Revealed Preferences (people are liars)
 

Picture this. You have a magical genie. Your wish is his command and anything you say you want done will be done instantly. I presume you'd make some pretty crazy demands, statues made of gold rivers of beer etc. Now picture this every single decision you make have a cost attached to it either a tangible cost or an opportunity cost. Suddenly that golden statue seems a little wasteful no? When people say "I want X to happen" what they are usually saying is "I want somebody who isn't me to make X happen for me". Thus you get the government, a group of individuals who make a living out of selling promises. They are the magical genie that never delivers.

This is the fallacy people fall into when they describe "market failures" they put what actually happens in the market against what people SAY they want to happen this is of course a huge fallacy. What people say they want to happen has been proven again and again to to contrary to what their actions reveal about their true preferences. Most people say they care about starving African children a small minority give money, a fractionally smaller minority spend time researching the topic and realizing that the way to help them out is to get rid of the warlords and murders who suck up all the aid.

You can't take what someone says they want for granted because when people talk about the state getting involved they are saying if I had a genie this is one of the things I'd wish for. When stuff has no cost we can all wish for free ponies. When we have to take opportunity costs into account those ponies don't look so cool anymore.

The war in Iraq, gay marriage laws, drug prohibition they are all caused by the fallacy of the genie.

Re: Revealed Preferences (people are liars)
 

The other possibility is that people are actually stupid/lazy/greedy/short sighted or simply uninformed and don't understand how their actions lead to various outcomes. Which means that people CAN want something in the long term but don't know or understand enough to make it happen.

The other larger point is that people have competing priorities, between cost and morality, between cost and risk, between the long term and the short, between individual gain and the good of all, between power and money, and they often pick an irrational choice that doesn't fit their goals at all.

The above can and does cause failure. The AP scandal is an excellent example of the last one. Gas guzzling SUVs are an excellent example of the second last. Buying the products of forced labor are an excellent example of the first.

The bottom line: People can SAY what they want to happen and actually want that to happen, but fall into numerous fallacies (i.e. "I'm only one person, what difference does my tiny contribution make" ), irrational tradeoffs, or poor understanding of the available information or its consequences. This has to the potential to cause complete social failure without intervention. Do you disagree?

Re: Revealed Preferences (people are liars)
 

Being lazy greedy and short sighted are their revealed preferences. That's exactly my point. In the Internet age (in the west) being uninformed is a choice too.

Competing priorities is exactly what I'm saying the sad fact of the matter is that the priority of being stupid and lazy trumps all the rest again and again.

Re: Revealed Preferences (people are liars)
 

Lol. Pretense of knowledge FTW.

[ QUOTE ]
The bottom line: Politicians and bureaucrats can SAY what they want to happen and actually want that to happen, but fall into numerous fallacies (i.e. "I know what's best for everyone, regardless of their individual means and ends and the laws of economics be damned!" ), irrational tradeoffs, or poor understanding of the available information or its consequences. This has the potential to cause complete social failure from intervention. Do you disagree?

[/ QUOTE ]

Re: Revealed Preferences (people are liars)
 

You are assuming that actions always are indicative of preferences, which is a core AC assumption that is not universally accepted.

It also ignores that more complete information might change people's preferences, and that if sellers have a vested interest in withholding information, consumers preferences may be influenced.

Eg in this case, at least so far, it would appear that PS and FT have made a decision that the doubt raised about the entire industry by more widespread exposure of AP would hurt the market overall more than it would shift business away from AP and toward them. Ie they are influencing the preferences of the market, not adapting their business to "absolute" preferences.

Re: Revealed Preferences (people are liars)
 

phil, if what you are saying is true, why do states have such destructive results on society?

edit- part of the whole point of AC is that these negative effects of government can be predicted. government will always seek more power, create false threats, perpetual warfare/welfare, etc.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
The other possibility is that people are actually stupid/lazy/greedy/short sighted or simply uninformed and don't understand how their actions lead to various outcomes.

