It turned out that actual people didn’t behave like the imaginary proxy. Economists are learning that the poor and the wealthy respond differently to austerity

It turned out that actual people didn’t behave like the imaginary proxy. Economists are learning that the poor and the wealthy respond differently to austerity and stimulus. This could present challenges to politicians. If people behave differently, then policy might have to treat them differently. Preference heterogeneity by itself does not imply anything about rationality. However, that is not to say the topic is so simple. We know this empirically by looking things like revealed preference for risk taking. One example might be propensity to take risky bets, despite known zero/negative NPV expected values. These people are happy to buy earnings Vol because the distributions on the downside has such little variation (poor today = poor tomorrow). Whereas a middle class person can make more use of the savings (investment opportunities are greater, and the downside risk of less savings is too), on the one hand, and is not so desperate for upside on the other (even if its just the psychic hit of the "chance" to be rich).