Preferences are revealed through actions, not stated preferences.
Samuelson's 1938 approach was an attempt to make economics independent of unobservable mental states. Its limit is that choice under constraint reveals ranking, not intensity, and not welfare.
In practice
- A regulator inferring how much households value a rail service from ticket sales learns what they bought, and not what they would have paid.
- A customer who buys the cheaper option has revealed a ranking, and nothing about how much they wanted the other.
- Further reading
- Wikipedia
- Subject
- Economics & Incentives
- Essay
- The theories behind every argument about money