[/ QUOTE ]

I agree with this, but you think governments are needed to help with this. I think governments are, at least, partly responsible for people being this way. I want government regulation reduced so people learn to be more responsible. It's like a teenage kid whose parents give them a car, they go out drive it into the ground and wreck it. Then the parents go out and buy them another one, no questions asked. The kid isn't going to learn and the irresponsible behavior is going to continue.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
You are assuming that actions always are indicative of preferences, which is a core AC assumption that is not universally accepted.

[/ QUOTE ]

So I'm going to choose to do something that I would prefer not to do? Tell me more.
[ QUOTE ]

It also ignores that more complete information might change people's preferences, and that if sellers have a vested interest in withholding information, consumers preferences may be influenced.


[/ QUOTE ]

It's not ignoring, it it's fully incorporated. People are not actively seeking information they are not saying we won't use your service till you give us more information they don't care about having more information. That's their revealed preference.

Re: Revealed Preferences (people are liars)
 

I'm disagreeing that their stupidity or laziness or lack of information reveal their true preferences. People are subject to numerous fallacies and irrationalities.

Let's take a few examples.

Lack of insight
- Nerd wants to get laid before he's 20. This is really, really important to him. However, he never approaches girls or tries to improve his social skills, because he's unable to understand the solid empirical link between doing this and getting laid.

Lack of information
- A mother really doesn't want children to work in factories. If she saw children working, and knew the name of the company, she would be appalled and never buy their products again. However, she is unable to get information on any products produced in another country as they go through several sets of hands before ending up in her Walmart. Companies don't voluntarily disclose this information (or do so fraudulently) because it saves them a lot of money (which their shareholders want).

Poor assessment of risk
AJ Green (part owner of Absolute) wants to be very wealthy and live an awesome life. He already has millions, and thinks he can get away with cheating people on his poker site which is worth hundreds of millions of dollars over the next ten years. The maximum profit he can gain from cheating is a couple of million. Yet he cheats anyway. His desire for security and profit would make the rational choice not to cheat - and yet he did because of his terrible assessment of risk.

There are heaps more.

Re: Revealed Preferences (people are liars)
 

Stupid genie.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
So I'm going to choose to do something that I would prefer not to do? Tell me more.

[/ QUOTE ]

First, people sometimes have no preference and still take action.

Second, people's preferences are frequently formed on faulty information and therfore their actions don't represent the action they would take in their own self-interest.

Third, even when fully informed people sometimes act against their own preferences.

Re: Revealed Preferences (people are liars)
 

But of course magical angelic omnipresent, omniscient, omnibenevolent bureaucrats and politicians suffer none of these failings.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
I'm disagreeing that their stupidity or laziness or lack of information reveal their true preferences. People are subject to numerous fallacies and irrationalities.

Let's take a few examples.

Lack of insight
- Nerd wants to get laid before he's 20. This is really, really important to him. However, he never approaches girls or tries to improve his social skills, because he's unable to understand the solid empirical link between doing this and getting laid.

[/ QUOTE ]

He values not getting rejected and not reading/practicing all that PUA crap over getting laid. That's his revealed preference.

[ QUOTE ]

Lack of information
- A mother really doesn't want children to work in factories. If she saw children working, and knew the name of the company, she would be appalled and never buy their products again. However, she is unable to get information on any products produced in another country as they go through several sets of hands before ending up in her Walmart. Companies don't voluntarily disclose this information (or do so fraudulently) because it saves them a lot of money (which their shareholders want).

[/ QUOTE ]

She values cheap products over the costs of finding out that the company is employing children either through information searches or finding companies that promise no child labour (or setting one up herself). Those are her revealed preferences.

[ QUOTE ]

Poor assessment of risk
AJ Green (part owner of Absolute) wants to be very wealthy and live an awesome life. He already has millions, and thinks he can get away with cheating people on his poker site which is worth hundreds of millions of dollars over the next ten years. The maximum profit he can gain from cheating is a couple of million. Yet he cheats anyway. His desire for security and profit would make the rational choice not to cheat - and yet he did because of his terrible assessment of risk.

