A Critique of Hausman’s Interpretation of Revealed Preference Theory

The main purpose of the essay is to criticize Hausman’s characterization of the economic notion of preference, which he referred to as “preference*”. My main objection is that it is misleading to define preference* according to only two elements: preference and belief. Instead, I will argue that even if we were able to assume belief as given, choices would still not reveal preference. Therefore, although it might be true that both belief and preferences are necessary for choices, I will argue that they are not sufficient as conditions. First, I will argue that efficacy should also be included as another element of the set preferences*. Then I will propose that, even if including efficacy, it could be misguided to conclude that we have reached a complete definition of preference*. Finally, I will suggest that there could exist a misunderstanding around the notion of belief.