The precision fallacy: On the futility of preference purification

Abstract

The standard theory of choice in economics involves modelling human agents as if they had precise attitudes when in fact they are often fuzzy. For the normative purposes of welfare economics, it might be thought that the imposition of a precise framework is nevertheless well justified: If we think the standard theory is normatively correct, and therefore that agents ought to be in this sense precise, then doesn't it follow that their true welfare can be measured precisely? I will argue that this thought, central to the preference purification project in behavioural welfare economics, commits a fallacy. The standard theory requires agents to adopt precise preferences; but neither the theory nor a fuzzy agent's initial attitudes may determine a particular way in which she ought to precisify them. So before actually having precisified her preferences, the welfare of fuzzy agents may remain indeterminate. I go on to consider the implications of this fallacy for welfare economics.

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