1. The Legacy of Positivism in Economics

In the middle decades of the twentieth century, economic methodologists began to advance several doctrines that had a strikingly positivist flavor. This article will examine an organized package of seven such doctrines:

This is somewhat of a caricature, and indeed these doctrines are less popular in some quarters of contemporary economics than they once were in the mid-twentieth century (Kahneman, Wakker, and Sarin Reference Kahneman, Wakker and Sarin1997; Camerer, Loewenstein, and Prelec Reference Camerer, Loewenstein and Prelec2005; Rubinstein and Salant Reference Rubinstein, Salant, Caplin and Schotter2008). Nevertheless, some economists today are happy to champion the above package of ideas almost in its entirety (Gul and Pesendorfer Reference Gul, Pesendorfer, Caplin and Schotter2008).

I follow the majority of philosophers, however, in thinking that many of these positivist ideas are deeply mistaken. I would deny 1, that the defining aim of the sciences is merely to explain the observable in terms of the observable. I think 2 is overstated. I am happy to think of economics as encompassing many defining aims other than to explain choices by reference to external circumstances. I would also deny 4, that hypotheses are only to be tested by their observable implications, and accordingly I would deny 5, that only standard choice data bear on economic models. I would also deny 6, that there is a practical, theory-independent procedure for observing agents’ choices. Finally, I have doubts about what the data show, and so I am reluctant to take a position on 7, the claim that basic economic theory is well confirmed.

Nevertheless, I think that doctrine 3 is defensible: economic models are just hypotheses about agents’ choices given the external circumstances. Although many economic models appear to describe agents’ preferences, expectations, and the like, this is just a convenient shorthand for these choice hypotheses. (This ‘shorthand story’ about economic models remains an official doctrine of mainstream economics, as codified in some of the leading textbooks in microeconomics and game theory.)Footnote ³

Now, many philosophers reject this shorthand story as a piece of outmoded positivism. I will argue, however, that this critique is unfounded. First, the shorthand story does not issue in any of the problematic positivist doctrines (secs. 3 and 4). And, second, the shorthand story can be warranted entirely independently of them (sec. 5). To put it briefly: the warrant for the shorthand story is to shield economic theory from misguided criticism from psychology. (But this does not entail that it shields economic theory from all criticism from psychology—far from it; see sec. 4).

Thus, the central aim of this article is to present the shorthand story in such a way that it is sharply separated from the other positivist doctrines (sec. 2). This clears the path for an economic methodology that dispenses with these problematic doctrines but retains the shorthand story. Thus far, philosophers have overlooked the possibility of doing this. I recommend this methodology to economists as the best way of doing justice to their desire to shield economic theory from misguided criticism.

I should note some limitations in the ambitions of this article. First, this article defends the shorthand story for the paradigm case of assignments of preferences within economic models. But it leaves aside the wider case of assignments of expectations and knowledge. Second, it focuses on economics as a descriptive science rather than as a normative enterprise, a science of policy or of rationality. Third, limitations of space prevent me from discussing each and every objection to the shorthand story. Most notably, I will not address Sen’s (Reference Sen1973) worry with respect to other-regarding agents or Hausman’s (Reference Hausman2012) argument that appeals to the fact that preferences typically need to combine with beliefs in order to generate action.

Fourth, the main aim of this article is not to critique any of the more problematic positivist doctrines. Fifth, this article does not aim to resolve the controversy over ‘idealized assumptions’ in economic models: Take the case in which some of a model’s content is false—at least at face value. Does this always hinder the aims for which the model is used, or indicate that the model is not fit for purpose. Alternatively, can falsehoods in fact help to further these aims (Friedman Reference Friedman1953; Musgrave Reference Musgrave1981; Mäki Reference Mäki2002)? Instead of providing a general answer to such questions, this article speaks to the issue of ‘false assumptions’ only for the case of preference assignments in economic models. So, of course, my discussion does not apply to those macroeconomic models, for example, that do not assign preferences to agents. Nor does it apply to parts of economic models other than preference assignments.

2. Preference Assignments as a Shorthand

I want to sharply distinguish the shorthand story from the problematic doctrines with which it is often conflated. To this end, this section articulates the shorthand story about preferences in economics in a nonstandard way—in two respects. First, I articulate the shorthand story in terms of the distinction between belief and acceptance, a distinction familiar from general philosophy of science. Second, I exclude any extraneous elements or misleading terminology—especially talk of ‘revealed preferences’.

