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S. N.


Principles of
Choice and Preference
Issued as
Paper No. 160, February 1967
Institute For Research
In The Behavioral, Economic
And Management Sciences
Herman C. Krannert Graduate School
Industrial Administration
Purdue University

22 September 2006
Universit di Siena
Dipartimento di Economia Politica
Piazza S. Francesco, 7
53100 Siena, Italy
+39 0577 289322
+39 339 417 8518

T his is a transcript of a paper issued at Purdue in 1967. Though

there has been minor editing, the original style of the document
has been kept as far as possible. The paper was submitted for
publication in Econometrica, and accepted subject to the requirement that
the last section be omitted. To the extent that I could understand a reason
for this requirement I was not inclined to accept it, and the paper was not
then published. However, from being issued as Institute Paper 160,
February 1967, it had a circulation and the influence has been evident, in
cases both with and without apparent awareness of source.
A case I know well, where ample acknowledgment is provided, is the
Oxford D Phil thesis of Yasumi Matsumoto, Choice Functions:
Preference, Consistency and Neutrality, 1982, done with supervision of
Amartya Sen. I was one of the examiners.
The general subject of choice functions perhaps had its beginnings
with Kenneth J. Arrows Rational choice functions and orderings,
1959. The path independence which features in my paper had attention
from a number of writers, Charles Plott I suppose being among the first
with his Path Independence, Rationality and Social Choice, 1973.
Matsumotos thesis records other cases, and from communications with
Murat Sertel I gather there are others again, including himself.
This paper having been put aside, I gave some report on the contents
in my out-of-print Logic of Choice and Economic Theory, 1989. There
has been a return to it now in order to give it a review, and perhaps to
consider again its possible publicationafter all, the conditional
acceptance had no time limit!
The list of references at the end of the paper remains as it was, and
the following are additional.
Afriat, S. N. (1967). Principles of Choice and Preference. Institute Paper
No. 160, Institute for Research in the Behavioral, Economic and
Management Sciences, Herman C. Krannert Graduate School of
Industrial Administration, Purdue University.
(1987). Logic of Choice and Economic Theory. Oxford: Clarendon
(1995). The Connection between Demand and Utility. Economics
Department, European University Institute, San Domenico di Fiesole
/Firenze (February).
(1996). Revealed Preference Revealed. Society for the Advancement
of Economic Theory Conference on Economic Theory and
Applications, Antalya, Turkey, 16-21 June, 1996. Discussion Paper
No. 98-7, Department of Economics, Bilkent University, Ankara,
1998. Revised version: Quaderno No. 265 (October 1999),
Department of Political Economy, University of Siena.
Arrow, Kenneth J. (1959). Rational choice functions and orderings.
Economica, N. S., 26, 121-7.
Ferejohn, J. A. and D. Grether (1977). Weak Path Independence. Journal
of Economic Theory 14.
Grether, D. and Charles Plott (1982). Nonbinary Social Choice: An
Impossibility Theorem. Review of Economic Studies 49.
Hansson, B. (1968). Choice Structures and Preference Relations. Synthese
Matsumoto, Yasumi (1982). Choice Functions: Preference, Consistency
and Neutrality. D Phil Thesis, Oxford, 1982. Supervised by Amartya
Parkes, P. R. (1976). Further Results on Path Independence, Quasi-
transitivity and Social Choice. Public Choice 26.
Plott, Charles (1973). Path Independence, Rationality and Social Choice.
Econometrica 41.
Richter, M. K. (1966). Revealed Preference Theory. Econometrica 34.
Sen, A. K. (1970). Collective Choice and Social Welfare. San Francisco:
Holden Day.
(1971). Choice Functions and Revealed Preference. Review of
Economic Studies 38.
Sertel, Murat (19??). (Additions, reader please advise.)

1 : Choice
2 : Search and Elimination
3 : Binary Choice
4 : Preference
5 : Choice Relations
6 : Analysis of Choice
7 : Progressive Choice
8 : Goods
9 : Consumer Preference

first step in examination of an act is to view it as a choice. It is
even impossible to recognize an act otherwise. Choice is the
abstraction for action. If anything is done, there is, by the free
nature of an act, always the antithesis that it might not have been done,
and this invokes all else that might have been done instead. This space of
possibility is given some abstract form. But even the identification of
what has been done is an abstraction, a limited specification that one
pretends suffices. Merely with a form of description a space of possibility
can immediately be presented, by the variations within that form. These
are the logical possibilities, which arise just from the manner of picturing
the possible, and they need not be real possibilities, however such can be
distinguished. Then when an act is presented as a choice, there is the
problem of accounting the singularity of what is done which differentiates
it in the variety of what might have been done. The account should
involve a principle which applies uniformly to the possibilities, yet
singles out the particular act, in terms of its cause, the motive, or the
objective. Value is a term serving that principle, with preference as a
cardinal concept for its expression.
Whatever the scope of the concept of choice and the
systematization of choice by preference, it remains just a model, a form
of representation and analysis. It is a scheme that can always be applied
to behavior, in some fashion, even without any assured significance. The
model of a choice system based on a preference order is habitual to
thought, in particular to economics; even in a more general perspective,
order appears as an almost invariable component in measurement. But
there is some puzzle about its singularity and unquestioned acceptance.
An analogy can be made with the routine of regression analysis between
experimental variables about which nothing is entertained but that they
have something to do with each other. Perhaps, if there is such a thing, it
is the scheme compelled by a regard for the empty form of the matter,
and beyond that ignorance.
Choice making is in the most familiar experience. Yet choice
systems, that proceed directly to a decision, are not. In the common
phenomena of choice making usually there are complex processes which
lead towards choice. The processes can be performed variously, but the
understanding is implicit that their variety makes no difference, that the
outcome is always the same, A choice process can be familiar as a
process of progressive search and elimination, and as such it can be well
illustrated from experience. The stability or invariant outcome of search
by variety of processes will here make the basis for the model of a choice
system based on a preference order. General principles concerning choice
and preference will be laid down, and illustrated, in particular in regard to
the analysis of consumption. A new approach to the analytical theory of
consumption is developed, by considering a scheme of consumption data,
and then certain economic questions that might be asked of that data.
With any act of an agent there are other possibilities, which might been
performed instead. Otherwise there is just a constraint. But other
possibilities there is an unaccounted freedom, and there arise question of
the cause of the act, the motive or objective, which singles it out from
among the other possible acts.
By the state of an agent is meant all those factors in conjunction
whose alteration makes a difference of importance to the agent. Action of
the agent is to bring about some such alteration.
Consider an agent whose possible states are in a set D . On any
occasion of action there is a certain set S D of states which are
attainable. The agent is faced with a set of possibilities; and action then
is to decide some element x S . The Principle of Choice asserts the
chosen element to be a function just of the range of possibilities, That is,
x = f ( S ) , where f is a function of S D such that f ( S ) S . Such a
function defines a choice system, with domain D .
In manifestation of choice in familiar experience, such choice
systems do not have immediacy. Rather, choice is brought about by a
process, subjecting possibilities to search and progressive elimination
narrowing them down towards a final result. Witness tournaments with a
first, second, , and a final round, or a ladder in which each contestant
can challenge a place above. There is implicit acceptance that the initial
drawing makes no difference, the outcome is invariably determined. Or
consider how a choice is commonly made by freely ruling out any
possibility which makes an unfavorable comparison with any other. It is
assumed it makes no difference to the outcome how this procedure is
carried out. The processes for a choice, the searches and eliminations, can
be various, but compatibility with the Principle of Choice requires that
the outcomes be invariably the same. It is required to characterize the
structure imposed on choice systems by this condition of invariant
outcome for processes they generate1. Such an invariance is perhaps more
intelligible to practical choosers than any statement of such structure, or
even the concept of a choice system itself. It will be made the basis for a
normal model for a choice system.

A different kind of discussion, directed towards axiomatic description, rather than a
model of choice making process, has been given by Arrow (1959).


Consider search processes, based on a choice system 0 , as follows.
Assume, for simplicity, that H is finite, so any W H is finite.2 A

aB! B5 b; so W eB! B5 f. The choice system determines

search path will describe the elements in W in some order, say

0 eB! B5 f eB! B5 f
and, applied to any pair of possibilities. it determines
0 eB< B= f eB< B= f
A search process, with the given path, consists in formation of a
search sequence C! C5 where
C! B! C7 0 eC7" B7 f a7 " 5 b
Thus, with initial choice B! and proceeding along the path, the
chosen element held at any stage is retained until it can be replaced
by a preferred element on the path, and so on until the path is fully
described and the search is terminated. The result of search, with
that path, is the final term C5 of the search sequence which derives
from it. Thus, it is a function of the path which can be called a
search function, and be denoted
J aB! B5 b C7
The definition of the search function can be restated
J aB! B" B# B5 b 0 e 0 e0 eB! B" f B# f B5 f
From the form it appears that
J aB! B< B5 b J aJ aB! B< b B5 b
which shows a progressive property of the search process, the final
term of an initial stage becoming the initial term of a further stage.
The condition to be considered for 0 is that its choice in any set
coincides with the result of any search, along whatever path, that is
J aB! B5 b 0 eB! B5 f
By this condition, f can be said to be normal. Since eB! B5 f is
a set, irrespective of order of the elements, normality implies that

2 Or if H is a natural representation of possibilities in a compact continuum it

can be resolved into a finite set of neighborhoods of approximately similar
possibilities, and choice made among these neighborhoods. Then the chosen
neighborhood can become the field of choice for a finer search by the same
process, and so forth until search is fine enough. This shows, in a fashion, how
the framework of finite choice is not so limiting.

the search function J aB! B5 b is a symmetric function

unchanged by permutation of the arguments, that is
J aB! B5 b J aB1! B15 b
where 1 is any permutation of ! 5 . This can be called the
search symmetry condition, for 0 . Normality also implies that
0 eB! B< B5 f J aB! B< B5 b
J aJ aB! B< b B5 b
0 e0 eB! B< f B5 f
Accordingly, for any V, W H,
0 eV W f 0 e0 eV f W f
which states that the choice in any set is the same as the choice in a
set obtained from it when all unchosen elements in any subset have
been eliminated. This can be called the elimination consistency
condition for a choice system. Repeated application of it gives
return to the normality condition, so the two conditions are
equivalent. Thus, with
W W! W " W # W 5
we have
0 aW b 0 a 0 0 a0 aW! b W" b W# W5 b
in particular, the W s could be single elements. The principle of a
tournament with a final between two divisions also follows from
the elimination principle, and is
0 aV W b 0 e0 aV b 0 aW bf
More generally, there could be a tree of divisions, stemming from a
single node) for the winner.3
It is now required to characterize the structure of a choice
system which satisfies this elimination consistency condition or,
what is equivalent, the normality condition which requires the same
result for search with every path, and then moreover that this

