Research

Mediated Preference Revelation: An Argument for Amending the Revealed Preference Principle

When it comes to discussing agents’ preferences, economists often appear like tightrope walkers. On the one hand, Samuelson’s methodological standards suggest models should stand on no more than his account of ‘as if preferences.’ On the other hand, some uses we make of economic models commit us to a more substantial account. In spite of numerous arguments against it, Samuelson’s program stands and the incongruity subsists. In this paper, I reconstruct a syllogism which, in the 40’s, could have been used to back up Samuelson’s research program. Though now known to be unsound, the argument reveals an appealing aspect of revealed preference theory. Namely, that, by excluding folk-psychology from scientific discourse, it (trivially) resolves a tension between folk-psychology and economists’ endeavors to meet certain scientific standards. Still today, similar grounds can be appealed to to undermine the use of folk-psychology in economics. I point out a distinction between normative and positive folk-psychology which, I suggest, provides us with an alternative way to resolve the tension. Economists, I argue, should expand their evidence base to include bits of normative folk-psychological discourse. The move would, furthermore, yield a side-benefit: economists’ technical concept of rationality would come closer to the ordinary one.

On The Voluntary Provision of Legitimate Public Goods

Economists face difficulties explaining observed choices in public good games. Besides their high sensibility to parameters of the game, these choices can be significantly altered if players are offered an opportunity to communicate, or if changes occur in formal institutional rules. The two latter phenomena, I argue here, can be parsimoniously explained by a deviation from the revealed preference paradigm. The reason is that, by conflating realizations of the “general will ” and realization of the “will of all,” applications of revealed preference theory conceal the presence of equilibrium selection issues that may arise in these situations. I specify a class of public goods, which I call legitimate public goods, in the presence of which individual behavior is better described by a solution concept that is not a Nash equilibrium. When facing a challenge to produce a legitimate public good, cooperative individuals need not unilaterally bring about events that conform to their individual wants, they may be doing their bit in a joint effort to bring about events that conform to the general will. As a consequence, their equilibrium choices need not disclose the quantity that they want to provide, but the quantity that, given other individuals’ behavior, they commit to provide. My approach contrasts with and is complementary to the current literature, which analyzes expressions of the will of all when a fraction of individuals have other regarding concerns or experience “warm-glow.”