Paper Title: Comprehending Human Economic Behavior Through a Multicultural Lens: Examining the Concepts of Homo Economicus and Islamicus

Author:        Setiawan bin Lahuri and Sultan Nanta Setia Dien Labolo

Publisher:    Kawanua International Journal of Multicultural Studies, 4(2), 106-117.

The concepts of homo economicus and homo islamicus have very different intellectual roots in viewing the nature of human economic behaviour.

First, homo economicus, which is rooted in Western economic thought, assumes that humans act rationally with the main goal of maximizing their individual interests and material satisfaction. He is assumed to always choose the option that is most advantageous for himself without caring about its impact on others. This is different from homo islamicus who is guided by the framework of Islamic values, such as justice, common welfare, and balance. Homo islamicus places collective benefit above individual interests. He always considers the social dimension and the welfare of the wider people in all of his economic actions.

Second, in the production system, homo economicus is solely profit-oriented by increasing efficiency and maximizing its own profits. He tends to exploit natural resources and labour in order to minimize production costs as low as possible in order to pursue maximum profitability. Meanwhile, homo islamicus views that the production system should not ignore the values of justice and social responsibility. For him, the production process must be carried out ethically by paying attention to the rights and welfare of workers and environmental sustainability.

Third, in the consumption system, homo economicus is only driven to fulfil his individual desires and satisfaction alone. He tends to consume goods and services excessively for the sake of prestige and status without caring about the social conditions around him. This is different from homo islamicus which encourages moderate, thrifty consumption patterns and still considers the needs of many people. For him, consumption is not just the fulfilment of individual desire, but also has a social dimension and moral obligation towards others.

Fourth, homo economicus views the distribution system solely as a tool to increase efficiency and individual profits. He ignores aspects of equity and social justice in distribution. Meanwhile for homo islamicus, distribution must be carried out in a fair and equitable manner in order to reduce inequality between community groups. Distribution is not just a matter of business efficiency, but also an important instrument for achieving common prosperity.

Fifth, analysis through the utility curve also shows fundamental differences in the orientation of these two concepts. Homo economicus solely wants to maximize individual satisfaction, as reflected in its ever-increasing total and marginal utility curves.

Meanwhile, homo islamicus continues to pursue individual utility but with moderate limits for the benefit of the collective, as reflected in its gentler utility curves. Although originating from very different intellectual backgrounds, the two concepts of homo economicus and homo islamicus can actually complement each other in providing a more comprehensive and multidimensional understanding of the nature of human economic behaviour.

The homo economicus concept was formally developed in the works of neoclassical economists such as William Stanley Jevons, Leon Walras and Vilfredo Pareto. They employed mathematical optimization models with assumptions of stable and consistent preferences to explain consumer rational decision making aimed at maximizing utility (satisfaction), and producers maximizing profits.

Author states that the validity of the homo economicus model has been challenged by substantial empirical evidence showing that human beings are not entirely rational in their economic decision making, and are prone to cognitive biases and sociological factors. Herbert Simon proposed the concept of “bounded rationality” to describe the limitations of human rationality. The behavioural economics movement also sought to incorporate psychological insights into economic analysis, to construct more realistic models of human behaviour.

The validity of the homo islamicus model has also been questioned for being overly idealistic and not necessarily reflecting the actual behaviour of Muslim economic agents, who are profoundly shaped by the modern social context.

Homo economicus concept is characterized by the assumption that everyone will always act to maximize his/her personal gain, driven by selfish interests and preferences.

Authors note that substantial empirical evidence indicates that people do not always act solely based on narrow material self-interest, but are also influenced by factors such as altruism, justice, and reciprocity norms.

Highlighting the morally-neutral behaviour of homo economicus, authors give the example of illegal gold mining in Africa that uses underage child labourers with low wages and very poor working conditions, or textile factories in Bangladesh that force their workers to work overtime for hours in unfit conditions just to meet production targets.

In contrast, author explains that homo islamicus is moderate, thrifty and considers the interests of the wider consumption patterns. He sets aside some income for alms or endowments whose benefits can be felt by the wider community.