> An even more accurate premise is that in some common and important interactions, people tend to be on average be approximately well-informed
I think that's often an unwarranted step to take - I'm MUCH more comfortable with the "act as if" formulation than I would be asserting that people actually are even approximately "well-informed" in most contexts. (Or "rational", for that matter.)
To illustrate the problem, consider an industry which is at least somewhat competitive. There is a wide range of available business strategies. Some of these strategies are dumb, but it might not be obvious which. Companies still have to make decisions, so they pick strategies. They might copy a market leader, flip a coin, hire physicists, hire astrologers...but somehow they PICK A BUSINESS STRATEGY.
After a few years, the businesses that happened to pick a particularly DUMB strategy go bankrupt; their businesses collapse and get bought; resources get reallocated to better use.
After many rounds of this game, a LOT of fragile, unlucky, or dumb business strategies have failed. A few remain that seem to work pretty well, and every company still going is trying to follow one of the more-successful strategies.
We now have some idea which strategies work but don't necessarily know WHY. There is institutional wisdom ("we've always done it THIS way") in the winners that they themselves might not understand.
In short, the economic environment (given some simple premises) tends to select for being efficient, regardless of whether people understand why what they are doing is efficient. Figuring it all out does probably happen eventually, but the order of cause and effect might be reversed - you try out the strategy, see that it works, scale it up and perhaps THEN figure out why it works. That's why I can describe companies as acting "as if they were rationally well-informed" even though I know that the individuals involved not only do indeed have a bunch of random "behavioralist" biases (the usual criticism) but in many cases they may actually lack conscious deliberate knowledge of why they do what they do.
I think that's often an unwarranted step to take - I'm MUCH more comfortable with the "act as if" formulation than I would be asserting that people actually are even approximately "well-informed" in most contexts. (Or "rational", for that matter.)
To illustrate the problem, consider an industry which is at least somewhat competitive. There is a wide range of available business strategies. Some of these strategies are dumb, but it might not be obvious which. Companies still have to make decisions, so they pick strategies. They might copy a market leader, flip a coin, hire physicists, hire astrologers...but somehow they PICK A BUSINESS STRATEGY.
After a few years, the businesses that happened to pick a particularly DUMB strategy go bankrupt; their businesses collapse and get bought; resources get reallocated to better use.
After many rounds of this game, a LOT of fragile, unlucky, or dumb business strategies have failed. A few remain that seem to work pretty well, and every company still going is trying to follow one of the more-successful strategies.
We now have some idea which strategies work but don't necessarily know WHY. There is institutional wisdom ("we've always done it THIS way") in the winners that they themselves might not understand.
In short, the economic environment (given some simple premises) tends to select for being efficient, regardless of whether people understand why what they are doing is efficient. Figuring it all out does probably happen eventually, but the order of cause and effect might be reversed - you try out the strategy, see that it works, scale it up and perhaps THEN figure out why it works. That's why I can describe companies as acting "as if they were rationally well-informed" even though I know that the individuals involved not only do indeed have a bunch of random "behavioralist" biases (the usual criticism) but in many cases they may actually lack conscious deliberate knowledge of why they do what they do.