3. Theory-Independent Observation and Behaviorism

This section fends off some misplaced objections. It does so by pointing out that the shorthand story does not entail positivist doctrine 6, nor does it entail behaviorism about commonsense psychology.

4. Shielding the Status Quo from Criticism?

This section will argue that the shorthand story does not issue in problematic positivist doctrines 4, 5, or 7. To keep things simple, I start with a toy example. Imagine that some researchers offer an individual—call him Conor—the choice of x cans of Coke and y cans of Pepsi versus $x^{*}$ cans of Coke and $y^{*}$ cans of Pepsi. And they repeat this experiment many times over the course of a year, each time varying the quantity of Coke and Pepsi on offer, x $x^{*}$ and y $y^{*}$. Imagine that these researchers discover that Conor chooses the first option over the second if and only if $(2/3)\text{ln}\left(x\right)+(1/3)\text{ln}\left(y\right)>(2/3)\text{ln}\left(x^{*}\right)+(1/3)\text{ln}\left(y^{*}\right)$. (Intuitively $(2/3)\text{ln}\left(x\right)+(1/3)\text{ln}\left(y\right)$ measures Conor’s tendency to choose the bundle of x cans of Coke and y cans of Pepsi on offer.)

Suppose that these researchers find a similar pattern among the other 19 subjects in their experiment. That is to say, they find that a subject’s pattern of choices can be accurately described by the function $a \text{ln}\left(x\right)+(1-a)\text{ln}\left(y\right)$, where $a=2/3$ for Conor, $a=1/4$ for Rose, $a=1/2$ for Helen, and so on. The details are not important. The point is just that it looks like individuals’ choices among Pepsi and Coke can be summarized by a single number a. The higher any individual’s a score, the more inclined that individual is to choose options with more Coke than Pepsi.

This is exciting news for Dr. Terzian, the chief economist at Coke: she now knows the distribution of a scores among 20 experimental subjects. Applying standard statistical techniques, she can then estimate the distribution of a scores among all soft drink consumers in the United States. Call this estimate the ‘Terzian model’.

Of course, 20 data points is not an ideal basis on which to estimate the distribution of a values among millions of soft drinks consumers. Ideally one would like a thousand data points, say. Unfortunately it is prohibitively expensive to calculate the a scores of a thousand individuals using the above method, because the method requires a year-long experiment for each individual.

Imagine, however, that, during the initial experiment with 20 subjects, the experimenters discover that individuals’ galvanic skin response, when drinking a can of Coke, is an excellent predictor of their a score. Or alternatively one might imagine that their EEG reading when drinking a can of Coke is an excellent predictor of their a score. So the researchers now have a cheaper way of improving the Terzian model: measure the galvanic skin responses or EEG responses of, say, a thousand subjects.

In summary, the content of the Terzian model is just a description of individuals’ counterfactual choices. Its content includes nothing specifically about these individuals’ psychological states. Nevertheless this model can be tested using biological and neurobiological data, such as galvanic skin responses and EEG responses. (And one can easily modify the example to illustrate how the Terzian model could be tested by cognitive data and introspective data too.) This illustrates a general point: to treat the content of an economic model as purely about choices given external circumstances does not shield the model from being undermined by cognitive, neurobiological, and introspective data, and so on—at least not completely shielded (Clarke Reference Clarke2014). In other words, the shorthand story does not issue in positivist doctrine 5, that the only evidence that bears on economic models is ‘standard choice hypotheses’: observations of agents’ choices and the external circumstances under which they make them.

Once this point is clearly illustrated, it becomes obvious, one might think. Nevertheless, Craver and Alexandrova (Reference Craver and Alexandrova2008, 393) argue against the shorthand story because they think that it “isolates economics from contributions from other disciplines.” Similarly Alexandrova and Haybron (Reference Alexandrova, Haybron, Davis and Hands2011, sec. 2) argue against the shorthand story because “[positivist] epistemology, which eschews everything but observable behavior—and thus throws out the baby, much of our best physics, and all good sense with the bathwater—has long since been consigned to the flames elsewhere in the academy.” If I am right, then such philosophers are mistaken. Why then was this mistaken reasoning so compelling?