3 This is an inadequate account of sport. Consider three football teams A, B, C.

Though there would be conflict with the notions here entertained, there should
be no surprise if invariably A defeats B, B defeats C, and C defeats A. For
these teams when they get together really play different games. With the one
pair the game resolves into a contest between the forwards, with the other
between etc. (ignorance of football prohibits a more specific demarcation of
possibilities). This note reports something of a conversation with William C.
Brainard (following a game). Cf. Arrows voting paradox.

invariant result be identical with the choice of the system, so the

search processes appear as in stable pursuit of that choice.


choices, thus,, as between C7" and B7 a7 " 5 b The

A search process,, as defined. is made up of a sequence of binary

normality condition therefore shows 0 as reconstructable out of the

binary choice system which derives from it. A binary choice system
can be stated by the relation of the chosen element to the unchosen
element in any couple, that is, by a binary choice relation
T H H, where BT C means that, in choice between B and C , B
is chosen. Thus the binary choice relation T which derives from a
choice system 0 is defined by
BT C 0 eB C f B
Normality allows recovery of 0 from T . Thus, for any B! B5

C ! B! , C 7 a7 " 5 b
C7" if C7" T B7
B7 if B7 T C7"

0 eB! B5 f C5

Consider now the generally necessary properties of a relation

by virtue of its being a binary choice relation T , and then the
further necessary property if it is to provide a symmetric search
function, as is required if it derives from a normal choice system.
Thus firstly, for all B C H, BT C or CT B, but not both unless
B C That is,
which conditions states T to be a complete, antisymmetric (anti-2-
cyclic) relation. In particular, BT B BT B, that is BT B for all B,
which states T is a reflexive relation. This is all that can be
supposed for a binary choice relation, such as would derive from a
general choice system 0 . But now let 0 be normal. Let B C D be any
T -3-cycle, that is BT C CT D DT B, so that
0 eB C f B 0 eC D f C 0 eD Bf D

J aB C D b 0 e0 eB C f D f 0 eB D f D

J aC D Bb 0 e0 eC D f Bf 0 eC Bf B

But the symmetry of J aB C b, implied by the normality of

0 eB C f requires
J aB C D b J aC D Bb
Hence D B Similarly, B C Accordingly,
that is, T is anti-3-cyclic. This condition, together with the
completeness of P, gives
-Thus, BT CT D BT D , that is, T is a transitive relation. It follows
from this that
Now further,
that is, T has no cycles of distinct elements, which is to say T is an
anticyclic relation.
Thus P, being reflexive and transitive, is an order. By
completeness, it is a complete order, and by antisymmetry,
equivalent to anticyclicity for a transitive relation, it is a simple
order. Thus T is a simple complete order, which is to say a total
Thus, considering a binary choice relation T and the search
function J which corresponds to it, it has appeared that if J is
symmetric then T Is transitive. It will be seen now that, conversely,
if T is transitive then J is symmetric. Thus, with T as a binary

moreover transitive, and consider C J aB! B5 b. By

choice relation, necessarily complete and antisymmetric, assume T

definition, if

C! B! , C7 7" a7 " 5 b,
C if C7" T B7
B7 if B7 T C7"
then C C5 But if C7" T B7 then C7 C7" so that, by the
reflexivity of T , C7 T C7" and if B7 T C7" then C7 B7 so that
C7 T C7" . Hence,

C7 T C7" a7 " 5 b.
C5 T C5" T T C!
and, since T is transitive, this implies C= T C< a= <b Therefore
CT C< a< ! 5 b,
since C C5 Thus CT eC! C5 f But
C7 T B7 a7 ! 5 b
Hence, since T is transitive, CT eB! B5 f Similarly, if
C J aB1! B15 b where 1 is any permutation of ! 5
then CT eB1! B15 f But
eB1! B15 f eB! B5 f
Hence, CT eB! B5 f But
C C eB! B5 f
Therefore CT C and CT C; whence, by the antisymmetry of T ,
C C, as required. Also shown here is the existence and
uniqueness of a superior element in any totally ordered finite set,
which presents itself obvious in the image of a set of points lying
along a line.
Thus, with T any binary choice relation, that is a complete,
antisymmetric relation, and JT denoting the search function
associated with it, JT is symmetric if and only if T is transitive and
therefore a total order. In this case,
JT aB C b 0T eB C f
where 0T is a choice function such that 0T aW b B is the unique
element in W which is superior in T , that is, such that BT W .
However, if T T0 is the binary choice relation which derives
from a given choice system 0 , this does not then mean, as is
required for the normality of 0 , that 0 0T ; for the ternary
quaternary, choices of 0 are not bound by any condition on the
binary choices. The condition 0 0T where T T0 is to be
considered in terms of the preferences associated with 0 through all
its choices.

