Sunday, April 30, 2006

Revealed Preference

In an earlier post I mentioned Frans de Waal, author of the very interesting book Chimpanzee Politics. I just came across an online quote from him on a different topic—ending with:

"And so I usually use it as an example I don’t trust questionaires at all ... you need to pay attention to behavior, behavior is the only thing that tells us what the real preferences are."

So far as I could tell from his book, de Waal does not have a background in economics. He does, however, inhabit the same world we do, and so has reinvented the principle of revealed preference.

Which reminds me of a quote from another author I am fond of: "Any spoke can lead an ant to the hub."


Mike Hammock said...

It's difficult for me to imagine how behavior of the sort Dave Meleney describes could reveal whether or not someone really holds the political beliefs one claims to hold.

One might as well ask "How seriously, then, can we take the claim of Dave Meleney to want to know whether we should take the claims of anarchists who teach at states schools seriously? Could we reasonably expect this poster to offer more in support of his curiousity than his post in the comments of this blog?"

You could argue that the fact that you took the time and trouble to post your questions suggests that you are genuinely curious. But then, one could make the same argument about anarchists who take the time and trouble to argue for anarchy.

Why, for that matter, would teaching at a state school be considered evidence that one does not believe that anarchy would be a desireable system? Why is use of the post office evidence that one does not really believe in anarchism? An anarchist might believe that a private post office would be better, or that a totally private school system would be better. (It's not even clear that Fedex is a good substitute for the post office in the case of letter mail, since the post office enjoys legal protections from competition that make Fedex unable to provide exactly the same service.)

Suppose I prefer Indian restaurants to other kinds of restaurants, but my town has no Indian restaurants. Does the fact that I occasionally eat out mean that, in fact, I do not like Indian restaurants more than other restaurants?

Revealed preference requires choice between available alternatives. It obviously cannot tell us much about preferences we cannot express.

I do not think it is impossible to conclude that a supposed anarchist is lying about his or her beliefs, however. For example, someone who claimed to be an anarcho-capitalist but who consistently voted for socialist candidates would be suspect, in my opinion. (I suppose they could be pursuing some complicated, contrarian strategy, but I don't find that persuasive.) Or perhaps the anarchist cannot articulate or defend his or her position; that would be evidence that this person is not familiar enough with the position to reasonably identify with it.

Perhaps some day there will be an anarcho-capitalist society, and anarcho-capitalists will be able to demonstrate their preferences by moving there.

David Friedman said...

"Do business with the Authority. Do business with the law of gravity too."

(Manny in The Moon is a Harsh Mistress)

James said...

dave meleney,

Revealed preference shows you what happens when a person optimizes acts a set of constraints. Not a bad way to find out what they prefer from within the constrained set of options. It doesn't mean that the same person wouldn't actually prefer to have a different set of constraints to deal with.

E.g., say someone mugs you and then offers to transport your mail for a penny. If you use their courier services rather than the USPS or UPS, does that mean you've reavealed a preference for mugging? Or does it just mean that given the constraints created by the mugger you still prefer to save on postage?

Mike Hammock said...

Dave, I think you're confused about what an anarchist is. An anarchist is (usually) someone who believes that anarchy would be a better system, not someone who "practices anarchy" (whatever that means). Similarly, a person who lives under a monarchy but would prefer not to have a monarchy could be called a republican (with a small "r").

Also, Anarcho-capitalism isn't utopian, or at least, not the flavor David Friedman espouses.

In any case, Frans de Waal's point, and I think Friedman's point, is about how we do science and economics. If we conduct a survey of environmental preferences, and people say they would pay tens of thousands of dollars to forego a one-in-four-million environmental risk, we take that with a grain of salt. Why? Because we know that in their personal lives they don't act as those they really have that preference. They don't spend that much additional money on a safer car to avoid much larger risks. They don't move to areas with cleaner air at great personal expense. Their behavior reveals their preferences in ways that surveys cannot.

I don't think that's the same as the anarchist who lives under a government.