You are not Homo Economicus

Two hands

The only reason why I passed economics at uni was because I had a massive crush on a football player. The crush was so big and obvious that even my boyfriend knew I had a crush. On someone else. But anyway, I digress.

This guy – built like a brick outhouse, and reasonably intelligent too – was my main motivation for going to economics lectures, which I hated. I would sit through the lectures muttering away because I didn’t agree with what I was being told. Economic theories just didn’t make sense to me.


WTF is homo economicus anyway?  Is that like Bigfoot?

In traditional economics, you are told that humans basically make financial decisions like robots. I sat through lecture after lecture being told to make decisions in my own self interest – and frankly, I struggled with that idea. Because my self interest was not just about getting the best price, or the ‘highest economic value’.   That doesn’t work for humans in reality.


This is how you really make decisions

Consider this: you can buy a coat for £150 pounds or an alternative coat for £15 pounds. The coats are the same colour, style, quality, type – they are identical in every way. Except for how they are produced and sold.

The more expensive coat is made locally, by a maker who pays their employees a living wage, the fabrics have been lightly treated because the underlying quality is good, the mark up at the store is reasonable (generally a 50% mark up) to support overheads, there is a lower carbon footprint. The £15 coat is sold right next door, by a globally known brand. Their front of house employees receive minimum wage, but the manufacturing is done in a low cost-country where workers are not guaranteed safe work places and you don’t really know what else is happening in the supply chain. The fabric is treated with chemicals to maintain its quality, and the item of clothing has more frequent flyer miles than you do.  And the margin is tiny – so they have to sell loads to make a profit.

Sounds like I want you to buy the more expensive coat – right?  Not exactly, because we haven’t spoken about you.


Say yes to this, but what are you saying no to?

In saying yes to the expensive coat – what are you saying no to? Are you saying no to having good food on the table, heating your home? Are you saying no to having a cash buffer which will keep you safe in uncertain times? Would the guilt of spending so much have an effect on other purchasing decisions you make?

I guess what I’m trying to say is we are not rational economic units. We are not what the economists think we are. There is no such thing as ‘all else being equal’ life doesn’t happen like that. We know that we have important decisions to make with how we spend our money and how we pursue our wealth. Our relationships with others, our community and the global system are affected by how we make and use our money.


OK, lah.  But what the hell can you do?

These are not simple decisions – and they are unique for everyone. If you feel overwhelmed by the decisions you need to make and the power in your pocket – I offer my guidance.

Do what you can, do your best, keep your values, honesty and integrity in mind, and let yourself make imperfect decisions. This mindset will help you evolve a way of dealing with money which is more sustainable for you and those around you.



Need some help making financial decisions? Book in a time to chat with me here, for free! Now, that’s an easy economic decision…

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