Homo economicus
Also known as: Econ, Rational economic man
The fictional, perfectly rational and self-interested agent of classical theory.
What it means
Homo economicus, or the 'Econ,' is the idealized model of a human being assumed by much of classical and neoclassical economics: a consistent, fully informed agent with stable, well-ordered preferences who maximizes self-interest using unlimited computational power. The construct is a deliberate simplification that makes economic behavior tractable and yields sharp, testable predictions — but it is the foil against which behavioral economics defines itself, since real people, the 'Humans' in Thaler's terms, depart from it in systematic, predictable ways. Those departures are precisely the catalogue of behavioral science: people honor sunk costs, are swayed by how choices are framed and defaulted, exhibit loss aversion and present bias, hold inconsistent preferences, and care about fairness and reciprocity rather than only their own payoff. A fair nuance is that the model is not meant to describe any individual but to capture aggregate tendencies, and defenders argue it remains a useful baseline and approximation in competitive markets; the behavioral critique is that the deviations are too large, too systematic, and too consequential to treat as noise. It matters because the gap between Econ and Human is the entire raison d'être of behavioral economics and the justification for nudges and other interventions.
Examples
An Econ would coolly ignore sunk costs, defaults, and how an option is framed, and would never reject an unfair but profitable offer — yet real Humans reliably do all of these.
An Econ would switch pension provider the moment a cheaper one appeared; real savers sit in whatever default fund they were auto-enrolled into a decade ago and never look.
Theory says tipping in a restaurant you will never revisit is irrational. Diners tip anyway, because fairness and reciprocity simply do not appear in the Econ's utility function.
First described in Classical economics; critiqued by Thaler, Kahneman & Tversky.