions

Homo economicus, or economic human, denotes the idea of human beings a

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards