revelatory preferances

As economists with a psychological bent have discovered, there is a problem with the way economists talk about preferences. Preferences in the neo-classic paradigm, codified by Arrow and Debreu, are invariant and logically sorted by a simple transitivity rule, so that if preference a is preferred to b and b to c, a is preferred to c. There is no test ‘in the wild’ that has ever reproduced this theorem.

However, economists generally dismiss tests in the wild as non-relevant, for, they claim, either the psychological tests that show non-transitivity are due to the special circumstances of the experiment itself, or empirical non-transitivity itself doesn’t count, because models that are transitive approximate the collective reality of markets.

There is, however, another problem with the idea of ‘choice’ as it is used in mainstream economics. It divorces consumption from what Simmel considered one of the hallmarks of modernity: the increase in both the number of links and the complexity of links that leads from means to ends. Simmel considers that money triumphs as an institution in modern society because it forms a perfect means in the midst of the tangle of means and purposes.

For the economist, revealed preferences have a certain dead-endedness – whether one buys a commodity for another end, or for itself alone makes no difference to the economic analysis of the transaction. But it is easy to see that this can’t be true. It isn’t simply that there is a difference between a company buying coal to make steel with – which, though a consumption of coal, leads to another purpose that will have a global effect on the purchase of the coal – but it is also true that satisfaction, or marginal utility, is also effected by the means-end chain.

As Simmel points out, for the individual, there is a divide between the logic of purposes, in which an overall purpose gives meaning and direction to a chain of means, and the emotional and motivational logic of means, in which means as stages in which one must act in a certain way have to be endured or enacted with a purposiveness in their own right that absorbs energy. Indeed, it is a common experience for those who finish a long task, say, writing a book or even simply an article, to feel a letdown at the end of the process, as one is simultaneously freed from exerting one’s energy and attention to the matter at hand and at the same time left with a sort of unguided and unstructured moment. The moment is not a vacation – it is a crowning, a finish, an ending. And yet it doesn’t give one anything to do.

But of course there is more to Simmel’s point than this. Much of the modern life-story is taken up with long-term projects of consumption towards some end. College students, for example, are encouraged from the very beginning to aim at some degree, which is in turn seen as the key to a job. And yet, as the degree is years off, it would be difficult to make a calculation to understand just how much time and energy one should spend on each step. Not that something like this doesn’t happen – a computer science student in an elective English literature class is very often a study in someone who has calculated exactly how little time needs to be spent on a subject that is only a lightly weighted means to his end. Of course, this student intersects with a teacher whose purpose is, in fact, exactly to teach that English literature class. Modern life is full of what we might call purposive jams – like traffic jams, they consist of people who, jostling one another, are going different places but find themselves within the limits of the same narrow situation.

The series of means is also susceptible to another contingency: polysemy. For as the steps, the means, to these longer ends are situations, they also have a multitude of affordances. The student might, by some miracle, fall in love with English literature, which would change his purposes entirely. This is a reality that doesn’t fall under revealed preferences, but quite the reverse – the preference itself is revelatory.

The adventure of modern life begins with revelatory preferences.