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.