There are heaps more.

[/ QUOTE ]

He values the quick buck over the long term cash. Those are his revealed time preferences.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
[ QUOTE ]
So I'm going to choose to do something that I would prefer not to do? Tell me more.

[/ QUOTE ]

First, people sometimes have no preference and still take action.

Second, people's preferences are frequently formed on faulty information and therfore their actions don't represent the action they would take in their own self-interest.

Third, even when fully informed people sometimes act against their own preferences.

[/ QUOTE ]

You two aren't using the same definitions. Either fix it or stop wasting your time.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
[ QUOTE ]
So I'm going to choose to do something that I would prefer not to do? Tell me more.

[/ QUOTE ]

First, people sometimes have no preference and still take action.

Second, people's preferences are frequently formed on faulty information and therfore their actions don't represent the action they would take in their own self-interest.

Third, even when fully informed people sometimes act against their own preferences.

[/ QUOTE ]

I don't think you understand the word preference.

Re: Revealed Preferences (people are liars)
 

So basically your argument is:

"Point to something everyone can agree is negative"

"Demand that people give their freedom and choices over to me for their own goddamn good, I know what is best. I will be a benevolent dictator, I promise."

"Profit"

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
So basically your argument is:

"Point to something everyone can agree is negative"

"Demand that people give their freedom and choices over to me for their own goddamn good, I know what is best. I will be a benevolent dictator, I promise."

"Profit"

[/ QUOTE ]
Nope. I'm responding to the rather dubious assertion that people's actions are in line with their true values and desires. This is frequently not the case, and I'm giving reasons why

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
Lol. Pretense of knowledge FTW.

[ QUOTE ]
The bottom line: Politicians and bureaucrats can SAY what they want to happen and actually want that to happen, but fall into numerous fallacies (i.e. "I know what's best for everyone, regardless of their individual means and ends and the laws of economics be damned!" ), irrational tradeoffs, or poor understanding of the available information or its consequences. This has the potential to cause complete social failure from intervention. Do you disagree?

[/ QUOTE ]

[/ QUOTE ]
Yes, I disagree. Advanced societies such as those in the West have elaborate systems of oversight and corroboration built by very intelligent people (things like a constitution, bills of rights, houses of parliament, separation of powers, election procedures).

[ QUOTE ]
"I know what's best for everyone, regardless of their individual means and ends and the laws of economics be damned"

[/ QUOTE ]
When there are shared goals and finite goods, someone has to make that decision. Under any system, there can only be one road going past the front of yours and your neighbor's house. Between you, you have to decide how to manage it. Similarly, there is only one Yellowstone. Management has to be delegated to someone on behalf of all, and that someone will suffer from all the problems you describe.

I happen to think that a solid political system is the best way of ensuring that such decisions get made in the public interest without majorly hurting personal liberty. You may disagree.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
I'm responding to the rather dubious assertion that people's actions are in line with their true values and desires.

[/ QUOTE ]

I don't think this is so except for situations where people's desires are irrational (e.g. I want a 5,000 square ft house in my neighborhood in Toronto for under $400,000, but if I don't "act" on that it's not because me actions don't reflect my desires).

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
[ QUOTE ]
So basically your argument is:

"Point to something everyone can agree is negative"

"Demand that people give their freedom and choices over to me for their own goddamn good, I know what is best. I will be a benevolent dictator, I promise."

"Profit"

[/ QUOTE ]
Nope. I'm responding to the rather dubious assertion that people's actions are in line with their true values and desires. This is frequently not the case, and I'm giving reasons why

[/ QUOTE ]

And what happens after you "prove" that people's actions are not in line with their "true values and desires"? You fix this by forcing choices upon them for their own good. What other way are you going to fix this?

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
So I'm going to choose to do something that I would prefer not to do? Tell me more.

[/ QUOTE ]

First, people sometimes have no preference and still take action.

Second, people's preferences are frequently formed on faulty information and therfore their actions don't represent the action they would take in their own self-interest.

