Bounded rationality

All our economics is based on the assumption of rational consumer behaviour. For example, consumer spending (and GDP) measure the volume of economy because every consumer is rational, and maximizes his/her utility from the incurred expense.

Turn the page to behavioural economics. We make decision from our bounded rationality. For example, we fear the low-probability high-drama incidents more. We are damn scared of radioactie leak from nuclear powerplant but not that much of a road accident. Even when we are told the probabilities, we are still guided by our fears rather than rationality.

I wonder then, is GDP or consumer spending as such, a good proxy for economic activity? How do we know if a given expenditure was useful or wasteful? And if spending is not a good proxy, what is?