The first reason is this: the shorthand story does indeed shield economic theory from being undermined by some psychological data—on some occasions. Imagine a psychologist in the Coke research group who complains: “Our laboratory work shows that $a\text{ln}\left(x\right)+(1-a)\text{ln}\left(y\right)$ is an excellent model of individuals’ choices between Coke and Pepsi, I agree. But I suggest that we start interpreting this model as a description of an individual’s strength of desire for Coke and Pepsi, desire being a posit of commonsense psychology. Now, I’ve examined the psychological literature, and it turns out that people very rarely choose the option that they desire mostly strongly. In fact, an individual’s choices are a poor guide to their desires. Thus, this psychological data from the literature casts considerable doubt on our model, as a model of desire for Coke.” One might imagine that the other members of the research group respond: “No, we are going to continue to interpret the $a\text{ln}\left(x\right)+(1-a)\text{ln}\left(y\right)$ model as a model of choices, not as a model of desires as you insist. So your psychological data are irrelevant in this instance.” On this occasion, the shorthand story does shield the model from being undermined by psychological data.

Thus, it is crucial, I suggest, to distinguish two ways in which one might try to shield a model from being undermined. The first way is to insist that there are limits on what sort of evidence can support or undermine a particular sort of hypothesis. Call this an ‘epistemological restriction’. The second way is to limit the hypotheses that form part of the real content of a model. Call this a ‘content restriction’.

The Coke example highlights that the shorthand story itself is a content restriction, rather than an epistemological restriction. The shorthand story is consistent with the idea that all sorts of psychological data can support or undermine standard choice hypotheses. But the shorthand story insists that content of preference assignments in economic models are just standard choice hypotheses, not distinctively psychological hypotheses. (I wait until sec. 5 to motivate this content restriction.) It follows that psychological data that bear on the latter hypothesis, without bearing on the former, are irrelevant to testing economic models.

There is a second reason why many philosophers have mistakenly thought that the shorthand story issues in positivist doctrine 5. This reason is rather ironic: many such philosophers seem to implicitly accept positivist doctrine 4 that hypotheses are only to be tested by their observable implications, that is to say, by noting what observations a hypothesis deductively entails and then discovering whether these predicted observations are indeed observed (Friedman Reference Friedman1953; Gul and Pesendorfer Reference Gul, Pesendorfer, Caplin and Schotter2008). Now, the shorthand story says that a model’s content is just a hypothesis about agents’ choices given external circumstances. It follows, given 4, that 5: only data about agents’ choices, and the external circumstances under which they make them, can support or undermine economic models. (This line of reasoning fails, however, because 4 is false. The Coke example illustrates this nicely: a wide range of observations can support or undermine a hypothesis, without the hypothesis deductively entailing those observations; see also Clarke Reference Clarke2014, sec. 4.)

Finally, there is positivist doctrine 7, the doctrine that basic economic theory is well confirmed. To examine this doctrine, it is important to distinguish two things: it is one thing to think that a model has a particular content, and it is another thing to think that this content is true (or well confirmed). Take, for example, a philosopher who thinks that the real content of all scientific models is some hypothesis about observables (van Fraassen Reference van Fraassen1980). For example, the real content of string theoretic models is that various measuring devices in a physics laboratory will give particular readings. But let us imagine that this philosopher does not accept string theoretic models. Obviously, therefore, this philosopher is not committed to the truth of the corresponding hypothesis about these measuring devices.

Analogously, the shorthand story is committed to treating economic models as merely hypotheses about patterns in agents’ choices. The real content of the model of Eve as a preference maximizer, for example, is that Eve’s choices conform to the Weak Axiom (sec. 2). But, the shorthand story itself is not committed to accepting this economic model, and so it is not committed to the truth of the Weak Axiom. This illustrates, more generally, that the shorthand story is not committed to the claim that basic economic theory is true (or well confirmed). In other words, the shorthand story does not entail positivist doctrine 7. (Of course, one might again wonder what the point of the shorthand story could conceivably be, if not as part of a dogmatic defense of basic economic theory. I wait until sec. 5 to address this.)

This simple but important point goes unrecognized, however, because talk of the ‘theory of revealed preference’ in the literature conflates the shorthand story with the Weak Axiom of revealed preference. Take, for example, Reiss (Reference Reiss2013, 35), who points out that agents “make all sorts of mistakes when they choose due to inattentiveness, weakness of the will, or false beliefs.” And so agents’ choices do not always adhere to the Weak Axiom. But the Weak Axiom is part of the content of standard economic models, when interpreted strictly according to the shorthand story (sec. 2). Therefore, Reiss points out, the content of standard economic models is false, when so interpreted. Reiss then concludes from this that “the scientific value of the technical [shorthand] concept of preference as choice is dubious” (35).