Third, even when fully informed people sometimes act against their own preferences.

[/ QUOTE ]

I don't think you understand the word preference.

[/ QUOTE ]

I do, and believe you do. You just accept the fallacy that actions always reveal preferences.

they dont

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
You are assuming that actions always are indicative of preferences, which is a core AC assumption that is not universally accepted.

[/ QUOTE ]

Do you have a better way? Mind reading, perhaps?

[ QUOTE ]
It also ignores that more complete information might change people's preferences

[/ QUOTE ]

No it doesn't. Didn't you earlier accuse ACists of relying on assumptions of perfect information? Now you're trying to cricize them for NOT depending on perfect information? Which is it?

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
phil, if what you are saying is true, why do states have such destructive results on society ?

edit- part of the whole point of AC is that these negative effects of government can be predicted. government will always seek more power, create false threats, perpetual warfare/welfare, etc.

[/ QUOTE ]

Of course, when Phil is ruling he will be able to avoid those faults.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
And what happens after you "prove" that people's actions are not in line with their "true values and desires"? You fix this by forcing choices upon them for their own good. What other way are you going to fix this?

[/ QUOTE ]
This is correct, but only in certain areas. People can drink, and smoke, and waste their time, and associate with criminals, and undertake bad deals, and go bankrupt. The intervention "for their own good" only occurs in certain areas, and a weighting toward those areas which affect multiple people at once and have adverse social effects. Namely:

- Food & drug safety
- Policing
- Environmental protection and preservation
- National defense
- Fraud prevention
- Diplomacy
- Basic health care for the poor
- Basic education

Government doesn't do a perfect job on these. Far from it. But the system largely works, and that's good enough for me.

And it's hilarious to me to think that the same people who voted in George Bush will do a better job on these items than the government if working via individual choice.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
I'm disagreeing that their stupidity or laziness or lack of information reveal their true preferences. People are subject to numerous fallacies and irrationalities.

Let's take a few examples.

Lack of insight
- Nerd wants to get laid before he's 20. This is really, really important to him. However, he never approaches girls or tries to improve his social skills, because he's unable to understand the solid empirical link between doing this and getting laid.

[/ QUOTE ]

You're only looking at one side of the coin. You're ignoring his preferences when it comes to rejection.

He prefers, given his situation at the time he acted, to not approach girls rather than risk humiliation/rejection. THat risk outweighs the potential reward of scoring. Regardless of what he says. If the reward outweighed the risk in his mind, he would act accordingly.

[ QUOTE ]
Lack of information
- A mother really doesn't want children to work in factories. If she saw children working, and knew the name of the company, she would be appalled and never buy their products again. However, she is unable to get information on any products produced in another country as they go through several sets of hands before ending up in her Walmart. Companies don't voluntarily disclose this information (or do so fraudulently) because it saves them a lot of money (which their shareholders want).

[/ QUOTE ]

Again, you're ignoring a big part of the equation.

She prefers to risk helping a poor family make more money rather than do the legwork required to find out for sure.

She wants more information with no more expense. But things don't work that way, and that exactly what the OP is getting at.

[ QUOTE ]
Poor assessment of risk
AJ Green (part owner of Absolute) wants to be very wealthy and live an awesome life. He already has millions, and thinks he can get away with cheating people on his poker site which is worth hundreds of millions of dollars over the next ten years. The maximum profit he can gain from cheating is a couple of million. Yet he cheats anyway. His desire for security and profit would make the rational choice not to cheat - and yet he did because of his terrible assessment of risk.

[/ QUOTE ]

He enjoys the psychic thrill of cheating. This argument means that any leisure activity is "irrational." You're reducing everything to a straight dollar equation, which is ironic considering that it's usually ACists who are accused of "worshipping" the dollar above all else.

Re: Revealed Preferences (people are liars)
 

Yes it is all dandy. Until you figure out that a coercion-free society is a far fetch. Bystander effect, groupthink, Stanley Milgram, Solomon Asch, Philip Zimbardo - these are just a few keywords to wiki for too see why.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]

Yes it is all dandy. Until you figure out that a coercion-free society is a far fetch. Bystander effect, groupthink, Stanley Milgram, Solomon Asch, Philip Zimbardo - these are just a few keywords to wiki for too see why.

