Economic models help explain the processes of acquisition, distribution and consumption of resources in society. However, any theoretic construct requires a number of variables to be consistent in order to create a summative conclusion. In the case of economic models, the most complex variable is human behavior. People are driven by many factors, which include the necessity to eat, sleep, have relationships, prestige, and other needs, which force them to act one way or another. Many such actions are entirely rational and can be explained with logic. However, many others are driven by emotions and cannot be rationalized.
Therefore, rationalization is the first behavior economists should observe. The more emotionally aware and psychologically stable a person is, the more likely they are to use logic in their decisions whether economic or personal (Dolfin et al., 2017). Such societies can be analyzed with simple rules, such as demand creates offer. If people lack the means to satisfy some of their needs, they will either create such means or acquire the necessary resources from outside sources. In either case, the economic model is not complex and understandable.
However, people with low emotional self-control are less likely to follow rational reasoning. The less self-sufficient a person is, the more sensitive they will be towards their weaknesses. Therefore, it can be reasoned that they will be more likely to engage in the spontaneous acquisition of resources and agree to disadvantageous conditions. For these societies, rules, which consider the irrational nature of people are more applicable, such as overvaluing one’s needs (Dolfin et al., 2017). The subsequent economic model will analyze people based on their overall economic sustainability, which determines the emotional aspect of decision-making.
Reference
Dolfin, M., Leonida, L., & Outada, N. (2017). Modeling human behavior in economics and social science. Physics of Life Reviews, 22, 1-21. Web.
