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Demonstrated preference

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Demonstrated preference is a theory, stated by Murray Rothbard, which asserts that people's spending decisions reveal their true preferences.Toward a Reconstruction of Utility and Welfare Economics

Rothbard's Statement

The concept of demonstrated preference is simply this: that actual choice reveals, or demonstrates, a man’s preferences; that is, that his preferences are deducible from what he has chosen in action. Thus, if a man chooses to spend an hour at a concert rather than a movie, we deduce that the former was preferred, or ranked higher on his value scale. Similarly, if a man spends five dollars on a shirt we deduce that he preferred purchasing the shirt to any other uses he could have found for the money. This concept of preference, rooted in real choices, forms the keystone of the logical structure of economic analysis, and particularly of utility and welfare analysis. - Murray Rothbard, Toward a Reconstruction of Utility and Welfare Economics

See also

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