A choice is defined by a set and an element in it, thus by aB W b,
where W is the range of choice and B W is the chosen element.
Any choice can be identified with the set of ordered couples in

which the first term is the chosen element and the second term is
any element in the range, thus
aB W b eaB C b C W f
These ordered couples state the preferences in the choice, the first
term being preferred to the second. Thus the preferences in a
choice give the preference of the chosen element to every element
in the range. The choice is identical with the set of preferences in it.

are defined by aB W b, where B 0 aW b and W H. The

Given any choice system 0 , with domain H, the choices of 0

preferences in the system 0 are the set of all preferences in its

choices, that is
c0 eaB W b B 0 aW b W Hf
eaB Cb B 0 aW b C W Hf
this defining the preference relation of 0 . In particular, the binary
choice relation which derives from 0 is the set
T0 eaB C b B 0 eB C f B C Hf c0
of preferences just in the binary choices.
Now 0 has antisymmetric preferences if c0 is an antisymmetric

preferences, of the form aB Cb and aC Bb where B C . But if 0 is

relation, in other words if it does not include any opposite

normal, T0 is a total order. In this case T0 c0 and c0

antisymmetric implies T0 c0 because any enlargement of T0 ,

one already included. Since in any case aB W b c0 if B 0 aW b,

which is already complete, must introduce a preference opposite to

that is, Bc0 W it then follows that aB W b T0 , that is BT0 W ,

which states B 0 aW b is the superior element in W in the total
order T0 This shows 0 0T where T = T0 Thus, a necessary
and sufficient condition that a choice system 0 be normal is that its
associated search function be symmetric, and its preferences
antisymmetric; or what is the same, that the binary choice relation
which derives from it be transitive, and identical with its
preference relation.
Thus, the familiar model is presented of a normal choice
system 0 , determined by a total order T of the possibilities, which
chooses in any set the one element which is superior in that order.
It is a total choice system that has been considered, in that it
chooses a single element in every set in its domain.
Correspondingly, T is a total preference system, being a simple,
complete order.

determines a subset 0 aW b W in every set W O . Let such an 0

Now let O be a set of sets, and let 0 be a function which

simple if 0 aW b is a single element for every W O , and to be

define a choice system, effective in O . Let 0 be defined to be

complete, with domain H, if O #H , that is, O is the set #H of all

subsets of a set H. Now a total choice system can be defined to be a
choice system which is simple and complete. Thus so far
discussion has been concerned only with such total choice systems.
But choice systems which are both partial and incomplete are
exemplified wherever there are equivalent possibilities between
which no distinction can be made. They are exemplified in
economics, for instance by the consumer who chooses points only
in budget regions, to determine a maximum of utility; and then
these points generally form a set, though in case of a strictly
concave utility function there will be only one such point. The
normal model for such a more general choice system can, on
grounds to be shown, again be based on a preference order, that is,
a reflexive transitive relation, but now without the antisymmetry
condition for it to be a simple order, and without the completeness
condition for it to be a complete order. Again, the approach will be
through processes for the discovery of choices.

A general choice system, with a set Y as universe can be
considered as a subrelation 0 of the relation I of membership of
elements to sets in Y to which they belong. Thus with I given by
a choice relation is given by any 0 I , where B0 W , implying
B W and W Y , means B is a choice permitted by 0 in W . In
particular, 0 is simple in H Y if
a W HbB0 W C0 W B C
that is, if 0 permits at most one distinct element to be chosen in any
set W H. Also 0 is complete in D if
a W Hba BbB0 W
that is, if 0 permits at least one element to be chosen in every
W H. Then 0 is a total choice system with domain H if it is
both simple and complete that is, chooses just one element in

W can be denoted 0 W eB B0 W f A choice of 0 is defined by

every set in H Generally, the set of elements chosen by 0 in a set

aB W b such that B0 W A preference shown in such a choice is any

aB Cb where C W . The preferences in 0 are any preferences
shown in any of its choices. Thus they form the relation T0 where
BT0 C B0 W C W

assumption B0 eBf for every B, it appears that BT0 B for every B,

which can be called the preference relation of 0 . With the

that is, T0 is a reflexive relation

Now with the relation T0 Y Y there can, with no
confusion in the double connotation, be associated a further
T0 Y #Y

BT0 W a C W bBT0 C ,

for all B Y , and W Y , that is W #Y That is, BT0 W states the

preference of B in relation to every element in S. In particular,
BT0 eCf BT0 C
Consider the choice system f* defined by
B0 W BT0 W B W
It is the choice system which arises when all the preferences which
appear in the choices of 0 are brought to bear on choices in any set,
the bearing of preference on choice being in the decision of chosen
elements as preferred elements. Automatically, 0 0 . The
Principle of Preference is that if a preference appears in any
choice, then it should have bearing on every choice. Applied to the
choice system 0 , it requires the extension of 0 to 0 . Let 0 be
called the closure of 0 ; more explicitly, it is the closure of 0 by its
own preferences. Then let 0 be called closed if 0 0 . Obviously
the closure of any choice relation is closed, 0 0 . For, by the
construction of 0 , T0 T0 The compatibility of 0 with the
principle of preference requires 0 to be closed, and thus of the form
0 0T where
B0T W BT W B W ,
and where T is a reflexive relation. For such a system, T0 T ; so
that 0 0 , and it is closed.
Now again let the idea be entertained that choices permitted
by a system 0 in a set W are not found directly but are discovered
by a process of search. Let a sequence of elements B C D W
be called a T -chain if BT CT T D , with origin D and final element

