Stated vs Revealed preference

Some time ago, I think in someone’s post about what advice they would give to folks, Tyler Cowen’s response was something to the effect of not necessarily taking your stated preference over your revealed preference. At least that is how I remember most of it. Taking some liberties with what the actual meaning of stated and revealed may be, I chose to look at them as whatever it is that I say that I will do/think/believe versus what I actually end up doing that can be observed. For example, my stated preference may be that I spend time reading when my revealed preference may be a lot of time spent watching TV. If I understand what Cowen is saying correctly, I shouldn’t automatically assume that the stated preference is somehow right/better/brings more happiness than the revealed preference. The necessarily is a key word choice. It may be the case that the stated preference is somehow better than the revealed preference but it may also not be the case and I should examine each situation where this occurs and consider why there is a difference between the two. The corollary is that in his observation people don’t consider whether there is a reason to think the stated preference is better.

One place that I think this occurs is in self improvement and our various plans to perform that on ourselves. We want to be thinner, more productive, more interesting and the like. Or at least that is our stated preference. Our revealed preference is to be about the size we are, about as productive as we are, etc. The first item, being thinner is a case study. The stated preference to be thinner is prevalent and supports an entire industry. The question is whether we would be that much happier or better off by achieving that stated preference keeping in mind that there are potential costs. In some cases the answer is yes. We may have a better self image, be able to do more, face fewer health issues. In some cases the answer is no. We may not gain anything in self image or the activities we can do/enjoy, and it is possible at least to create more issues for our health. We can decrease our happiness by moving away from our revealed preference. Somewhere in between we may want a bit of the stated preference while only incurring a bit of the costs.

The insight here for me is that accepting or trusting the stated preferences exclusively over the revealed ones may cause me to pursue actions that decrease my happiness. It is necessary to consider revealed preference, why it differs from stated preference, and what the motivations are in having a separate stated preference.


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