From the Economics of Choice to the Economics of Human Development: Reconsidering the Economic Agent in the Age of AI

Economics has developed sophisticated accounts of how individuals make choices, yet it has devoted comparatively little attention to how individuals become capable of choosing meaningfully. While the capability approach expanded economic evaluation beyond utility and resources, and provides conceptual space for further extension, it leaves the developmental formation of agency under-theorized: it specifies the opportunities available to persons without fully explaining how the capacity to exercise those opportunities is formed. This article argues that agency formation, the developmental process through which persons acquire the capacity for self-directed choice, should be treated as a distinct object of economic evaluation. Drawing on the capability approach as a normative foundation, Archer’s account of reflexivity as a developmental mechanism, and Akerlof and Kranton’s analysis of identity costs as constraints on self-direction, the article develops a three-dimensional evaluative criterion that assesses capabilities, agency, and agency formation simultaneously. The criterion evaluates economic institutions not only by the opportunities they generate but by whether they cultivate or suppress the developmental processes through which agency emerges. Artificial intelligence serves as a theoretical stress test: by increasingly substituting algorithmic systems for human deliberation, it exposes the inability of choice-centered evaluation to register developmental losses associated with the outsourcing of judgment. An application to formal schooling demonstrates how this evaluative approach generates conclusions that neither human capital theory nor the capability approach can produce on their own.