B. Moreover let it be called a final T -chain in W if for no A W is

A B D a T -chain. The final element B in a final T -chain
B C D in W with origin D defines a T -final element in W with
origin D. The process of search which is to be considered consists
in formation of T -chains in W starting with any origin D , and
continuing them until they become final, so as to determine a T -
final element with that origin. As the condition for the normality of
0 , the choices permitted by 0 in any set are to be the elements
discoverable as T -final elements in W with whatever origin. But
the condition that B be a T -final element with origin D can be
stated BTt D , where Tt defined by
BTt D a C! C5 b B C! D C5 C! T T C5
is the chain extension of T , being the relation between extremities
of T -chains, and it has the property of being the transitive closure
of T , that is, the minimal transitive relation containing T . So the
condition for B to be T -final in W with whatever origin is
a D W bBTt D
that is BTt W . With B W , this is equivalent to B0t W , where 0t 0Tt
is the closed choice system with preference relation Tt , where
T T0 Generally, 0 0t But normality requires 0 0t ;
equivalently, that 0 be closed, and T0 Tt 0 But T0 Tt 0 is the
condition that T be transitive. Since T0 is in any case reflexive,
this therefore is the condition it be a reflexive transitive relation,
that is an order. The relation 0t defines the normal closure of any
0 I It is the minimal normal relation containing 0 . Thus a
necessary and sufficient condition that a choice system be normal
is that it be closed and its preferences form an order ; and now the
normal form of a preference system, defined by association with a
normal choice system, is an order. It is the form for a preference
system which without comment is usually assumed. It is the
familiar standard model for a preference system, and choice by
preferences in such a system is the standard model for a choice
system. It has here been related to model processes of search in
making a choice, and assumptions about those processes. A feature
to be remarked is that while a general choice system in a universe

!! : 8
of 8 objects can require up to
; :
: ;

elements for its specification, a normal choice system requires no

more than 8. Thus, given a transitive relation T between 8 objects,
there exists a minimal relation F such that T Ft. This relation T
has the property
of being intransitive, it defines the intransitive base for T , and is
given by F T T # It contains at most 8 elements All the
choices which result from T can be discovered by search with F .
Accordingly, in choices with a normal system. no more than 8
elements need so to speak, to be born in mind. While it might be
questionable to link this directly with a logical ground for the
model, certainly it shows its practical facility.

Given any choice system 0 J there can be formed its preference
relation T T0 , then the transitive closure Tt of T , and then the
choice system 0t 0Tt . The method of analysis of choice by the
concept of preference is summed up in this formation 0t from 0 .
The relation 0t can be defined by its property of being the normal
closure of 0 , or the smallest normal relation in which 0 can be
contained, that is, it is normal, contains 0 , and is contained in every
normal choice relation that contains 0 . The method of preference
analysis of a given system f consists in viewing it as part of some
normal system 1, that is a system 1 based on a preference order.
Any such system 1 must contain 0t . But 0t is such a system, and any
normal system containing 0t is such a system. Thus 0t is crucial to
the method. The method consists in expectation of certain further
choices 0t from any given choice 0 . Thus if 0 states some choices
that have been observed, then by this observation there will
subsequently be anticipation of choices as stated by 0t . In other
words, with any given preferences, such as could be shown in some
observed choices, there goes the anticipation that these, together
with the further preferences contained in T , will bear on any
further choice which might be made. As in any statistical analysis,
observation is to be made the basis of expectation. Classical
methods of statistics proceed by associating finite schemes of data
with such analytical fictions as distribution characteristics, to
which inertia is to be attributed, and with that give the basis for
expectations. Preference is the peculiar statistical concept for the

analysis of choice. It is a fiction like any statistical concept, and

there might be no real systematic structure at all to a variety of
observed choices. But if a systematic character does exist, the
proposal is that it might be grasped in terms of preferences. Inertia
is attributed to preferences, so that, once observed in any act of
choice, they will tend to be present and condition any other acts of
choice. But they must, according to their nature as a concept, be
carried together in a transitive system. A transitive system which
contains any given preference must also contain their transitive
closure. Therefore whenever any references are shown, so also are

Let aB< W< b, where B< W< a< " 5 b be a set of 5

the preferences in their transitive closure taken as shown.

choices. They form the choice relation

0 eaB< W< b < " 5 f
with preference relation T0 defined by
BT0 C a < " 5 bB B< C W<
with transitive closure Tt 0 defined by
BTt C a D! D5 b B D! C D5 D! T T D5
That is,
BTt C a < = >bB B< B= W< C W>
On data of the 5 choices, there is expectation of any choice B in a
set W for which B0t W , where
B0t W BT0 W B W
If such a process gives expectation of the preference of B to C,
while at the same time. on some other ground, or by the same
process, there is expectation of the absence of this preference, there
is a contradiction of expectations. It appears that the absence of
such contradictions makes it a basis for various theories of choice,
such as the theory of choice of consumption, as is going to be
remarked later here; or the von Neumann-Morgenstern utility
theory of choice of probability, as has been considered elsewhere.4
The peculiar form of these theories is associated in each case with
the form of the choice sets, and some other simple assumption.
Thus in the case of the consume it could be the thrifty use of
money, or that more of any goods is better, or that more of all
goods is better, as will be discussed later ; and in the other case,

4 Afriat (1962 ii).


that in the simplex of probability distributions, a preferred

displacement at any point determines a preferred direction at every
point. With general principles about choice and preference taken
for granted, such simple assumptions are an entirely sufficient
ground for these theories.