Reiss’s last move is too quick. Note crucially that people are not always maximizers of their commonsense preferences. This is for exactly the reason that Reiss gives above: people “make all sorts of mistakes when they choose.” It follows that the content of standard economic models is also false, when strictly treated at face value as a hypothesis about commonsense preferences.Footnote ¹² So Reiss’s point above does not tell in favor of the face-value story over the shorthand story. It only appears to do so if one conflates the shorthand story with the Weak Axiom of revealed preference. In sum, this section has shown that the shorthand story does not itself issue in problematic positivist doctrines 4, 5, or 7.

5. The Rationale behind the Shorthand Story

What then is the rationale behind the shorthand story, if not to provide a supposedly theory-independent and conclusive way to evaluate economic models (sec. 3) or to shield basic economic theory from all psychological criticism (sec. 4)? To set the scene, consider the economic model of the consumer, whose face-value content is as follows: (i) There are a range of commodities. And an agent—call him Adam—chooses how much of each of these commodities to consume. (ii) Adam has commonsense preferences over such ‘commodity bundles’. In the version of the model that I want to consider, the model attributes to Adam a maximally specific assignment of preferences, $H_P$. These preferences are stable over time. (iii) Adam is an optimizer: he always chooses the most preferred bundle on the menu of bundles available to him. So, on this basis, the model describes which commodity bundle Adam would choose from any given menu of bundles. It describes his counterfactual choices, $H_C$. (iv) The menu of commodity bundles from which Adam can choose is constrained by the prices of each commodity, by Adam’s income, and by the tax regime. Therefore, this description $H_C$ of Adam’s choices specifies how price, income, and tax make a difference to Adam’s choices as a consumer.

Let us imagine, however, that much of what this model says at face value about Adam’s psychology is false. (a) The model describes some of Adam’s commonsense preferences incorrectly. In particular, the model does not accurately describe Adam’s preferences between enormous bundles, such as 1,000 loaves of bread versus 900 apples. And it does not accurately describe his preferences between minuscule bundles, such as one loaf of bread in a given month versus one apple that month. (b) Adam’s commonsense preferences are not stable, as assumed, but vary somewhat depending on his mood and on environmental cues. (c) Sometimes ‘interfering factors’ result in Adam choosing one bundle over a second bundle, even though he has a commonsense preference for the second bundle over the first. For example, when Adam is tired or stressed he tends to make mistakes. And, suffering from a clinical pathology, on some occasions Adam compulsively buys kitchenware, rather than renting movies, for instance. This is despite the fact that Adam has a strong and stable commonsense preference for movies over kitchenware. Indeed he has no use for kitchenware, nor does it afford him any pleasure either during or after the purchase.

In spite of all this, it is perfectly possible that the model under consideration accurately describes a large proportion of Adam’s counterfactual choices. Here are a few ways in which this is possible. In relation to c: imagine that the model describes Adam as possessing a stronger commonsense preference for kitchenware than he in fact does possess. As a result, the model describes more or less accurately Adam’s consumption of kitchenware. This slight misdescription of Adam’s commonsense preferences offsets, if you like, the misdescription of Adam as a perfect optimizer of these preferences. In relation to b: imagine that the model does not accurately describe Adam’s commonsense preferences at any moment in time, preferences that are rather unstable. But instead the stable preferences that the model attributes to him are a good ‘average’ over this range of unstable preferences. As a result, the model describes more or less accurately Adam’s total monthly consumption of each commodity. In relation to a: imagine that Adam’s income would never be low enough that only minuscule commodity bundles would be on his menu of available bundles. Similarly, it would never be high enough that any enormous commodity bundles would be on the menu. As a result, the model accurately describes his choices with respect to the menus of commodity bundles that are in some sense ‘practically feasible’. In this respect it does not matter that the model misdescribes Adam’s commonsense preferences concerning minuscule and enormous bundles.

In summary, at face value, the above model of the consumer misdescribes much of Adam’s psychology; for one thing, $H_P$ misdescribes Adam’s commonsense preferences. Nevertheless the model’s description of Adam’s choices $H_C$ is more or less accurate—at least when considered month by month and with respect to menus that are practically feasible. But recall that $H_C$ is in effect a description of how price, income, and tax make a difference to Adam’s choices. So the model describes these influences more or less accurately too.

