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Preference Revelation

The late Paul A. Samuelson was the first Nobel laureate in economics and is widely regarded to be the most outstanding American economist to date. He wrote many papers that had a profound influence on the thinking of economists but he wrote one paper that, to me, is a great tool for all of us, not just economists. The paper is entitled “Consumption Theory in Terms of Revealed Preference” and, in a nutshell, here is what it says. If you want to know what another person is up to, watch what they do because you can, from their actions, infer their motives or preferences. Below is an example of how useful it can be to observe people’s actions when matched against what they say.

Education

People frequently like to say that they are very serious about the education of their children but when I have observed people’s actions in the past, I often came to believe that parents were only paying lip service to education. Consider this example. A student is observed to be very gifted academically and is offered the opportunity to attend a school for gifted students. In order to attend this school, the student must take the subway each day. The student’s parents have very modest means and, given their current expenditure choices, the parents cannot afford the subway fare for their child. So in order for their child to attend this school for gifted students, the parents give up eating meat to generate the subway fare for their child. What do these actions reveal? At a minimum, the choice of giving up meat reveals how important it is to the parents that their child receive a first-rate education and their actions reveal this by their willingness to give up eating meat. Words don’t matter – the parents’ actions say it all.

The example above is drawn from real-world events that I was told many years ago. To preserve the anonyminity of the individuals involved, I do not want to reveal their names but the example is very instructive. My question for you, dear reader, is this. How many current U.S. residents are willing to make important sacrifices so that their children can get a good education? Your answer to this question, if you are honest, is likely to be rather disappointing I think.

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Categories: Education, Uncategorized
  1. Joe Zitka
    February 27, 2017 at 11:15 AM

    “Gov. Haslam defends proposed gas tax hike, pledges sweeping relief elsewhere: If passed, Tennessee would become the only state to offer tuition-free community college to any adult, regardless of age.” Prof. Rossana, we will see if the citizens from the great state of Tennessee are willing to sacrifice a few pennies per gallon for education.

  2. February 27, 2017 at 12:10 PM

    Very well said, Bob.
    I will share this with my ECO 1000 students this week.
    –John

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