Monday, February 22, 2016

Leo Rosten on Revealed Preference

I have a very small collection of economics jokes, not jokes about economics but jokes that teach economics. Browsing Leo Rosten's The Joys of Yiddish, I found another one:
"My father was so mad yesterday," said little Morris, "that five separate times he wanted to give me a frosk."

"How do you know it was exactly five times?"
"Because I counted."
"What did you count?"
"The number of times he hit me."
"I thought you said he wanted to hit you."
"I did. Would he have hit me if he hadn't wanted to?"

A reader who remembers my past posts better than I do points out that I blogged this joke once already, a couple of years ago.


Xerographica said...

Honestly I'm not a fan of the term "revealed preference". Samuelson ruined it for me. He tainted it beyond repair.

Coincidentally... here's what I posted less than an hour before you posted this blog entry... Clarifying The Popularity Of Three Economic Rules. The third rule is "Tabarrok's Rule"... which is pretty much the same thing as "revealed preference" but minus the creepy baggage.

If you take a look at my second post in that thread you'll see that I shared Adam Smith's passage about a "coach and six". Vrooooom?

In this post (not sure if that's going to link right) that I just posted over at the Ron Paul Forums... I shared a great idea. I'll share it here as well since it's relevant to Tabarrok's Rule.

Imagine a subreddit on Reddit called "WealthOfNations". Members of that sub could use it to share/upvote their favorite passages from the Wealth of Nations. This would allow people to quickly find and read the most popular passages from the Wealth of Nations.

You could do the same thing with Machinery of Freedom. Unfortunately I wouldn't be able to participate because I'm shadowbanned from Reddit.

Of course it would be infinitely better if people could spend their money on their favorite passages. Then it would allow other people to quickly find and read the most valuable passages. It would be a Reddit that didn't violate Tabarrok's Rule.

David Friedman said...


Looking at your three economic rules, I observe:

" wouldn’t it be amazing if the urge to “do something” could be channeled into, say, ending hunger in the world or universal literacy (both cheaper than even one Iraq-sized war)?"

I doubt that we could either end hunger or illiteracy at the cost of one Iraq sized war, not because the amount of money is too small but because I don't see any way of spending it that would have either effect. What institutions do you imagine to do it, and how would they actually work in a real world of self-interested actors? If you give the money to the relevant governments, do you expect that all of them will pass it on to the intended recipients? If not, do you include the cost and difficulty of replacing those governments as part of the project?

The Iraq experiment did not suggest that solving that problem is easy.

Anonymous said...

Didn't you find this a couple of years ago?

Xerographica said...

David Friedman,

Thanks for looking at those three economic rules! Regarding the second rule... perhaps some context would help.

For quite a while I thought that the problem with liberals was that they didn't truly understand the concept of "opportunity cost". From my perspective... this is exactly where the bottleneck was. So four years ago, when I learned that the liberal economist John Quiggin was writing a book about opportunity cost, I was thrilled. But eventually I came to realize that "opportunity cost" wasn't exactly where the bottleneck was. So last year I wrote a blog entry about my realization... The Inadequacy Of The Opportunity Cost Concept.

In that entry I pointed out that I strongly agree with Quiggin that war has a very high opportunity cost. I also pointed out that he doesn't necessarily explain how we determine the value of any given war or the value of the alternative uses of society's limited resources. Quiggin simply assumes that the alternatives would be more valuable. Like I said in that post... I think it's a pretty decent assumption... but the issue is how, exactly, do we determine whether the assumption is true or not.

While writing that entry... I realized that Quiggin's pacifist argument was based on a pretty basic premise that society's limited resources should be put to their most valuable uses. But he never really stated this premise... it was always implied. It's an important premise though! So, in that entry, I named it after him...

Quiggin's Implied Rule of Economics (QIRE): society's limited resources should be put to more, rather than less, valuable uses

QIRE should hopefully beg the question of how, exactly, do we accurately determine the value of the various possible uses of society's limited resources.

In volleyball... one person "sets" the ball and another person spikes it. QIRE is the ball being set... then we need another rule to spike it...

Tabarrok's Rule: Actions speak louder than words

... or...

Tabarrok's Rule: Spending speaks louder than voting

Spending is how we accurately determine the value of the various possible uses of society's limited resources. Hence the importance of allowing people to choose where their taxes go (pragmatarianism).

Quiggin tweeted my blog entry... but that was the extent of his reply. Maybe he's still working on his answer!? Maybe he'll dedicate an entire chapter in his upcoming book to his answer! Or maybe he'll only share his answer if/when enough people ask the question of how, exactly, do we accurately determine the value of the various possible uses of society's limited resources.

Unknown said...

And today's SMBC comic has one about diminishing marginal utility you might find useful. I certainly found it funny.

Anonymous said...

@Marnus Beylefeld:

Wouldn't that be declining marginal disutility? And, actually, if disutility is taken to be an absence of utility, wouldn't declining marginal utility necessarily imply increasing marginal disutility?

Unknown said...

@Anonymous - You are assuming the comic from the economist's perspective. Look at it from the devil's. Then it is declining marginal utility.

Philo said...

He should have said his father wanted to hit him *at least* five times (not *exactly* five times): in common parlance one often "wants" to do something without actually doing it.