Chapter 3: Action and Preference, Part 2 41

In the other sense of “trivial,” the word is just a synonym for “tautology.” We have argued that the principle is not a tautology; but suppose that it is one. Then, it would be “trivial” in this second sense. But it does not follow that it is trivial in the first sense.

Some tautologies are important; others are not. Many philosophers think that mathematics consists of tautologies. It hardly follows, if they are right, that mathematics consists of trivialities. The subject would be much easier if it did.

1.	Give examples of tautologies that are trivial in the first	?
	sense.
2.	What determines whether a tautology is trivial in this

sense?

MARGINAL UTILITY

Exactly how untrivial our principle is, we shall now see. Suppose you have five different goals, which you rank in this order: (1) drinking a glass of orange juice; (2) eating the whole orange; (3) stomping an orange into the ground; (4) eating an orange peel; (5) collecting all the pips in an orange to add to your orange pip collection. (Remember you rank these goals ordinally; you are not measuring them using a common unit. Also, we assume that one complete orange is required to satisfy each of these goals.)

Further, suppose you have only one orange. What will you do with it? The answer will be apparent to anyone except a hermeneutician. You will use the orange for orange juice, since this is your most highly-valued use.

Now, what if you have two oranges? Just as obviously, you will use the oranges for your first two most highly valued uses. The

42 An Introduction to Economic Reasoning

more oranges you have, the lower you can go on your preference scale.

Let’s look at the same phenomenon from another angle. Suppose you have five oranges, which you intend to use for the five goals specified above. The oranges are equal in quality and serviceability. Now, disaster strikes. Johnny Orangeseed steals one of your oranges, leaving you with only four. What do you do, as far as the use of the oranges is concerned?

The answer is once again apparent. Your pip collection will have to do without the addition you hoped to contribute to it. Since adding to the collection is your least valued use, you will give it up first. Note that this is true regardless of which orange Johnny steals. Suppose, e.g., that he takes the orange you had planned to squash into the ground. You will then shift the orange from the pip collection to be stomped. Regardless of which orange is taken away, you will give up your least valued use. The unit of the good (in this case, oranges) that is devoted to the use you value least is called the marginal unit. As we shall see in the next chapter, this concept plays a crucial role in the explanation of prices.

	1.	Show that the explanation just given of what you would do
?		if you lost one orange follows from the principle that you
		always select your highest valued preference.
	2.	The analysis just given doesn’t work. It wrongly assumes
		that you have a list of preferences in your head before you

choose. But in fact your preferences exist only at the moment of choice. Is this objection right?

Chapter 3: Action and Preference, Part 2 43

THE INDIFFERENCE OBJECTION

You might object to our analysis in this way. We assumed that you could rank all five uses of an orange in order from first to fifth. But what if you can’t? Suppose, for example, that you cannot make up your mind between eating an orange and stomping it into the ground. You are indifferent between these two alternatives. Then what will you do with your second orange if you have two of them? Your preference scale does not dictate a choice.

Let’s examine the situation more closely. You have one orange, out of which you have made orange juice. (This is your highest valued use.) You now acquire a second orange but cannot make up your mind between your second and third choices.

Should you simply go on to choice four, or, overcome with indecision, toss away the new orange? Certainly not. You would rather either eat the orange or stomp it than eat the orange peel (alternative four). As to tossing the orange away, then you would not realize any of your preferences. This would be an especially foolish thing to do.

The comments just given rest on a brilliant analysis of the problem of “Buridan’s ass,” given by Murray Rothbard. Buridan, a great scholastic logician, imagined a perfectly rational donkey. The donkey never acts unless there is sufficient reason to do so. He has a choice of eating one of two bales of hay, identical in all relevant properties. Buridan imagined that the donkey, unable to find a reason to choose between the two bales, would do nothing and thus starve.

Rothbard pointed out that Buridan’s account of the situation was incomplete. The alternatives facing the donkey are not just (1) eat bale of hay A, and (2) eat bale B. They include also (3) do not eat either bale and starve. Since, presumably, the donkey ranks (3) below either (1) or (2), he will not, as Buridan has it, choose (3). To

44 An Introduction to Economic Reasoning

do so would involve a violation of our fundamental principle: an actor always prefers a higher ranking goal to a lower ranking one.

?	1.	Look up the section on Buridan in Rothbard’s Economic
		Thought Before Adam Smith (Cheltenham, U.K.: Edward
		Elgar, 1995), and give a brief report on his work.
	2.	How might a supporter of Buridan’s argument reply to

Rothbard?

MORE ON INDIFFERENCE

A chooser, then, faced with two alternatives that seem to him “about the same” must somehow make up his mind between them. He will, e.g., flip a coin to determine whether to eat the orange or squash it. And once he has chosen, his choice counts as a preference as much as an act based on the most ardent conceivable desire. You cannot demonstrate indifference in action: given two alternatives, you must pick one or the other.

And of course it is action that we are concerned to analyze in economics. Indifference, then, plays no part in our discipline. But, you will object, what if, as in our example, you do not have a marked preference for either alternative? (Before continuing, see whether you can answer this objection.)

The key to the problem, once more, brings in a point from the previous chapter. Remember, the scale of preference is an ordinal scale: we rank alternatives only as first, second, third, . . . etc. We do not take the alternatives as containing more or less of some common unit. More generally, all we are concerned with is the fact of preference: the strength of the preference does not for our purposes matter. Thus, a preference established by flipping a coin is still a

Chapter 3: Action and Preference, Part 2 45

preference. The psychological state in which you decide is irrelevant for us as economists.

Because we do not use the concept of indifference in Austrian economics, we get a bonus. Mainstream neoclassical economics relies heavily on indifference curves, Edgeworth boxes, and other complicated mathematical constructions that we do not have to bother with. Austrian economics is in this way much easier to learn than this rival system.

1.	You can too demonstrate indifference in action! Flipping a	?
	coin to decide between two alternatives is just a demon-
	stration of indifference in action. Evaluate this objection.

EXTRA-CREDIT—MORE ON BURIDAN’S ASS

We have shown that Buridan’s ass is not rational: if he were, he would choose not to starve (given that he prefers eating to starving). But, Buridan might object, what is his hapless donkey to do? He must have a sufficient reason to choose this bale rather than that one: and given that the two are by hypothesis identical in all relevant qualities, he cannot do so. Perhaps then there is no rational alternative available and the paradox proves that in the situation described, there cannot be a perfectly rational agent.

We suggest that the example does not show so drastic a consequence. Rather, what it brings into question is the assumption that a perfectly rational agent must have a sufficient reason for deciding between two alternatives, under any description of these alternatives. The donkey does not have to be able to come up with a reason for choosing one bale over the other, in order to be rational. In this case, in fact, he would be irrational to waste time in a futile