Numéraire
Volume the Twenty-third · of the table of twenty-six
The Behaviors · Group VI · № 23 · Ch

The Choice

preference and its logic

Every price the table has examined rests, in the end, on a single act: a person, choosing. Demand is choice counted; the want behind it is choice inferred; even rationality, stripped to its core, is defined as nothing grander than choice that hangs together. Choice is therefore the floor of the whole edifice — the place where the asking of why is meant to stop. This is the volume of that floor, and of whether it holds. Its twelve plates follow the assumption from its most elegant statement — a preference, complete and consistent, that choosing merely maximizes — to the seams where it gives way: not the familiar seams of foolishness and error, but the stranger discovery that the preference the theory sets out to reveal may not have been there before the choice that revealed it, and that the consistency it calls rational cannot even be stated without quietly letting the world back in.

in print · № XXIII · 12 of 12 plates
← The complete table of volumes

The argument of the volume

Economics explains a great deal by a single move: it asks what people chose, and treats the choosing as its own explanation. Why this price? Because of demand. Why this demand? Because, at these prices, this is what people chose to buy. And why did they choose it? Here the questioning is meant to halt. They chose it because they preferred it; and preference, in the mature theory, is not a further fact awaiting explanation but the bedrock on which explanation rests. Choice is where the regress of why is permitted to stop — the unmoved mover of the whole apparatus.

What makes this more than a shrug is the elegance of what is built upon it. Grant only that a person can rank the options before her, and that the ranking does not double back on itself, and a remarkable structure follows: the ranking can be represented by a number, choice becomes the maximization of that number, and the entire calculus of demand — curves that slope, responses that can be signed, a welfare that can be read off behavior — falls out as though it had been folded inside the two assumptions all along. The theory asks almost nothing of the chooser and returns almost everything. That ratio is the source of its power, and the reason it became, more than any other idea in the discipline, simply the water economics swims in.

The volume is concerned with the seams, and they are not the obvious ones. It would be no scandal to find that people are sometimes foolish, or impatient, or poorly informed; a theory of ideal choosing absorbs a world of mistakes easily enough, by treating them as noise scattered around a true preference. The difficulty this volume pursues runs deeper, and six plates now set it down. The assumptions the theory calls modest — that a person possesses a complete and consistent ranking at all — prove on inspection to be neither modest nor plainly true. The preference the theory promises to read off behavior may not be there before the reading, so that different ways of asking elicit different preferences and none has the standing of the original. The very transitivity that lets a ranking collapse into a single number proves not a discipline the chooser keeps but the first thing he surrenders when his reasons pull apart, his preferences running in a circle wherever the criteria conflict. The consistency that the theory equates with rationality turns out to be undefinable without smuggling back the very context — the menu, the meaning of the act, the world surrounding the choice — that the whole project was built to do without. And even the bare abundance of options, which the theory says can only help since whatever is unwanted may simply be ignored, is found past a modest number to dismay and to paralyze, the larger menu becoming a burden rather than a gift. And one difficulty lies beneath these five, touching not the ranking but the use the ranking was for: even granting a preference flawless and full, the maximizing the theory asks of it — to survey every option, weigh every consequence, and seize the best — is a feat no finite chooser can perform, not for any failure of will but because the reckoning outruns the mind that must do it, so the optimum is not a mark missed by noise but a mark beyond computing, and what the chooser does instead is to fix a standard of good enough and search only until it is met.

The argument remains open. What follows is an attempt to fix its exact edges.

The twelve plates of this volume

  1. i The Axiomsin print completeness and transitivity; the two conditions from which a number, and then the whole of demand, are made. Read the plate →
  2. ii The Revelationin print revealed preference; the attempt to reconstruct the ranking from nothing but the choices themselves. Read the plate →
  3. iii The Reversalin print preference reversals; the same options ranked one way when chosen, the opposite way when priced. Read the plate →
  4. iv The Cyclein print intransitivity and the money pump; whether a preference that runs in a circle is the mark of a disordered mind or the natural price of weighing several things at once. Read the plate →
  5. v The Framein print description invariance; the same option chosen, or refused, by the words in which it is put. Read the plate →
  6. vi The Boundin print Simon's bounded rationality; the chooser who searches until good enough, not until best. Read the plate →
  7. vii The Selfin print the divided chooser; today's preference reversing tomorrow's, and the question of which self is served. Read the plate →
  8. viii The Menuin print Sen's inversion; why the set a thing is chosen from is part of what is chosen, and consistency was never internal. Read the plate →
  9. ix The Surfeitin print choice overload and the paradox of choice; how more options, though any one of them may be ignored, reduce both welfare and the willingness to choose at all. Read the plate →
  10. x The Libertyin print the impossibility of a Paretian liberal; choice as the exercise of freedom, not the satisfaction of want. Read the plate →
  11. xi The Nudgein print libertarian paternalism; if there is no neutral way to offer a choice, who arranges it, and toward what? Read the plate →
  12. xii The Wantin print the tie-back; the choosing returned to the wanting it was meant to replace — see № 08. Read the plate →

In closing

This volume set out to test the floor of the whole edifice — the act of choosing, to which every price is finally referred, and at which the asking of why was supposed to stop. The theory built on that floor is among the most elegant the discipline owns: from the bare supposition that a person can rank the options before her, and rank them consistently, it raises a number, a maximizer, and the entire calculus of demand. The plates in print followed that structure to six places where it gives way — not the easy places, where people are merely foolish, but the places where the foundations themselves prove unable to bear the weight set upon them.

The assumptions called modest were not: to require a complete and consistent ranking of every option — faced or unfaced, comparable or not — is to require a great deal, and to forbid the honest answer that some things do not lie along one scale. The preference the theory promised to read off behavior was not reliably there to be read: ask by choosing and ask by pricing, and the same person ranks the same things in opposite orders, so that the preference looks less like something discovered than something the question builds. The transitivity that turns a ranking into a number was not a law the chooser obeys but the first casualty of his caring about more than one thing at once, his preferences curling into circles that no single scale can hold. The consistency the theory equated with rationality could not be defined without letting the world back in: the menu an option is drawn from, and the meaning of the act of taking it, turn out to be part of what is chosen, so that a rationality certified from behavior alone was never on offer. And the abundance the theory took for pure opportunity was not: past a modest number the very options that could in principle be ignored instead overwhelm, and the freedom of the fuller menu curdles into paralysis and regret. And one finding cut beneath these, into the act the ranking served: the maximizing the theory takes for granted — the survey of every option, the seizing of the best — is no labor a bounded mind can perform, so the chooser does not optimize but satisfices, halting at the first option that clears a threshold of good enough; the best gives way to the good enough, and rationality moves from the outcome chosen to the search that found it. Six findings, and each one a subsidence in the same floor.

Read beside its companion, the result completes a single thought. The Utility showed that the want a price is meant to measure cannot be observed, and dissolves, when pressed, into the choice that was to reveal it. This volume shows that the choice will not bear the transfer — that it is no more self-contained, no freer of its setting, no more simply there than the want it was asked to replace. The two quantities on which the theory of price was built each turn out to rest on the other, and on the world surrounding them both; press either and it gives. This is not the demolition of economics, which goes on doing indispensable work atop foundations it has learned not to examine too closely. It is a map of where the foundations are soft — which is the whole of what this table was ever for. Every element in it is a primitive that turns out, on inspection, not to be primitive. The Choice is only the one where the regress was supposed to end, and did not.

A price was always a number set against a want, and the want has turned out to be a choice, and the choice a thing the world helps to make — so when the number is at last paid, what, exactly, has been measured?