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.

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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?

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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)
 

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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.

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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)
 

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

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


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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.