In the nature of an act it is a simple choice. There is a set of
possibilities and just one is chosen. Thus while general choice
systems have certain manifestations, it is simple choice that is
especially important. It is now to be considered how simple choice
can be approached progressively, by means of a sequence of
general choice systems. The choice systems have primary,
secondary, rates in a hierarchic sequence say 0" 0# Given
any set W! , it is the initial set in a sequence
W7 07 W7" a7 " # b
If W: is a single element, at some stage :, then so is W; for ; :.
Thus the primary system forms a set of candidates from the initial
set W! , then the secondary system forms a set among these, and so
forth, narrowing down the possibilities until a single element
emerges. None of the base systems need be simple, nor even any of
the compound systems 0< 0" . Yet, for a given set W! ,
0< 0 " W !
can be a single element, for a sufficiently large < depending on W!
Such a system of progressive choice, possibly, and possibly
not, ending in simple choice, is exemplified by election to different
official ranks through the levels in a political body; or again, by
progressive examinations which not everyone survives; or, for
another kind of instance, by systems of filters which finally isolate
a single spectral component; or again, a certain kind of view of

denote a finite set of vectors B aB" B# b, where B< ! for <

evolutionary emergence; and so forth. For another example, let W!

sufficiently large. Let 07 choose vectors with the largest 7th

elements. The progressive system 0" 0# finally chooses a
vector in any W! with the largest first differing element. For given
W! , and 7 sufficiently large, 07 0" W! is a single element, which
is the first vector in the set in the order of first differing elements.
The vectors could be words, the elements being letters. This order
for any set of words is the order they would have if they were
arranged in a lexicon; and, given any set of words, the choice

system chooses the first word in this order. Or consider, for given

3 a3" 35 b, " 3" 35 8

8 and 5 8, the set of

Then 3 has place

! 8

in the order of first differing elements.

The fundamental descriptive coordinates of economics are
quantities of goods. Sometimes their connotation as such is taken
to mean that more is better. Such an assumption can be
misleading, unless specific conditions are explicit. If more bread is
unpalatable without more jam, then more bread, without more jam,
is not better; it leaves the consumer where he was before, insofar as
concern is with consumption, and possibly worse off than he might
have been since money could have been spent uselessly which
could have been spent in the gain of some other value. Thus the
assumption that more is better is an inalienable attribute of so-
called goods is unwarranted. But it appears in the familiar
monotonicity assumption of utility theory, and also in production
theory in the classical assumption that a production function is
differentiable and the partial derivatives are all positive. These
assumptions are interpreted as condition for non-saturation. But for
this they are not necessary, if saturation is to mean, as seems most
natural, that the utility or production function has a maximum and
the maximum is attained.
Even though more is better is generally inappropriate, the
condition less is not better can be seen to be acceptable with
appropriate qualification, and "less is worse" is a condition of
general importance, as a condition of economic efficiency. Thus let

S eB B aB" B8 b 9 f
B S, where

denote a stock of goods in stable possession of an agent. Assume

the possibility of disposal, so that the agent is to alter possession
from B to any C S such that C B. Then with possession of B
the agent has choice in the set
WB eC 9 C Bf

The fact that B is retained means that the choice aB WB b is made,

and therefore, if T is the agents preference relation, that BT WB , that
that is, less is not better, this not excluding the important possibility
that less might be as good. But now suppose that the goods have
exchanged value, between themselves and also with further goods
not represented in S but which touch the agents interests. Were it
the case that some lesser C B is as good as B, in retaining B
instead of C the agent would be foregoing a surplus of value
derived from B C, and, assuming the agent has other interests
which could receive value from that surplus, he freely sustains the
positive cost of a lost opportunity, which is not normal.
Therefore, assuming the agent conforms to the normal model for
choices, and assuming possession of a stock in S is not entirely
comprehensive of the agents interests, less cannot be as good, that
Together with the condition that less is not better, this gives that
less is worse. This proposition, and similarly certain others to be
considered, can be made a logical ground for the usual theory of
consumer behavior, as will now be seen

Let there be a market of some 8 consumer goods, and consider

of the goods are :< 9 a< " 5 b Let there be a consumer

some 5 different periods < " 5 in which the vectors of prices

whose consumption is purchased from the market, and let the

in the periods be B< 9 a< " 5 b Any proposition about the

vectors of observed quantities of goods purchased by the consumer

proposition about such data aB< :< b a< " 5 b

consumer, if it is to have real content, must have realization as a

The expenditures in the periods are /< :< B< For the same
expenditures, any consumptions C< 9 such that :< C< /< are
feasible; that is any C< [< , where
[< eC< :< C< /< C< 9 f
In particular
C< [< a< " 5 b

Since money is the means for gaining consumption, and an

amount is shown committed in each period, equal to the amount
spent, the consumer appears in any period as making a choice
among all consumptions which are feasible for the money spent.5

aB< [< b of B< out of [< a< " 5 b These choices together
That is, the consumer appears, in period <, as making the choice

form the choice relation

0 eaB< [< b < " 5 f
The viewing of the consumer's consumption in any period in this
way as a choice thus makes a reduction of the date to the relation
The interest of data Is that it should be a source in the
formation of expectations. In the case of the consumer, who does
nothing but consumes, in any period, any significant expectation
concerns consumption in some period, when the prices are given or
in any way conditioned. Therefore let there be a new period, in
which it is supposed the prices are going to be :. It is required to
form an expectation concerning the vector of consumption B in that
period. Whatever it is, there will be an expenditure /, such that
:B /, and, as before, B will appear as a choice out of the

[ eC :C / C 9 f
corresponding set

5 This particular framing of consumption as a choice is the essence of the

revealed preference principle of Samuelson (1948). Then from the choices the
preferences are derived automatically, and can be collected together as a set.
Then by requiring that opposite preferences not be revealed, Samuelsons
weak axiom of revealed preference is obtained. But the general principle
concerning choice of preference (see note 5, p. 15) make it just as appropriate
to request that there be no opposing preferences in the transitive closure of the
preferences revealed in the choices; and then the strong axiom of
Houthakker (1950) is obtained. However, Houthakker proposes this axiom not
with such a derivation, but as an alternative mathematical characterization of
the class of differentiable demand functions which have the property that they
give consumption as the absolute maximum of some utility function subject to
the budget constraint. In other words. it is presented as just having a
mathematical meaning, as a descriptive axiom for this class of demand
functions; and so the complete revealed preference idea touched by Samuelson
but of which the idea of formation of the transitive closure is an essential part,
escapes. It needs to be remarked that the Houthakker axiom is only
appropriate to the case of an absolute maximum of utility which is part of the
main case In which there Is just a maximum. Moreover, the analysis for a
demand system, which gives a single consumption on each budget constraint.,
gives no result for a general set of choice data, in particular a finite set such as
is treated here, and which is most fundamental for empiricism.

