Economic Man

What is an 'Economic Man '

An economic man, a term first coined in the late 19th century, has developed to refer to a hypothetical individual who acts rationally and with complete knowledge, but entirely out of self-interest and the quest to maximize personal utility. An economic man is an imaginary figure who is able to satisfy economic models that push for consumer equilibrium. All of an economic man's choices are based on the fulfillment of his or her "utility function", meaning the ability to maximize any situation that involves choice.

BREAKING DOWN 'Economic Man '

Many economic models are hypothetical, and the assumptions on which they are built deviate from real-world conditions. For example, many economic-modeling assumptions assume that demand is a linear function of price. While this may sometimes be the case with certain goods, it is not reflective of the actual consumer environment. Economic Man is the principal, symbolic of every individual in society, whose preferences satisfy the condition specified in the models.

RELATED TERMS
  1. Self-Interest

    Acting in the way that is most personally beneficial. Adam Smith, ...
  2. Economic Equilibrium

    A condition or state in which economic forces are balanced. These ...
  3. One Man Picture

    A situation in which the bid quote and ask quote for a security ...
  4. Mainstream Economics

    A term used to describe schools of economic thought considered ...
  5. Rational Choice Theory

    An economic principle that assumes that individuals always make ...
  6. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given ...
Related Articles
  1. Investing

    Man Group: Investment Manager Highlight (EMG.L)

    Learn more about Man Group, a London-based investment manager, and the four investment divisions that handle its product offerings.
  2. Trading

    Understanding the "Hanging Man": The Optimistic Candlestick Pattern

    A hanging man is a candlestick pattern that hints at the reversal of an uptrend. The candlestick is recognizable by a small box atop a long, narrow "shadow."
  3. Markets

    Understanding Self-Interest

    Acting in one’s self-interest means to act in the way that is the most personally beneficial.
  4. Managing Wealth

    Financial Fitness: Saving in the Age of Instagram

    Consider reminding your kids that good things come to those who save early. Here we give you three hypothetical retirement savings scenarios to start.
  5. Trading

    Explaining Rational Behavior

    Rational behavior guides the decision-making process toward choices that maximize an individual’s benefit.
  6. ETFs & Mutual Funds

    EXDAX: Overview of Top Manning & Napier Funds

    Learn about four mutual funds administered and managed by Manning & Napier that can help investors diversify their retirement portfolios for 2016.
  7. Markets

    Economics 101

    Economics is the study of how individuals, governments, businesses and other organizations make choices that effect the allocation and distribution of scarce resources.
  8. Markets

    What Is Economic Equilibrium?

    Economic equilibrium occurs when market supply is equal to market demand.
  9. Markets

    The Difference Between Finance And Economics

    Learn the differences between these closely related disciplines and how they inform and influence each other.
  10. Trading

    Understanding Rational Choice Theory

    Rational choice theory assumes an individual will always make prudent and logical decisions that yield the most benefits.
RELATED FAQS
  1. What is the homo economicus?

    Homo economicus or "economic man" is the characterization of man in some economic theories as a rational person who pursues ... Read Answer >>
  2. How do I build a profitable strategy when spotting a Hanging Man pattern?

    Learn how to use the opportunity for a low-risk, high-reward trade that is presented when a trader identifies the hanging ... Read Answer >>
  3. How are Hanging Man patterns interpreted by analysts and traders?

    Learn the meaning of the hanging man candlestick formation and why it is viewed by market analysts and traders as a possible ... Read Answer >>
  4. How effective is it to create trade entries after spotting a Hanging Man pattern?

    Explore the factors that influence the effectiveness of a trading strategy based on the hanging man pattern and what makes ... Read Answer >>
  5. What is the utility function and how is it calculated?

    Learn what the utility function is in microeconomic theory and how it is calculated based on a functional form that represents ... Read Answer >>
  6. What is the marginal utility of income?

    Take a deeper look at marginal utility of income, why individuals tend to be more satisfied with more income and how measuring ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center