In economics we assume two things: that the market participant has perfect information and then on pondering all this information they make a rational decision. Everyone also appreciates that this is a simplification used to make assumptions, discuss theories and as a helpful tool in considering more complex situations. Perfect information implies that we know everything about every alternate option for the decision we are making. The idea of knowledge is integral to this, for every decision we make is based on what we know about our choices. This is true for every decision ever made in the past and presently, however, more recently the availability of information has changed drastically.

The expansion of technological abilities of the human race has been vast in the last century. Previously, decisions economic or otherwise were based on word of mouth and personal knowledge. Loans were assured by friends and goods were bought by recommendations or proximity. Whilst these methods of decision making are not ignored today there is more information out there about anything and everything than there ever was before. With access to the internet the assumption of perfect information is more and more realistic. The market participant can access almost perfect information when choosing a product. The modern world has allowed us to be very close to having perfect information should be choose to acknowledge it. Therefore, knowledge plays a vital part in modern economics, recording past choices and having access to other people choices allows us to make more informed decisions in the present.

On the other hand, you can consider all the information and have all the knowledge in the world and still make an irrational decision. It can be argued that there are more factors to making a decision than just knowing all the options and choosing the one with the best economic outcome. Our emotions and influencing circumstances have come to guide our heads more than rationale. For example, if your do not need a top, economic logic suggests that you would not purchase one. However, if there is a top on sale, our surroundings imply not that you are losing £15 as the purchase is not necessary but gaining £10 on the sale price of this £25 top. Situations which are shown from a positive outlook are more appealing than saying the same thing from an equal but negative outlook: 30% success is better than 70% failure; although rationally they are the same.

This suggests that we are simply at the whim of our surroundings and that knowledge plays only a small part in modern economics; that the remainder of economics is the decision of marketing ploys. However, I disagree, individuals have the choice to act rationally if they are aware that it is possible. Additionally, the increased prevalence of technology should encourage people to make more rationally informed decisions.