Austrian Theorizing: Recalling The Foundations by Walter Block:
“Indifference,” for the Austrian School is a technical word. We deny that indifference is compatible with human action, the attempt to render the world a more preferable place than would have occurred had no such act taken place. Were a man truly indifferent between state of the world A (the one which would ensue without his intervention) and state of the world B, he would not act so as to make the latter more likely.
We do not deny, however, that “indifference” also has a perfectly reasonable usage in common parlance. In ordinary language, a person could be readily understood to be indifferent between wearing a green or a blue sweater. This means that he doesn’t care much which one he chooses. Given that he will only wear one of them at a time, and chooses the green, he is still reckoned, speaking loosely, to be indifferent between them, because we can readily imagine him picking the other.4
But if we were to “get technical” about the matter, it would be at the very least extremely puzzling for a man to select the green sweater in preference to the blue if he were truly indifferent between them. Indeed, this would be nothing less than a logical contradiction. If indifference were his exact mental state, surely he would select neither article of clothing. As in the case of Buridan’s Ass, who avoided both piles of equidistant hay, he would eschew both sweaters.5 Very much to the contrary, if when presented with both the person selected green instead of blue, we as outside analysts, or economists, would be entitled to infer from this act a preference for green.
People don't get stuck like the donkey who can't choose between two equidistant piles of hay. They do other things. When they are indifferent they can use a tie breaker, even an arbitrary one like a coin flip. Then they can say, "Yes I chose the green sweater, not the blue one. But that doesn't mean I prefer it. I chose it by coin flip."
When people are genuinely indifferent but prefer to make a choice rather than do nothing, they act accordingly – they make the decision somehow, such as with a coin flip or by examining their preferences more carefully and discovering they were only indifferent to some level of precision but not infinitely indifferent.
Coin flips are very well known. Why doesn't Block address this? It's true that the coin flipper preferred the coin flip method over alternatives like sitting there unable to choose. But that is a different preference than preferring a green sweater to a blue sweater.
Block also specifically covers the sweater example:
Our author’s second sally (1999, p. 826) is “One can only observe that I choose a green sweater, but this does not rule out the possibility that I was actually indifferent between a green sweater and a blue sweater.” In common parlance, we are certainly prepared to accept Caplan’s introspection on the matter. Presumably, he has no strong preference for the one color over the other. But as a matter of technical economics, we are hard put, on the basis of indifference, to account for the fact that he did indeed pick up and put on the green sweater, when he could have had the blue. Perhaps the green one was on top of the blue, and some slight additional effort would have been necessary to wear the latter; perhaps they were side by side, but at the last minute, even thinking he was fully indifferent, he veered toward the green based on a very slight, perhaps even unconscious preference. All we know is that he dug into his sweater draw, and came up with the green one. What else are we to infer but that he preferred his color?
Block seems to be missing the point that you could prefer the top sweater which is a different thing than preferring the green sweater. In the last words of the paragraph, Block summarizes a preference for a more convenient sweater as a preference for "his color" (that is, the color he chose). But that's silly. He may not have been choosing a color of sweater, but a proximity of sweater, as Block himself just said. (Caplan, the inferior thinker who Block is arguing with, simply fails to provide any notable analysis of this matter to discuss. But Block, so starved of discussion – after I was ejected, years ago, from the Mises email group (where Block participates) for lacking the authority of credentials – is pleased to have Caplan to talk with, as he says in the introduction.)
As Critical Rationalism explains, actions don't speak for themselves anymore than data does. It takes intellectual interpretation to figure out why a man took a particular action. Block seems to know this when talking about getting into the mind of the economic actor, but seems to forget it in this part about the sweaters. When you get into the mind of the actor and try to understand his purpose, you may discover he wasn't choosing by color.
Did he take that action because he preferred green over blue, or because he preferred a closer sweater? The action of picking up a sweater alone can't tell you on which basis the man made the choice (color, location, something else, or a mix), only that, in that instance, he preferred the green-and-closer-and-many-other-things sweater over the alternatives (he preferred the whole bundle of traits that he chose). The bundle of traits people chose is always infinite, so it takes explanations and critical thinking to determine which traits were important to the person's preference. Such analysis matters because people have preferences which are not unique to each individual choice, but instead allow them to make many choices according to common themes. These ongoing, persistence preferences are key parts of a person's life/personality/thinking which enable him to do any planning regarding the future, and enable him to be understood by others.