Money pump
If your preferences are inconsistent, someone can cycle you through trades until you're broke.
What it means
A thought experiment showing that an agent whose preferences are intransitive — preferring A to B, B to C, and C to A — can be exploited by repeatedly charging small fees to trade them around the cycle, draining their money for no net change. It is the classic argument for why rational preferences must be transitive and why violations are not merely odd but costly. Behavioral economists invoke it both as a normative warning and to ask why real people, who do show preference cycles and reversals, are not in fact pumped dry. It matters because the gap between the theoretical vulnerability and observed reality probes how damaging inconsistency really is.
Examples
Someone who'll pay a little to swap A for C, C for B, and B for A can be charged each time and end up where they started with less cash.
A shopper who prefers the roomier car to the cheaper one, the cheaper to the sportier, and the sportier to the roomier can be walked round the forecourt with a swap fee each lap.
Portfolio churn works the same way: every 'better' switch carries a commission, so a client with cycling preferences can be steered back to where they began, poorer by the fees.
First described in Davidson, McKinsey & Suppes (1955); Ramsey.