Very well put. And, as hard as it is to capture all those nuances in an equation or a model, the biggest problem is that there are too many theorists, and common people, believing that the "real market" is the one that comes out of the theory - with its completely unrealistic homo economicus - and not the real markets, those which develop in the real world and are so much more complicated, non linear, and working on human reactions.
A theory can be useful in dealing with complex situations. But believing that the theory can become the reality is the same mistake that marxists made.
Homo economicus is real. Economics is useful and its really important (though imperfect) way f understanding the complex interactions between people all over the world.
The problem is that we are not homo economicus. We are Homo Sapiens. Europeans & Mexicans & Italians and Londoners. Some of us are even Americans. We are also brothers and lovers and criminals and parents.
Homo Economicus is a a description of a certain set of homo sapiens character traits.
@netcan allow me to disagree. People make part of their choices partially basing them on rational reasoning (and, even for that part, mostly based on incomplete data and often faulty logic). But just check what works in marketing and you'll see how limited that rationality really is.
I mean "exists" in a pretty weak sense. If you present people with complex economic choices, they make rational choices and maximise their economic utility. IE if they are using second hand computers running hacked up linux to play movies on their TV and a good, cheap alternative presents at a lower price, most will eventually switch to that.
Describing them as such allows us to predict their behaviour.
A theory can be useful in dealing with complex situations. But believing that the theory can become the reality is the same mistake that marxists made.