Uncovering the truth with individual choices vs what they claim to value
Survey is an often-used tool to find out what a group of people want, desire, or need. It’s a simple device, we ask a question, you answer the question, then combined with many other participants we can turn the responses into pretty graphs to understand the world a little better.
However, there’s an often-overlooked error with surveys, people don’t always know what they want, nor does their vocalised demands always meet their true desire. This doesn’t rely on people being malicious — although that is another problem altogether. If you’ve ever had a conversation with someone who’s hmming and harring about a topic you’ve likely witnessed what we’ll describe first hand — resolving an internal conflict of choice.
The brain is a tricky device. Sometimes you know you know, sometimes you know that you don’t know — other times you don’t know that you know, a preference was made outside of your consciousness that you need to try and figure out.
Why do I prefer these things? When did I decide that? Did I even look at all of the other options?
Stated preference is open to hacking though social pressure and the desire to be liked. Where revealed preference doesn’t tend to get the same scruiteny. In the economic sense, there’s no one standing outside Wal-Mart or Tesco inspecting your purchases to make sure you only buy the brand of tomatoes that are locally produced (yet). In the political realm, we can see the same thing happening with events like Brexit, despite the loud noises against Brexit, the populous still voted multiple times in favour of Brexit.
How does this economic theory apply to more than just economics?
The market is an abstract concept of individual (consumer) and group trading (corporation or other group), where a demand is able to get met with supply.
The social, and political realm ultimately are intertwined with the understanding of choice in a market, not because of perversion, but because the market is simply people exchanging surpluses.
When you’re explaining human choice activities in something as wide as ‘the market’, which encompasses all individual trade, you’re going to stumble upon something that can be applied upstream to humans in other areas.
How does this theory look in the way it’s normally discussed?
Paul goes to the supermarket to buy his weekly groceries. A few days earlier he was approached by a canvaser asking “Which baked beans would you buy?”, the list contains 4 entries “Heinz”, “Supermarket own”, “Branstons”, or “Other”.
Paul ticks “Heinz” and moves on.
During his shopping he is walking around the supermarket, he picks up his beans along with the other supplies he purchased for the week.
What brand do you think Paul bought?
Finishing my obviously made up story with “You’re wrong, he bought the cheapest ones!” would be a fitting ending, however, as I write this, I’m hyperaware that I may come across as just verifying my own hypothesis. There’s a high likelihood that Paul buys Heinz, but, there’s also the likelihood he purchases a competing brands beans.
The preference stated on the survey doesn’t guarantee the respondents actual answers will correlate with reality.
Why would Paul pick Heinz on the survey if he actually doesn’t care? Is Paul a lier? No.
- Many years of advertising to remind us “Beanz Meanz Heinz” could be one explanation for ticking a box with their name on it, and the mention of “Beans”.
- Maybe Paul wasn’t paying attention to the survey at all and wanted the person to go away without causing much fuss.
In all, polls are not awesome at representing reality to us, and can only show us, with so much resolution, what is actually happening in the world.
Option 1 does tell us that the name recognition of the product is high, but it doesn’t account for the other market factors that can change the outcome when it’s time for an action to take place (revealed preference). Name recognition will not make your baked beans sell if they’re ridiculously overpriced.
Some other examples of SP vs RP outside of economics:
- Someone who has never consciously thought about their favourite animal, but given knowledge of all the campaigns to support certain species, has chosen to donate a portion of their income to a group that focuses on dogs could be argued to have revealed their preference for dogs.
- Someone who claims to care about the environment, but then discards plastic waste into farmers fields could be argued to not care for the environment.
- A person who claims to want x political outcome, but votes for the party that opposes that.
- Companies that declare X, but take action Y.