An expectation concerning the consumers choice out of any set

will therefore give an expectation about B.
Now, an analysis of choice on the normal model leads to
formation of 0t from 0 . and to the expectation of any choice B out
of any new set [ for which B0t [ . What is the same, the method
leads to formation of the relation
T eaB C b a <bB B< C [< f
containing the preferences in the choices of 0 , and then to
formation of the transitive closure Tt of P, where
BTt C a < = >bB B< B= [< C [>
and to the expectation that if B is a consumption at prices :, and

[ eC :C / C 9 f,
/ :B and

then BT [ , that is a C [ bBT C .

Given the way an act of consumption has been viewed as a
choice, the procedure thus far follows from entirely general

peculiarity is the form of the choices aB< [< b, and this has not
principles, and there is nothing distinctive about it. The only

brought any result. Analysis would have it end at this point, were
there no other significant attributes of the consumer to be
entertained and exploited; in which case, it would seem, the
familiar theory of the consumer, with a preference map, with
concave boundaries, which could be represented as the levels of a
quasiconcave utility function, would have no basis in general
method. It would appear to be a special model, presented outright,
explicitly, or possibly, what is logically the same, implicitly
through some axiomatic description, such as have been a well
known labor and mystification of consumption analysts.
In order to proceed further, the construction of the relation T
will first be made more plain. Define ?< /<" ?< , so that ?< B< ",
y [< ?< C " C 9

BT C a < =bB B< B< Tt B= ?= C ",


where, with H<= ?< B= "

B< Tt B= a : ; >bH<: ! H:; ! H>= !
Consider the following conditions on the data:
[ a B C bBTt C B C

W a B C bBTt C B C
X a < BbBTt B< ?< B "
H ! H ! H !
<= => ;<

H<= H=> H<= !

with negation [ W X G It will appear that

[ W X G
Thus, immediately, W [ and
[ a < = C bB< Tt B= ?= C " B< C
W a < = C bB< Tt B= ?= C " B< C
X a < =bB< Tt B= ?= B< " G
Then further, from ?< 9 follows
?= C " B< C ?= B< "
?= B< " a Cb?= C " B< C
[ G W [ X G
so that
[ W X G
The conditions [ W X will now be interpreted separately.
Thus, [ asserts that, for some C, there is some B C such that
BT C, that is, some quantities in C can be reduced and the resulting
consumption B is still as good as C. In other words, some amounts
of goods are not wanted, or C is an inefficient consumption in that a
smaller one is as good. The condition [ , which will be called the
want condition, therefore means that no consumption C exists
which can be shown on the data to be inefficient. This does not
exclude the possibility of inefficient points; merely that, with the
data available, they cannot be demonstrated. If the monotonicity, or
non-saturation, law more is better is to be required, then certainly
[ is required, if the data is to be compatible with that law.
Now for W , it is equivalent to the assertion that, for the actual
consumption B< in some period <, there exists some C B< such
that B< T C That is, all the quantities consumed in period < could be
increased, without a better consumption being the result. This
means that in some period < the consumer is proved on the data to
be at a point of consumption saturation. Therefore W asserts that
the data cannot show the consumer to be in any period at a point of

saturation. This does not mean that in any period the consumer
might not actually be saturated; merely that the data does not prove
it. Nor does it exclude the possibility of saturation for
consumptions other than the B observed. If non-saturation is to be
required as a general hypothesis, then certainly W will be required,
for the compatibility of the data with the hypothesis. This limited
interpretation being understood, W can be called the non-saturation
The condition X is that, for some period <, there exists an B
such that BT B< and :< B /< Thus, on the evidence of the data,
the consumer could have got in some period < a consumption B as
good as B< , and cheaper, and is unthrifty in not doing so, since he
could have saved some money at no sacrifice. Thus X means that,
on the data, the consumer is demonstrably unthrifty in some period;
and X allows that the consumer might be unthrifty, but requires
that it cannot be proved. If the character of unfailing thriftiness is
to be attributed to the consumer, it must not be contradicted by the
evidence, and this requires the condition X , which will be called
the thrift condition.
Thus three possible attributes of the consumer, concerning
thrift, want and insatiability, though logically inequivalent as
general characteristics, in each case obtain the same condition of
the data if they are not to be contradicted; and that condition is G ,
which will be called the cyclical condition, on the data. This then is
the necessary and sufficient condition that any of the three
mentioned attributes of the consumer can be entertained, without
contradiction from the evidence of the data.
But still there is no manifestation of the usual theory of the
consumer, as seeking consumption which will give a maximum, for
the money spent, of a utility function of the usual form, monotone
and quasiconcave, or what is the same, a utility relation with a map
of the usual form. However, now it will be made to appear. The
cyclical condition is necessary and sufficient for the existence of a
solution -< Q< of the system of simultaneous linear inequalities
-< ! -< H<= Q= Q< a< = " 5 b6
Therefore, assume the cyclical condition, and let a-< Q< b
a< " 5 b be any solution where -< is to define a multiplier
and Q< a level, associated with the consumption B< in period <.
They are going to be interpreted as a Lagrangian multiplier or