[/ QUOTE ]

Groupthink. Interesting. Some bad people are out there, and they might hurt other people, so I can feel good about hurting other people myself!

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
He enjoys the psychic thrill of cheating. This argument means that any leisure activity is "irrational." You're reducing everything to a straight dollar equation, which is ironic considering that it's usually ACists who are accused of "worshipping" the dollar above all else.

[/ QUOTE ]
pvn,

You're missing the point, and making mine for me. It's often claimed in these debates that the forces of rationality will restrain people and companies from doing undesirable things and keep a lid on chaos, fraud, and predation. Examples of common AC claims:

- Companies wouldn't do that because they want to maintain a good reputation (assumption of economic rationality)

- Monopolies such as buying up all the roads or local water resources can't happen, because the person who owns the last bit of that resource will charge astronomical prices as it's worth so much (assumption of economic rationality, adequate information, freedom from duress, adequate prediction of value)

- Child rapists will be ostracized from society - so the child rape problem won't be any worse than it is now (too many assumptions to list)

You can't have it both ways.

Apart from that you're missing the broader point relevant to this thread that action and preference can be incongruous with the actions that a person would undertake with a clear head and proper information. The POTRIPPER account would never have pulled that stunt in the tournament if he had adequately assessed risk. He failed. Thus, his actions and preferences became incongruent.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
I'm disagreeing that their stupidity or laziness or lack of information reveal their true preferences. People are subject to numerous fallacies and irrationalities.

Let's take a few examples.

Lack of insight
- Nerd wants to get laid before he's 20. This is really, really important to him. However, he never approaches girls or tries to improve his social skills, because he's unable to understand the solid empirical link between doing this and getting laid.


[/ QUOTE ]

Beauty and the Geek addresses this issue.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
You're missing the point, and making mine for me. It's often claimed in these debates that the forces of rationality will restrain people and companies from doing undesirable things and keep a lid on chaos, fraud, and predation.

[/ QUOTE ]

But nobody, even if they make these claims, claims that it will be 100% effective.

If anecdotal evidence is your "ZOMG GOTCHA" here, then you must agree that statism is a huge failure since every iteration of it has tried to stop murderers, and none has every succeeded. Ditto for theft. And fraud. And predation. And we don't even have to get into the cases where the state itself engages in those practices.

[ QUOTE ]
Apart from that you're missing the broader point relevant to this thread that action and preference can be incongruous with the actions that a person would undertake with a clear head and proper information.

[/ QUOTE ]

But who is disputing this?

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
[ QUOTE ]

Yes it is all dandy. Until you figure out that a coercion-free society is a far fetch. Bystander effect, groupthink, Stanley Milgram, Solomon Asch, Philip Zimbardo - these are just a few keywords to wiki for too see why.

[/ QUOTE ]

Groupthink. Interesting. Some bad people are out there, and they might hurt other people, so I can feel good about hurting other people myself!

[/ QUOTE ]

Not exactly. But if you consider anyone that strays from the view of your ingroup as ignorant, if your group is overly enthusiastic of its beliefs, if you tend to class people differing from the group into a single pool, if you never question the groups beliefs and if your group contains people that shoots down questions of the groups belief - then you are likely groupthinking.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
[ QUOTE ]
You're missing the point, and making mine for me. It's often claimed in these debates that the forces of rationality will restrain people and companies from doing undesirable things and keep a lid on chaos, fraud, and predation.

[/ QUOTE ]

But nobody, even if they make these claims, claims that it will be 100% effective.

If anecdotal evidence is your "ZOMG GOTCHA" here, then you must agree that statism is a huge failure since every iteration of it has tried to stop murderers, and none has every succeeded. Ditto for theft. And fraud. And predation. And we don't even have to get into the cases where the state itself engages in those practices.

