I just started a community college class on macroeconomics, and they mention this concept of assuming people are rational - "which means they have well-defined goals and try to fulfill them as best they can". With your knowledge of psychology and economics, how accurate would you say that is (and, if possible, what ways to study economics would you recommend in the stead of this class)?
people are rational - “which means they have well-defined goals and try to fulfill them as best they can”.
No. Economic rationality assumes that all agents are;
(2) Seek to make themselves as well off as possible
(3) And with the least amount of effort
how accurate would you say that is
Key to that definition is the word “agent” which is any decision-making entity in an economic model. Accuracy depends on who or what the agent is. Consumers are highly irrational and erratic where corporations are supremely rational, models however, have both behaving at the same level of rationality (which causes a side eye when reality violates said assumptions.)
So yes and no. Businesses tend to be more or less economically rational, but individual consumers are not. Their decisions are not math-based, they rely on heuristics, are alarmingly influenced by framing and etc. A business detaches the human element which is the primary explanation – but they still do a lot of stupid shit. Because Economic Rationality =/= actual rationality. It’s just a subset of behaviors.
what ways to study economics would you recommend in the stead of this class
The Economics Book feels like a ba rather than a bs, which imo is the way to start. Everything else is going to throw numbers and technical terms at you. After that do Barron’s. This is real economics but without the overcomplication. Includes a glossary at the back + practice problems and answers.
Read Smith, Marx, Keynes, Hayek, Friedman, Rand, etc. Dive into the classics.