6 Afriat (1963, 1967).


function QaBb which can be constructed as follows. Thus, define

marginal utility, and a utility level, respectively, for a utility

1< -< ?< Q< aBb Q< 1< aB B< b

From u< 9 and -< ! follows 1< 9 so Q< aBb is an increasing
linear function of B. Now, for all B, define
QaBb mine Q< aBb < " 5 f
Then QaBb is an increasing concave function, and thus has the form
of a classical utility function. It remains to show that
QaB< b maxeQaBb ?< B "f
Thus, it is immediate that Q< aB< b Q< Also
Q< Qs -= H=< Qs 1= aB< B= b Qs aB< b
so that Q< aB< b Qs aB< b Hence
QaB< b mine Q= aB< b = " 5 f Q< aB< b Q<
Now further,
?< B " ?< aB B< b !
1< aB B< b !
Q< aBb Q< .
But QaBb QaB< b Hence
?< B " QaBb Q<
But ?< B< ", and QaB< b Q< Hence
QaB< b Q< maxeQaBb ?< B "f
as required.
It is noticed further that
?< B " QaBb QaB< b
This shows not only is QaBb at a maximum at B< subject to the
constraint ?< B ", but it is a thrifty maximum: it cannot be
attained where u< B ". Moreover, as is easily seen,
BTt C QaBb QaCb
That is, if the relation Q be defined by
BQC QaBb QaCb,
then Tt Q. Thus Tt has been expressed as part of a relation of a
form that corresponds to a standard consumers preference map. It
can be expressed as a part of such a relation in a certain infinity of

Any kind of characteristic of the consumer, more specifically,
any feature in the structure of wants, the separations,
complementarities, and substitutabilities, such as can be described
in the framework of a standard map, can be given determination
from each of the infinity of standard maps in which Tt can be
embedded, and thus be found with a certain range of variation,
representing the information concerning them that is contained in
the data. For instance, a cost of living index has determination
which describe a certain interval, and the limits which define the
interval can be found.7 In particular, the upper limit based data just
for the base and current period appears as a Laspeyres index.8 Well
known lore interprets the Laspeyres index as an upper limit, though
without the sense of the interpretation ever being made fully
explicit. It also interprets the Paasche index as a lower limit, but, in
the sense here proposed, it does not appear as such.9 In fact, even
given that the data satisfy the conditions for admitting explanation
by a utility function, or the various other hypotheses here
considered, which impose the same condition on the data, the
Paasche index can be greater than the Laspeyres index10, which
renders the proposition absurd.
It has appeared that any of three different assumptions, thrift,
etc., about the consumer are sufficient to require any observable
data to admit explanation by a utility function. No more can be
attributed to this function than that it is a representational device.
Certainly the consumer may be unaware of attachment to a utility
function, and still act in a way that admits such representation. But
even if the consumer were deliberately guided by such an
attachment, the function need not be a function of the standard
form. It could be a function of any shape, but since communication
takes place only acts of consumption from the market, that shape
could never be communicated. So long as the consumer is thrifty, it
would always be possible to make representation of observed
behavior by a classical utility function, even if the real utility
function were different. To make this clear, assume any function Q
such that
QaB< b max eQaBb ?< B " B 9f

7 Afriat (1967,ii).
8 Afriat (1963,ii).
9 Afriat (1963,ii)
10 Afriat (1963 iii).

for the maximum condition. Since ?< B< ", the thrift condition is
?< B " QaBb QaB< b
The maximum condition gives
?< B " QaBb QaB< b
Hence, with H<= ?< B= "
H<= ! QaB= b QaB< b
H<= ! QaB= b QaB< b
Therefore, from
H<= ! H=> ! H;< !
QaB< b QaB= b QaB< b
and hence that
QaB< b QaB= b QaB< b
But then
H<= ! H=> ! H;< !
is impossible. Thus the cyclical condition must be satisfied. But, by
this condition, there exists an increasing concave function which
can have the same role as Q, so far as anything observable is

Afriat, S. N. (1962): Preference scales and expenditure systems.
Econometrica 30, 305-323.
(1962): The validity of the expected utility hypothesis. Recent
Advances in Game Theory, Princeton University Press, 73-82.
(1963i): The systems of inequalities +<= B= B< Proc.
Cambridge Phil. Soc., 59,125-133.
(1963ii): An identity concerning the relation between the
Paasche and Laspeyres indices. Metroeconomica 15, II-III,
(1963iii): The method of limits In the theory of index numbers.
Presented at the Joint European Conference of the Institute of
Mathematical Statistics and the Econometric Society, July

1963, Copenhagen. Abstract: Report of the Copenhagen

Meeting, Econometrica 1964.
(1967i). The construction of utility functions from expenditure
data. International Economic Review 8.
(1967ii): The cost of living index. M. Shubik, ed. Essays in
Mathematical Economics in Honor of Oskar Morgenstern.
Princeton University Press. Ch. 23: 335-66.
Arrow, K. J. (1959): Rational choice functions and orderings.
Economica N. S. 26, 121-7.
Houthakker, H. S. (1950): Revealed preference and the utility
function. Economica N. S. 17,159-74.
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