He is self interested, materialistic, and obsessed with calculating his worth. But who is the rational economic man?
For some time now, I have been searching for “rational economic man”. The hero of the elementary economics textbook, Homo economicus is calculating, self-interested and materialistic. You may not like him but he is the mainstay of economic life.
Or is he? The great robber barons of 19th-century capitalism seem to have been more anxious to build empires than to enjoy the spoils of great wealth. Andrew Carnegie found his fortune burdensome. He became a great benefactor and said that “the man who dies rich dies disgraced”. His rival, John D. Rockefeller, may have done more for economic growth through his philanthropy than through the creation of Standard Oil. He established the University of Chicago – perhaps a mixed blessing – and his foundation supported the evolution of antibiotics and green revolution crops.
Bill Gates does not miss out on comforts. It is said that he can select the temperature of his bath from his car. But there is something odd about his materialism, as you can see from the unfashionable spectacles and the crumpled suit. Even if I had $50bn, I wouldn’t spend it on electronic displays of old master paintings in my house. Gates’s extravagances seem to be attempts to push the limits of his obsession with information technology. If you read his books, you will be in little doubt that what motivate him are silicon chips and the ambition to control the development of the computer industry.
Surely Genghis Khan must qualify as rational economic man. His name is a byword for the unscrupulous pursuit of self-interest and his reputation for rape and pillage unparalleled. Rape, anyway. Genghis had a voracious sexual appetite and bevies of conquered virgins were brought to his tent. But he was less interested in pillage. “I have only one coat,” Genghis wrote, “I eat the same food and am dressed in the same tatters as my humble herdsman.”
That was not true of the late President Mobutu of Zaire, who pillaged more than anyone in recent history. As one American ambassador to his benighted country put it, “Mobutu has not only killed the golden goose, he’s eaten the carcase and made fat from the feathers.” Mobutu salted away billions and owned four villas on the Cýte d’Azur alone.
Yet even Mobutu was more concerned with money as a means to power than as an end in itself. He chose to rule his country for 32 years until his death, rather than retiring to the south of France. His son said: “For him money was simply a means to an end, a way of getting what he wanted.”
Rational economic man might be more naturally attracted to financial services. I ordered Donald Trump’s The Art of the Deal, confident that I would find the true confessions of Homo economicus. What disappointment! Trump’s very first sentence is: “I don’t do it for the money.” He goes on: “I’ve got enough, much more than I’ll ever need. I do it to do it. Deals are my art form.” I should have guessed. I’ve seen the Trump Tower and the Trump Shuttle. Rational economic man is not in search of naming opportunities.
Warren Buffett doesn’t display that sort of vanity. And there can be no doubt that Buffett is deeply interested in money and committed to making as much of it as possible. Yet there is something strange about Buffett’s attitude. His biographer, Roger Lowenstein, explored the issue: “It’s not that I want money,” Warren replied, “It’s the fun of making money and watching it grow.” And that, presumably, is why Buffett still lives in the Omaha bungalow he bought in 1957 and his idea of a good night out is a Nebraskan steak washed down with cherry Coke.
Tom Wolfe described the noise of the trading floor as “the sound of young white men baying for money” – and I turned to Michael Lewis’s account of his time at Salomon for descriptions of the real Sherman McCoy. But the closest approach is the seven-year-old child whose ambition to be an investment banker is cited on the cover. The great aspiration of the characters inside is to be regarded by their fellows as a Big Swinging Dick. As Lewis reports: “What really stung the traders, however, was not their absolute level of pay but their pay in relation to the other bond traders.”
We should not really be surprised at this. Building and running great business empires is hard work. So is conquering most of Asia and Europe, as Genghis did. The incessant dealmaking of a Donald Trump is demanding and even the life of a bond salesman is stressful. People who are highly successful at any of these things are likely to be driven by the need for achievement rather than the need for money.
Rational economic man would maximise the difference between the money he took out and the effort he put in. If you have ever employed someone like that, you will have wanted to let them go. And people who push self-interest to its limits are sociopaths, operating at the boundaries of criminality if not across them. People such as Nicholas van Hoogstraten, the property dealer who has just been convicted of manslaughter. The man who built Britain’s only 20th-century palace, with a mausoleum designed to hold his body and his art collection for 5,000 years. “The only purpose in creating great wealth like mine is to separate oneself from the riff-raff,” he once explained.
Materialistic individualism personified, van Hoogstraten is the nearest approach to rational economic man I have yet found. It will be interesting to see what his psychiatric reports have to say.
B. Gates, The Road Ahead,; Penguin USA, 1996
B. Gates, Collins Hemingway (Contributor), Business @ the Speed of Thought: Succeeding in the Digital Economy; Warner Books, 2000
M. Lewis, Liar’s Poker: Two Cities, True Greed, Hodder and Stoughton, 1989
R. Lowenstein, Buffett: The Making of an American Capitalist; p. 20 Doubleday, 1995
M. Wrong, In the Footsteps of Mr Kurtz: Living on the Brink of Disaster in Mobutu’s Congo p. 20 Fourth Estate 2000
D. Trump Trump: The Art of the Deal p. 1, Random House, 1987