Adam’s case can be used to highlight the virtues of the shorthand story. Consider an economist who has two ultimate aims as far as Adam is concerned. Her first aim is to describe Adam’s choices more or less accurately. Her second aim is to describe Adam’s psychology more or less accurately. So the above model is very good at meeting her first aim but fails to meet her second aim. What then should this economist’s attitude toward this model be? I suggest that she take an ambivalent, ‘aim-relative attitude’. In the context of pursuing her aim of describing Adam’s choices, she should accept the model. In the context of pursuing her aim of describing Adam’s psychology, she should reject the model. This is just an extension of the idea, familiar from the modeling literature, that one’s attitude toward a model will depend on one’s aims (sec. 2). Incidentally, Daniel Kahneman, I think, is a great example of an economist who switches in this manner between treating economic models of decision making as models of choices, in one context, and then as models of an agent’s psychology in another (Kahneman and Tversky Reference Kahneman and Tversky1979; Kahneman et al. Reference Kahneman, Wakker and Sarin1997).

One can now proceed to argue as follows: (A) One of the defining aims of economics is to describe how external circumstances such as price, income, and taxes make a difference to an agent’s or agents’ choices. But (B) it is methodologically felicitous for a discipline to take an aim-relative attitude to its models. So there is a context in which it is methodologically felicitous for economics to treat preference assignments as just describing agents’ choices given the external circumstances. But (C) this treatment is just what the shorthand story about preference assignments (short) offers. Therefore, short is methodologically felicitous, where one is able to implement it coherently. But one is able to implement short coherently for the overwhelming majority of preference assignments in current economic models.Footnote ¹³ So this shorthand story provides a methodologically felicitous treatment of such preference assignments.

I will now bolster this argument by lending further support to premise A and B. (See sec. 2 for premise C.)

Premise A claims that one of the defining aims of economics is to describe how external circumstances make a difference to an agent’s or agents’ choices, for example, the consumption of fruit in Belgium aggregated over a month. Here are some examples of the external circumstances I have in mind: the prices of each commodity in a market, the technological ability of firms to produce commodities by transforming other commodities, the initial endowment of commodities among agents and firms, and the tax regime. For example, one of the defining aims of economics is to describe how technology shocks and commodity shocks make a difference to prices, and thereby to an agent’s or agents’ supply and demand behavior.Footnote ¹⁴ Similarly, one of the defining aims of economics is to describe how government intervention via taxation makes a difference to prices, and thereby to an agent’s or agents’ supply and demand behavior.

More controversially, to this list of external circumstances, one might also add the availability and distribution of information—for example, information about the quality of a commodity (secondhand cars being the classic example) or about other agents’ choices (e.g., whether one’s partner cooperated or defected in the last round of an iterated prisoners dilemma). Thus, one of the defining aims of so-called informational economics is to describe the way in which agents’ choices are influenced by external circumstances such as indicators of quality and the choices of other agents. (Of course, a complete discussion of the content of models in information economics would also have to say something about the content of its assignments of knowledge and expectation—a task I have had to set aside for another day.)

There may of course be many other defining aims of economics. For example, one might think that it is a defining aim of economics to describe the cognitive and neurobiological mechanisms that underlie decision making (Camerer et al. Reference Camerer, Loewenstein and Prelec2005). Nevertheless it is clear that one of the central defining aims of economics is (also) to describe how external circumstances make a difference to an agent’s or agents’ choices.

Finally and most important is premise B, which I put forward as a prosaic methodological guideline for model-based science. This premise says that it is methodologically felicitous for a discipline to take an aim-relative attitude to its models. To see this guideline in action, consider a climate model that, at face value, divides the globe into regions and that describes the rainfall in each region for each month in the next year. Let us say that one of the defining aims of climatology relates to tropical seasons. The aim is, namely, to describe how rainfall in the southern tropics changes from month to month. And a second aim is a cross-regional comparison. The aim is, namely, to describe how yearly rainfall varies across the various regions of the globe.

A climate model might (seem to) be very good at achieving the aim of predicting tropical seasons, for example, and (seem to) be bad at achieving the aim of cross-regional comparison. On these occasions it is methodologically felicitous for climatology to take an ambivalent, aim-relative attitude to this model. This involves treating the climate model, at one point, as a description just of seasonal changes in tropical rainfall. In this context one accepts the model. And then, at another point, one uses the model to describe just regional variance in yearly rainfall. In this second context one rejects the model. (It is important to recognize that this is not to deny that a model’s ability to describe seasonal change in the tropics accurately is not sometimes strong evidence as to whether it describes cross-regional variance accurately. As I discussed in sec. 4, the sort of evidence that bears on a hypothesis may be very broad.)