[ QUOTE ]
Apart from that you're missing the broader point relevant to this thread that action and preference can be incongruous with the actions that a person would undertake with a clear head and proper information.

[/ QUOTE ]

But who is disputing this?

[/ QUOTE ]

Lol. Economics attempts to form theories on how to achieve the greatest common good. If you don't dispute that mistakes are made due to lack of information, mistakes in an individual's self-assesment of utility and/or irrational actions then you are admitting that economic policy cannot be accurately based solely on "revealed preferences", yet that is a basic tenet of Austrian economics. In fact von Mises goes so far as to reject indifference as being possible, which Caplan thorougly dismantles.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
Economics attempts to form theories on how to achieve the greatest common good.

[/ QUOTE ]

I disagree. "Economics" is a very broad label covering all aspects of studying production and consumption. It may be your goal to use economics to measure common good and optimize it, it is not appropriate for you to substitute that goal for a description of the entire field of study.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
[ QUOTE ]
Economics attempts to form theories on how to achieve the greatest common good.

[/ QUOTE ]

I disagree. "Economics" is a very broad label covering all aspects of studying production and consumption. It may be your goal to use economics to measure common good and optimize it, it is not appropriate for you to substitute that goal for a description of the entire field of study.

[/ QUOTE ]

mmmm...I didnt. I singled out one goal, "attempts to". There was no implication that that was the entire field of study.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Economics attempts to form theories on how to achieve the greatest common good.

[/ QUOTE ]

I disagree. "Economics" is a very broad label covering all aspects of studying production and consumption. It may be your goal to use economics to measure common good and optimize it, it is not appropriate for you to substitute that goal for a description of the entire field of study.

[/ QUOTE ]

mmmm...I didnt. I singled out one goal, "attempts to". There was no implication that that was the entire field of study.

[/ QUOTE ]

Sorry, but my interpretation of "ABC attempts to XYZ" is that the purpose of ABC is to achieve XYZ. The purpose of economics is to study production and consumption. The goal of achieving a social calculus is NOT the purpose of ecnomics, although many individuals may try to use the results of economics to do just that.

Re: Revealed Preferences (people are liars)
 

pvn and borodog,

I'm not sure if the two of you have actually begun to believe that the glib, thoughtless responses you guys trot out every time we have this debate actually constitute an argument.

There are complex issues in economics (particularly the subfield I'm most interested in - behavioral economics) that attempt to detail the various phenomena brought up in this thread. Yet the two of you continue to somehow believe that you are above all this petty academic research, that somehow your overarching dogma takes care of everything. And, before you can object about fallacies of straw men and appeals to authority, I'm gonna tell it like it is.


The fact is, time-dependent preferences are a tricky issue in economics. How should I, as an economist, weigh future utility vs. utility now? How should I, as a human being making choices, weigh future utility vs. utility now? I see no attempt to answer these questions, besides simply "this is how person X does it and this is how person Y does it and we can't argue because how could you know better". Well, I do know better, and I won't accept the argument that I don't simply because it is conceivable that I'm wrong.

There is, of course, the easiest place to start: drug addicts. At one moment, an addict might tell you he has the preference to quit drugs. The next moment he's shooting up heroine. What's the deal? Apparently, the drug addict has a "revealed preference" to do heroine. Or, perhaps, in the former moment the drug addict made a very complex calculus of utility across time and decided to quit drugs, only to have his hunger for drugs . This calculus which our brain has evolved to carry out is something that sets humans apart from other animals, and I don't much care for tossing it aside. That we succumb to weakness at times should not invalidate this special talent, nor does it invalidate the results of this calculus.

More generally, there are actions we take that we regret even when they cause our intended results. What does this say about our preferences?

The limitations on our rationality are well studied. We make bad decisions all the time - and I don't mean decisions that I personally find bad. Study after study shows that I will make a different decision on which gambles to accept simply based on how they are phrased or what context they are given in. The same exact problem is presented to me, with the same exact results, and yet I choose differently. What preference has been revealed here, besides a preference for schizophrenic behavior?

