Economics makes one assumption that is flat-out wrong, that people are rational in the economic sense. They aren’t, and have never been rational in their purchasing patterns.
The only thing a person absolutely needs to have:
Shelter, food, clothing. Nothing else.
The “toys” that people buy, are not needed, they are simply wanted. Why does anyone need a car with a 300HP engine and a top speed of 140+ mph? There is no where in this country that a person could drive that fast. It is wasteful and ignorant to purchase such a vehicle, but people buy what they WANT, not what they NEED. IMO.
“Economics makes one assumption that is flat-out wrong, that people are rational in the economic sense.”
That’s certainly one problem, but as pointed out in the article, part of the deeper problem is defining what is “rational” from the standpoint of measuring economic success.
For example, the bankers who continued to receive fat compensaon packages during the bailout had a economic perspective from which both the compensation and the bailouts were “obviously” rational in terms of economic efficiency.
And as a result, you can read pieces on editorial page of the Wall Street Journal which *still* do get why so many conservative voters are furious over the bailouts.
In context of economics, when it’s said that people are rational, it means that they act in rational ways (i.e. use available knowledge to coordinate, plan, etc.) towards desired ends.
An end itself may seem rationally desirable to that individual, but not necessarily to another. Given that every individual is subject to differing sets of values & preferences, and so forth.