Crikey, very well-written and well-reasoned! I would just add:
(4)(b) Human have perfect information about the world.
In order to make rational choices, producers and consumers need perfect information. This also ignores so much of reality. Again, there are so many examples, but even in a simplified model transaction of buying a loaf of bread includes so many variables that it would be impossible to know them all: All of the bakeries offering bread, the prices they ask for their loaves, the sensory quality of the bread, the nutritional quality, the bakeries’ food safety standards, and so on. Imagine trying to investigate the food safety record for the producer of each item in your typical grocery cart—an impossibility.
Crikey, very well-written and well-reasoned! I would just add:
(4)(b) Human have perfect information about the world.
In order to make rational choices, producers and consumers need perfect information. This also ignores so much of reality. Again, there are so many examples, but even in a simplified model transaction of buying a loaf of bread includes so many variables that it would be impossible to know them all: All of the bakeries offering bread, the prices they ask for their loaves, the sensory quality of the bread, the nutritional quality, the bakeries’ food safety standards, and so on. Imagine trying to investigate the food safety record for the producer of each item in your typical grocery cart—an impossibility.
Thanks.
4 was such a big one; I knew I couldn’t do it justice in a shortish post. But it is a fundamental assumption that is very wrong.
You are correct; information asymmetry is one big driver of people making “non-rational” choices.