REMM takes, REMM rejects. REMMs are everywhere.
We argue that the explanatory power of REMM, the resourceful, evaluative, maximizing model of human behavior, dominates that of all the other models summarized here. To be sure, each of the alternative models captures an important aspect of behavior, while failing in other respects. REMM incorporates the best of each of these models.
From the economic model, REMM takes the assumptions that people are resourceful, self-interested, maximizer, but rejects the notion that they are interested in only money income or wealth.
From the psychological model, REMM takes the assumption that income elasticity of demand for various goods has certain regularities the world over. Nevertheless, in taking on this modified notion of a hierarchy of needs, it does not violate the principle of substitution by assuming people have “needs.” From the sociological model, REMM takes on the assumption that “society” imposes costs on people for violating social norms, which in turn affect behavior; but it also assumes that individuals will depart from such norms if the benefits are sufficiently great. Indeed, this is how social change takes place.
From the political model, REMM takes on the assumption that people have the capacity for altruism. They care about others and take their interests into account while maximizing their own welfare. REMM rejects, however, the notion that individuals are perfect agents.
In using REMM, detail must be added (as we have done implicitly in the examples above) to tailor the model to serve as a decision guide in specific
circumstances. We must specify more about people’s tastes and preferences that are relevant to the issue at hand—for example, by making explicit assumptions that people have a positive rate of discount for future as opposed to present goods, and that they value leisure, as well as intangibles such as honor, companionship, and self realization. Finally, combining these assumptions with knowledge of the opportunity set from which
people are choosing in any situation (that is, the rates at which people can tradeoff or substitute among various goods and bads), leads to a powerfully predictive model. REMM is the basic building block that has led to the development of a more or less unified body of theory in the social sciences. For example, some economists, like recent Nobel Laureate Gary Becker, have applied REMM in fields previously reserved to sociologists such as discrimination, crime, marriage, and the family. Political scientists in company with economists have also employed utility-maximizing models of political behavior to explain voter behavior and the behavior of regulators and bureaucrats. Still others are using REMM to explain organizational problems inside firms. For all its diversity, this growing body of research has one common message: Whether they are politicians, managers, academics, professionals, philanthropists, or factory workers, individuals are resourceful, evaluative maximizers. They respond
creatively to the opportunities the environment presents to them, and they work to loosen constraints that prevent them from doing what they wish to do. They care about not only money, but almost everything—respect, honor, power, love, and the welfare of others. The challenge for our society, and for all organizations in it, is to establish rules of the game and educational procedures that tap and direct the creative energy of REMMs in
ways that increase the effective use of our scarce resources.
REMMs are everywhere.