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Machine learning and the economy
Published in Siddhartha Mitra, Robotization and Economic Development, 2023
In economics, the theory of revealed preference (Roper, Britannica Website) is a formal but useful statement of the obvious: what a person chooses for given income and prices informs us about his preferences. But even if we take a single product – say movies, which are characterized by difference in genre (action, romantic comedies, period dramas, horror, etc), linguistic medium used, lead actors, style resulting from the tastes of the director/producer – an immense amount of information would be needed to determine a consumer's preferences: a ranking of movies of various types. Given that each viewer has different preferences, a lot of information on actual choice would have to be collected at the level of each viewer and then processed. Also note that our preferences are time- and context-dependent: a couple might like watching romantic comedies on Friday night to celebrate their togetherness after a hectic work at the office, run all the required chores on a Saturday, and then prefer to watch a horror movie to break the monotony of a Sunday afternoon. In other words, a deep knowledge of a person's preferences has to be built on a mountain of information and facilitated through accurate processing.
Ecosystems: Functions and Services
Published in Yeqiao Wang, Terrestrial Ecosystems and Biodiversity, 2020
There are two main methods for estimating monetary values: revealed and stated preferences. Both these methods typically involve the use of sophisticated statistical methods to tease out the values.[9] Revealed preference methods involve analyzing individuals’ choices in real-world settings and inferring value from those observed choices. Examples of such methods include production-oriented valuation that focuses on changes in direct use values from products actually extracted from the environment (e.g., fish). This method may also be applicable to indirect use values, such as the erosion control benefits forests provide to agricultural production. Other revealed preference methods include hedonic pricing, which infers ecosystem service values from closely linked housing markets. For example, urban forest ecosystems and wetlands may improve water quality and that may be (partially) captured in property values.[10] The travel cost valuation method is used to value recreation ESs and estimate values based on the resources, money, and time visitors spend to visit recreation sites.
Sustainability Analytics and Decision Execution
Published in Ram Ramanan, Introduction to Sustainability Analytics, 2018
Many environmental goods are not traded, and hence their market prices are not known. Revealed preference theory, pioneered by American economist Paul Samuelson, is a method of analyzing choices made by individuals, by assuming that the preferences of consumers can be revealed by their purchasing habits. Individual’s preferences may be revealed through their buying choices of related products. For instance, damage, resulting from the rise in sea levels, can be measured using the market value of the inundated land plus the cost of building protective sea walls. The change in purchasing habits of individuals—the fall in price—reveals a measure of the impact of sea level rise. Similarly, a shift in the demand or supply of a market good could be measured to obtain the value of an environmental aspect. For instance, the impact of climate change on energy could be assessed through the measurement of the shift in energy resource demand function; or the value of superior environmental performance of a product could be evaluated by the premium consumers are willing to pay for equivalent functionality.
Revealed and stated preferences for reliable commuter rail in Norway
Published in Transportation Letters, 2020
Askill Harkjerr Halse, Vegard Østli, Marit Killi
In economic analysis of transport demand, the preferences of travelers can be inferred from either data on (1) their actual choices (revealed preferences, RP) or (2) data on choices between hypothetical alternatives (stated preferences, SP). SP data is a useful supplement to RP data because the researcher can control the characteristics of the alternatives, which ensures that the parameters of interest can be identified. The drawback of SP data is its hypothetical nature.