As I stated, time preferences are a sticky issue. How to weigh them is difficult. If I need to do X today to achieve Y tomorrow, is it "bad" to do something that only gives me some limited utility today when the payoff from Y is much larger? Economics isn't necessarily geared to handle these questions, but it does well with money. Even in this narrow, limited domain, we humans have our follies.

Is $5 today really worth $50 tomorrow? I might act like it is, but won't I be rather disappointed tomorrow? Does this disappointment, which we can all agree is rather likely, not matter? What if it is shown that people are actually rather receptive to being forced to save money in the future, knowing that, when the time comes, they might act differently if not locked in? What if it is shown that this is actually a very good way of increasing savings rate, which we can all agree is probably good for people as individuals as well as for the economy as a whole?

When are we going to stop with the gimmicky response of "but the politicians know??" and start actually investigating the issue? Do you want to be right, or to be "right"? Instead of appealing to some vision or ideal of humankind, can we try some study? Some exchange of ideas that might lead to better understanding, rather than pointless arguments over fundamental moral assumptions that actually have little to do with the facts?

This post isn't complete, but here it is. Pick apart at will, but know that I won't be responding just for the sake of responding.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
pvn and borodog,

I'm not sure if the two of you have actually begun to believe that the glib, thoughtless responses you guys trot out every time we have this debate actually constitute an argument.



[/ QUOTE ]

WYF are you talking about? [img]/images/graemlins/confused.gif[/img] My participation in this thread has consisted of 2 brief posts pointing out that the failings that Phil153 sees with individuals all apply, except to a far greater degree, to politicians and bureaucrats, whom Phil153 believes are the answer to all the world's woes, and to point out that two posters were starting to talk past each other with different definitions of "preference" and "action" and to tell them straighten it out before they wasted a lot of time yelling about different things.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
pvn and borodog,

I'm not sure if the two of you have actually begun to believe that the glib, thoughtless responses you guys trot out every time we have this debate actually constitute an argument.

There are complex issues in economics (particularly the subfield I'm most interested in - behavioral economics) that attempt to detail the various phenomena brought up in this thread. Yet the two of you continue to somehow believe that you are above all this petty academic research, that somehow your overarching dogma takes care of everything. And, before you can object about fallacies of straw men and appeals to authority, I'm gonna tell it like it is.


The fact is, time-dependent preferences are a tricky issue in economics. How should I, as an economist, weigh future utility vs. utility now? How should I, as a human being making choices, weigh future utility vs. utility now? I see no attempt to answer these questions, besides simply "this is how person X does it and this is how person Y does it and we can't argue because how could you know better". Well, I do know better, and I won't accept the argument that I don't simply because it is conceivable that I'm wrong.

There is, of course, the easiest place to start: drug addicts. At one moment, an addict might tell you he has the preference to quit drugs. The next moment he's shooting up heroine. What's the deal? Apparently, the drug addict has a "revealed preference" to do heroine. Or, perhaps, in the former moment the drug addict made a very complex calculus of utility across time and decided to quit drugs, only to have his hunger for drugs . This calculus which our brain has evolved to carry out is something that sets humans apart from other animals, and I don't much care for tossing it aside. That we succumb to weakness at times should not invalidate this special talent, nor does it invalidate the results of this calculus.

More generally, there are actions we take that we regret even when they cause our intended results. What does this say about our preferences?

The limitations on our rationality are well studied. We make bad decisions all the time - and I don't mean decisions that I personally find bad. Study after study shows that I will make a different decision on which gambles to accept simply based on how they are phrased or what context they are given in. The same exact problem is presented to me, with the same exact results, and yet I choose differently. What preference has been revealed here, besides a preference for schizophrenic behavior?

As I stated, time preferences are a sticky issue. How to weigh them is difficult. If I need to do X today to achieve Y tomorrow, is it "bad" to do something that only gives me some limited utility today when the payoff from Y is much larger? Economics isn't necessarily geared to handle these questions, but it does well with money. Even in this narrow, limited domain, we humans have our follies.