Note that premise B does not say that this way of proceeding is mandatory or that it is always the best way on balance. It just says that it is one desirable way to proceed. As section 2 illustrated, it is a well-attested feature of the model-based approach to science that the same model can be used in a number of different ways (Morgan Reference Morgan2012). Importantly, premise B is consistent with the idea that some disciplines aim to describe unobservable features of the world. This is in contrast to positivist doctrine 1. Similarly, premise B is consistent with the idea that one of the defining aims of economics is to model agents’ psychological states and the cognition and neurobiology of decision making. This is in contrast to positivist doctrine 2. All that premise B requires is that one of the ultimate aims of economics is—in addition to any aims pertaining to cognition and neurobiology—to describe how external circumstances make a difference in an agent’s or agents’ choices.

In summary, this section has made the warrant for the shorthand story entirely explicit. The shorthand story allows economists to focus on pursuing one of the central aims of economics, namely, describing how external circumstances make a difference to choice behavior.

6. Conclusion

This article has examined the shorthand story about assignments of preferences in economic models (and it has put aside the wider issue of knowledge and expectation in economic models). According to the shorthand story, when an economist assigns preferences to an agent, this is for the economist to believe that the agent’s choices conform to a particular pattern (sec. 2).

Section 3 preempted some misguided criticisms of the shorthand story, criticisms that Hausman, Rosenberg, and several others give the impression of endorsing. It preempted these criticisms by pointing out that the shorthand story should be distinguished from positivist doctrine 6, which says that there is a practical, theory-independent procedure for observing an agent’s choices. The shorthand story does not entail doctrine 6, nor indeed does it entail behaviorism about commonsense psychology.

Section 4 refuted the positivist doctrine 4 that models are only to be tested by testing their observable implications. It follows—contrary to Alexandrova, Craver, and Haybron—that the shorthand story does not issue in positivist doctrine 5, the doctrine that the only evidence that bears on economic models is observations of agents’ choices and the external circumstances under which they are made. What is more—contrary to Reiss—the shorthand story itself is not committed to endorsing basic economic theory, unlike positivist doctrine 7.

Thus, the first take-home message is this: by carefully spelling out a judicious version of the shorthand story, it becomes evident that the shorthand story does not entail positivist doctrines 4, 5, 6, or 7—despite what its critics suggest. The reason that it is so important to distinguish these problematic doctrines from the shorthand story, I contend, is that the failure to do so has prevented philosophers of economics from credibly engaging with economists. When economists see philosophers striving to criticize the shorthand story—an entirely respectable part of economic methodology—they are less likely to take seriously our criticisms of the genuinely problematic positivist doctrines.

But what is the warrant for the shorthand story? To answer this, I applied some familiar ideas from the literature on modeling. My answer was that the shorthand story allows economics to focus on one of its defining aims: to describe how external factors make a difference to choices. Thus, the shorthand story shields economic theory from being undermined by any cognitive and neurobiological data and the like that are not relevant to this aim. It shields via ‘content restriction’ but not by ‘epistemological restriction’ (sec. 4). And this restriction is warranted by the principle that it is methodologically felicitous for a discipline to take an aim-relative attitude to its models (sec. 5).

So the second take-home message is this: the shorthand story does not need to be warranted by appealing to any problematic positivist doctrines. In particular, one does not need to claim that (1) the defining aim of the sciences is merely to explain the observable in terms of the observable or that (2) the sole defining aim of economics is to explain choices in terms of external circumstances. Similarly, in the past, the motivation for the shorthand story may have been to provide a theory-independent and conclusive way to test economic models (sec. 3) or to shield basic economic theory from all psychological criticism (sec. 4). But this need not be its rationale today.

This addresses the concerns of critics who charge that “it is unclear what [the shorthand] reduction of preference to hypothetical choice would accomplish” (Hausman Reference Hausman, Caplin and Schotter2008, 137). It rises to the challenge posed by Alexandrova and Haybron (Reference Alexandrova, Haybron, Davis and Hands2011, sec. 3), who note that “what is absent is a good argument for why this is the right view of economics.” And it corrects Hausman’s (Reference Hausman2000, 114) contention that there was “never any reason to develop [the shorthand story] in the first place. … There is nothing to be ashamed of in the notion of a subjective preference ranking, and it is no good pretending that economics can make do without it.”