The term “Homo Economicus” can be traced back to the 19th century, when critics of John Stuart Mill attacked him for creating a monomaniacal economic man concerned only with the accumulation of money. The term is literally translated as “Economic Man” and speaks to people as seen in the framework of economic theories where they display perfect decision-making, complete rationality and also have access to perfect information.
To summarise the defining traits, I will quote categories from Effectiviology who explains there are several distinct traits that generally characterize the homo economicus – but I will also contrast these traits with the watch collector:
- Flawless rationality. The homo economicus can make decisions in a perfectly rational manner, without being influenced by any biases. The watch collector, unless living in a cave with no internet access, is simply never going to be able to free themselves of external biases. Time and again, new ‘hype trains’ emerge, and collectors can’t help themselves from buying a ticket to get onboard.
- Unlimited cognitive capacity. The homo economicus can process any amount of information that they have, regardless of the quantity, quality, or complexity of that information. The watch collector, simply has insufficient bandwidth to do this meaningfully. Everyone has preferences with regards to colours, shapes, and designs… and everyone has different wrist sizes too, making certain choices good for some, and poor for others. Watch collectors therefore find themselves inherently narrowing down their ‘field of vision’ to better align with their own preferences – this, inherently, creates their own unique bias when it comes to evaluating the choices that exist out there!
- Perfect information. The homo economicus has access to all the relevant information pertaining to the decisions that they have to make. For the watch collector, as I have discussed before, there is no such thing as perfect information in the watch-world. Whether it is access to historical sales data, or accurate data about production quantities, supply and demand… all of this is largely heresy when public – so incomplete information is par for the course in terms of watch collecting.
- Narrow self-interest. The homo economicus is only interested in helping themself, and doesn’t care about anyone else. For the watch collector, this may have been disputable few years ago, when watches weren’t seen as ‘investments’ by many – you could go onto a forum and get a good deal on a pre-owned watch from a fellow collector who was happy to see the watch go to another enthusiast… but today, I think this point doesn’t apply to watch collectors either, at least 90% of the time. If you got a call for a steel Rolex Daytona today, and you hated it, what are the odds of you letting another friend who loves it, buy it at retail instead?
- Focus on maximizing utility and profit. The primary goal of the homo economicus is to maximize utility if they’re a consumer and profit if they’re a producer. For the watch collector, similar to the previous point, I would say this is one which has changed in the last few years… Watch collectors were just another type of hobbyist before – enabling one another and always ready to help – today, I would say that many ‘new’ collectors actually fit firmly into this category, above all else; indeed, many have recently entered into the hobby solely for the pursuit of profit.
- Preference consistency. The homo economicus’ preferences and goals remain relatively consistent over time. In terms of the watch collector, this is a place where older collectors display strong preference consistency, as they had time to define and hone their views on their own preferences, before price and value mattered. Today, you will hear people changing their tune regarding preferences every other month, suddenly loving what they hated etc… this isn’t ‘wrong’ – but with exposure to social media and many similar reverberation chambers, one can easily find that your preferences are altered through the concept of ‘Nudging’ – which we can look into, in further detail, as a separate topic.
The idea that this model accurately reflects how humans actually behave seems far fetched, and this has indeed been disproven. Here’s a relevant quote:
“If you look at economics textbooks, you will learn that homo economicus can think like Albert Einstein, store as much memory as IBM’s Big Blue, and exercise the willpower of Mahatma Gandhi. Really. But the folks that we know are not like that. Real people have trouble with long division if they don’t have a calculator, sometimes forget their spouse’s birthday, and have a hangover on New Year’s Day. They are not homo economicus; they are homo sapiens.”“Nudge: Improving Decisions About Health, Wealth, and Happiness“, by Richard Thaler and Cass Sunstein
With that being said, the key takeaway at this point is to realise that while the overall homo economicus model is perhaps flawed in its application to observed behaviour, there are perhaps varying degrees to which it could partially apply. By way of a simple example… a person may very well be making decisions to maximise profit, even when they claim this not to be the case. This sounds like a statement of the obvious – but in the watch collecting game, there are those who claim to like a piece, or who suggest they wanted something for a long time – yet, even if this isn’t something they’re prepared to admit to themselves… the only reason they liked it or wanted it, is because of the potential profit it would yield for them.
The next topic will be the Nudge… – i.e. small and benign inducements to behaviour and choices – they pervade society, but you may barely notice them. Should be interesting, in the context of watch collecting!
Until next time… feel free to post feedback or suggest future topics in the comments below.