Is $5 today really worth $50 tomorrow? I might act like it is, but won't I be rather disappointed tomorrow? Does this disappointment, which we can all agree is rather likely, not matter? What if it is shown that people are actually rather receptive to being forced to save money in the future, knowing that, when the time comes, they might act differently if not locked in? What if it is shown that this is actually a very good way of increasing savings rate, which we can all agree is probably good for people as individuals as well as for the economy as a whole?

When are we going to stop with the gimmicky response of "but the politicians know??" and start actually investigating the issue? Do you want to be right, or to be "right"? Instead of appealing to some vision or ideal of humankind, can we try some study? Some exchange of ideas that might lead to better understanding, rather than pointless arguments over fundamental moral assumptions that actually have little to do with the facts?

This post isn't complete, but here it is. Pick apart at will, but know that I won't be responding just for the sake of responding.

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It is quite clear to me that you have NO CLUE what my opinions are about any of this. You have some bizarre strawman carricature in your head and have decided that's what I believe. You're wrong. Are you going to tell me NOW that you know better what I believe than I do?

I mean, seriously, What. The. [censored].

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
The fact is, time-dependent preferences are a tricky issue in economics. How should I, as an economist, weigh future utility vs. utility now? How should I, as a human being making choices, weigh future utility vs. utility now? I see no attempt to answer these questions, besides simply "this is how person X does it and this is how person Y does it and we can't argue because how could you know better". Well, I do know better, and I won't accept the argument that I don't simply because it is conceivable that I'm wrong.


[/ QUOTE ]

The problem I have with economists who try to do the social calculus is that they dont factor in the cost of government. They have a particular issue like drug addiction and want to maximize peoples utility (I'll assume your side is right for a moment) even if it goes against their revealed preferences. Then they have a government program that solves it and then they claim to have maximized the actors utility when infact its this theoretical maximum minus the cost of government.

Academic economics doesnt take into account the costs of the Iraq war, fiat money, innefficiency, or corruption. All the models are using a 'pure' form of government. But the problem is, is that once you have a mechanism for forcefully transferring wealth its going to get used to reduce your consumer surplus. So yes, mabey a government can do some things better than a free market. But its like you want to solve the AP scandal and instead we get a war in the middle east. The solution is far more volatile than the original problem.

Re: Revealed Preferences (people are liars)
 

[ QUOTE ]
[ QUOTE ]
The fact is, time-dependent preferences are a tricky issue in economics. How should I, as an economist, weigh future utility vs. utility now? How should I, as a human being making choices, weigh future utility vs. utility now? I see no attempt to answer these questions, besides simply "this is how person X does it and this is how person Y does it and we can't argue because how could you know better". Well, I do know better, and I won't accept the argument that I don't simply because it is conceivable that I'm wrong.


[/ QUOTE ]

The problem I have with economists who try to do the social calculus is that they dont factor in the cost of government. They have a particular issue like drug addiction and want to maximize peoples utility (I'll assume your side is right for a moment) even if it goes against their revealed preferences. Then they have a government program that solves it and then they claim to have maximized the actors utility when infact its this theoretical maximum minus the cost of government.

Academic economics doesnt take into account the costs of the Iraq war, fiat money, innefficiency, or corruption. All the models are using a 'pure' form of government. But the problem is, is that once you have a mechanism for forcefully transferring wealth its going to get used to reduce your consumer surplus. So yes, mabey a government can do some things better than a free market. But its like you want to solve the AP scandal and instead we get a war in the middle east. The solution is far more volatile than the original problem.

[/ QUOTE ]

I haven't said a word about government, have I? But even if we pretend I have, this is just another example of a post that has an assumption in mind and the argument doesn't quite get there.

If you want to actually assume that "my side is right", you can't just stop at saying that "government costs something". True, but where is the actual arithmetic? If "utility saved/increased through government program X" - "cost of government program X" > 0, should we then use this government program? Is this an issue of what is fundamentally right and wrong (government = bad), or an issue of pragmatics?