Economists often identify a dichotomy between people’s stated preferences and the preferences that are revealed when people are actually required to choose between scarce uses of their resources (such as time and money).
For example, many people state that they dislike anonymous out-of-town shopping malls, but when faced with the actual choice of visiting a clean, convenient, warm shopping centre with a wide variety of stores conveniently located, or walking around a cold, wet, exposed town centre where shops are dispersed across a wide geographical area, they then reveal their true preference for the shopping mall.
In other words, stated preferences often reflect idealised commitments where there is no necessity to make trade-offs between alternative uses of scarce resources, whereas revealed preferences provide a more accurate reflection of our true values given the facts of the real world.
The actress Emma Thompson provided a good example of the dichotomy between stated and revealed preferences this week. On Friday she participated in the campaign to stop Heathrow expansion, signing the deeds to purchase land that had been earmarked for the airport’s third runway as part of a strategy to prevent the project from going ahead. On Sunday, two days later, Ms Thompson was in the national media again, this time in Los Angeles attending the Golden Globe awards.
The only way that Ms Thompson could have travelled from London to LA was by flying. Here we have Ms Thompson’s stated preference for limiting air travel and her revealed preference for the benefits that air travel brings. Indeed both Emma Thompson and fellow campaigner Zac Goldsmith are likely to have clocked up far more air miles than the average person.
The fact that Emma Thompson may appear to say one thing and do another does not necessarily invalidate the case against airport expansion. However, it does suggest that decisions about the supply of air travel in the UK (and other countries) should be informed by knowledge of people’s revealed preferences in the context of the trade-offs between different uses of scarce resources. Leaving such planning decisions to the market (that is, a system of private property rights under the rule of law informed by the price mechanism) is one way of achieving such an outcome.