Revealed preferences vs. misaligned incentives

post by jml · 2018-12-30T03:06:51.797Z · score: 14 (8 votes) · LW · GW · 5 comments

This is a link post for https://blog.jminjie.com/@Jordan/preferences-and-incentives-a828223d9f

Revealed preference theory (RPT) is the idea that we can’t trust people’s self-proclaimed preferences as much as we can trust their actions. So if someone claims to care about the environment but still eats meat, doesn’t recycle, and doesn’t donate any money or spend any time working on the problem, we might say that their actions reveal that they don’t actually care as much about the environment as they claim to.

One alternative to RPT is misaligned incentive theory (MIT). This is the idea that when someone’s actions seem to contradict their self-proclaimed preferences, it might be because their long-term and short-term incentives are not aligned. For example, if someone says they are trying to quit smoking, but in the moment they can’t resist lighting up a cigarette, we wouldn’t say that they must not really want to quit, because it could just be that their long-term goal of quitting smoking is not aligned with their short-term desire for a nicotine fix.

RPT and MIT are both useful frameworks for looking at behavior which is seemingly contradictory. Just because someone acts in a way that obviously goes against their goals doesn’t always mean those goals are false, sometimes it’s just hard to do the long-term thing when the short-term thing is so much easier. Likewise, sometimes people are wrong or lying about about their preferences, and the only way to find out is by actually observing their behavior.

In general the RPT view is harder to verify, so a practical solution is to assume the MIT view by default. This means trying to help by pitching ways someone could better align their incentives. For example, you could recommend that a smoker try a nicotine patch, which allows them to satisfy their nicotine cravings without filling their lungs with tobacco smoke. Or you could suggest to your friend that instead of just writing rants against Republicans on Facebook about climate change, they could use that time and write a guide for young people on how to set up domestic recycling. If these recommendations are repeatedly denied, you now have evidence against the MIT view and can gradually switch to the RPT view.

5 comments

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comment by shminux · 2018-12-30T03:50:22.292Z · score: 3 (2 votes) · LW(p) · GW(p)

I suspect the situation is vastly more complicated than that. Revealed preferences show the contradiction between stated preferences and actions. Misaligned incentives models (a part of) a person as a separate agent with distinct short-term goals. But humans are not modeled well as a collection of agents. We are a messy result of billions of years of evolution, with some random mutations becoming meta-stable through sheer chance. All human behavior is a side effect of that. Certainly both RPT and MIT can be a rough starting point, and if someone actually numerically simulates human behavior, the two could be some of the algorithms to use. But I am skeptical they together would explain/predict a significant fraction of what we do.

comment by jml · 2018-12-30T05:16:39.476Z · score: 6 (4 votes) · LW(p) · GW(p)

As far as a lack of predictive ability I think you're right. I'm more just trying to draw out a common dichotomy that comes up in certain kinds of discussions about how we ought to spend our time.

For example, some people enjoy playing video games but then occasionally feel vaguely ashamed that they didn't spend their time doing something more productive. In these cases, they might be unsure about which view to take: RPT says that the time they spent reveals their true preference for video games, but MIT says that they fell prey to the short-term incentive structure. If we want to achieve long term goals, this becomes an issue because we want to be true to our nature, and not insist on lying about our goals, but we also want to be able to avoid local maxima in the form of quick pleasure.

comment by Dr. Jamchie · 2018-12-30T19:01:12.745Z · score: 1 (1 votes) · LW(p) · GW(p)

There is a third alternative: being true about your preferences, but realizing you are not in power to do anything about it.

I.e. I prefer to win lottery, but there is nothing reasonable I can do to achieve that, so I drop the participating in lottery altogether. From the outside it might look like I have revealed that I do not want to win a lottery since I do not even buy the ticket. Caring about environment might fall into this category as well.

comment by Pattern · 2018-12-30T18:00:50.049Z · score: 0 (0 votes) · LW(p) · GW(p)
If these recommendations are repeatedly denied, you now have evidence against the MIT view and can gradually switch to the RPT view.

So we know someone wanted to change, if they are successful in changing?

comment by jml · 2018-12-31T04:11:40.723Z · score: 2 (2 votes) · LW(p) · GW(p)

Hmm, I would say it the other way. We know the problem isn't just misaligned incentives if they repeatedly deny solutions which align their incentives.