You're responding to the claim that "classical economics does not actually assert that individual humans behave in a purely rational and fully-informed manner" with an argument that it is impossible for individual humans to behave in a purely rational and fully-informed manner.
The only part of your comment that addresses the actual point of disagreement is "(Actually, classical economics does.)"
As an aside, Keen's argument is silly. "Rationality" does not require that one must perform a search through every possible permutation of items. One might as well claim that it's impossible to draw a straight line from A to B because there are infinitely many lines from A to B we must search through to find the one we're looking for.
>"Rationality" does not require that one must perform a search through every possible permutation of items.
And yet you - or someone, inevitably - is also going to claim that markets are somehow magically "efficient" precisely because they're capable of usefully approximating exactly this kind of optimisation.
So which is it? Is "market efficiency" rational or not?
As for the original claim - of course it's true. Any sane study of the financial industry should make it obvious that the last people you want to manage anything are those who are motivated primarily by profit - precisely because they inevitably lack empathy and awareness of the social costs of their "rational" decisions.
Imagine I argue that, to sort an array of n integers, I must ask myself "is this permutation the sorted array?" for every n! permutations of the integers. Thus it is obvious that humans cannot correctly sort a list of 100 numbers, because even if I could correctly determine whether a given array of 100 numbers is sorted in a single second, it would take 9.3 × 10^157 seconds to sort such an array.
This is clearly silly, because I ignore all the other algorithms for sorting such an array--I assume that the only available option is something comically inefficient. In just the same way, when Steve Keen argues that it's impossible that my purchases are rational because choosing rationally requires me to iterate through every possible bundle and select the best one, he is making big assumptions about the type of problem I face, the tools available, and the meaning of rationality.
> And yet you - or someone, inevitably - is also going to claim that markets are somehow magically "efficient" precisely because they're capable of usefully approximating exactly this kind of optimisation.
As others in this thread have explained, question of whether markets usefully approximate this kind of optimization is distinct from the question of whether individual people perform this optimization successfully. Deviations from efficient markets absolutely occur--the question is what my priors should be. The fact that, for example, it's extremely difficult to reliably identify and profit from financial market inefficiencies suggests that, in fact, markets really do behave astonishingly well, given all that we know about human irrationality.
> >"Rationality" does not require that one must perform a search through every possible permutation of items.
> And yet you - or someone, inevitably - is also going to claim that markets are somehow magically "efficient" precisely because they're capable of usefully approximating exactly this kind of optimisation.
I don't see the problem. To me, it seems perfectly reasonable to say that people (and the market) can usefully approximate the optimization in question, and therefore do not have to search through every possible permutation. That is, I see no contradiction between your quote from the GP, and the efficient market hypothesis (at least, the EMH as a useful approximation).
The only part of your comment that addresses the actual point of disagreement is "(Actually, classical economics does.)"
As an aside, Keen's argument is silly. "Rationality" does not require that one must perform a search through every possible permutation of items. One might as well claim that it's impossible to draw a straight line from A to B because there are infinitely many lines from A to B we must search through to find the one we're looking for.