What happens when economists come across disconfirming experimental evidence? In this chapter, I will discuss one fascinating case. I chose it because of its tractability and because the anomalous results have been discussed repeatedly in prominent economic journals. It is more an illustration than an argument for the interpretation of economic methodology defended above. Although it provides some evidence that economists are not committed to the inexact method a priori, one case obviously proves nothing.

The discovery of preference reversals

No economist is under any illusion that the axioms of utility theory are exceptionless universal laws, but utility theory may still be a reasonable first approximation that is useful in predicting and explaining behavior. What should be worrisome to economists would be evidence that people's choices differ systematically from those predicted by utility theory.

One way in which people's choice behavior does apparently deviate systematically from that predicted by utility theory involves so-called “preference reversals.” Paul Slovic and Sarah Lichtenstein describe the discovery of this phenomenon as follows: