My old university, allegedly, asks its PPE applicants:
If there were three beautiful, naked women standing in front of you, which one would you pick? And does this have any relevance to economics?
Here's my answer.
Orthodox economics says the question has little relevance. It regards tastes as given and beyond analysis, as the slaves of the passions. But orthodox economics is wrong.
First, most men would choose the woman who gives them the come-on, rather than the most beautiful one who doesn't. Our choice, then is partly determined by the opportunity set. This is especially true if a man has had a run of bad luck with the ladies, which reduces his expectations.
In both cases, choice is not necessarily a guide to what we really want. Instead, society shapes our preferences - not just vice versa - as Jon Elster has shown.
Secondly, what men value in women might not be women as such, but particular qualities of them: norkage, hair colour, (ahem) personal grooming, likelihood of banging like a Grimsby tugboat engine, ability to converse well in the intervals between shagging. Indeed, it's possible that men's preferences across women are the same, and differences are due only to different values placed upon these features.
This leads to theories of hedonic pricing. These raise practical and philosophical issues: is consumer price inflation over-stated and therefore the long-term rise in living standards understated? Is there such a thing as a true, theory-free macroeconomic aggregate?
Thirdly, some qualities women have (the ability to bang like a GTE) are experience goods - we can't know them in advance. This is another reason why we might not choose the woman we would like most. In conditions of imperfect information, choices don't always maximize our welfare. In extreme cases, imperfect - and asymmetrical - information can lead to acute market failure, as George Akerlof showed in his story of the market for lemons.
Fourthly, having sampled one woman, many men would prefer another, even if they are not disappointed by the experience good. Are such unstable preferences a sign of irrationality? Or are they because men value variety? The question matters. It shows that, in order to judge whether someone is rational or not, we must know what it is they are trying to maximize.
Fifthly, over a particular range, men are not always sensitive to financial incentives. I have a strong preference for (say) Kelly Brook over Kate Moss. I would need big money to take Kate Moss. Financial inentives matter, then, but only at the margin. And many of us are a long way from the margin.
Sixthly, there might be no such thing as a collective preference. For example, given a choice of Kate Moss, Kathy Sykes and Kelly Brook, my preference ranking is: 1 = Kathy, 2 = Kelly, 3 = Kate. One of my colleague's ranking is: 1 = Kate, 2 = Kathy, 3 = Kelly. And another colleague's is: 1 = Kelly, 2 = Kate, 3 = Kathy.
So, whom do we collectively prefer? It's impossible to say for certain, unless we can measure interpersonal rankings, so we can judge whether my preference for Kathy over Kelly is stronger than my colleague's preference for Kelly over Kathy. If we can't do this - that is, if crude utilitarianism does not apply - we are in a world of Arrow's impossibility theorem. This shows that social choice is not the straightfoward thing our politicians sometimes claim it to be.