Revealed Preferences (people are liars)

[tomdemaine]

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.

[Phil153]

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?

[tomdemaine]

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.

[Phil153]

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.

[Borodog]

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

[tomdemaine]

[ 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.

[owsley]

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"

[Phil153]

[ 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

[pvn]

[ 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.

[Phil153]

[ 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.