I found the answer here 
- 
http://stackoverflow.com/questions/5713872/rails-command-line-not-found-when-installed-with-rvm

I should *not* use sudo while installing rails - that way, rvm manages a 
separate copy of gems for each version of ruby.

On Thursday, April 5, 2012 12:34:46 PM UTC+5:30, candor wrote:
>
> Hi, 
>
> I am getting an error while creating a new rails (3.2.3) project on 
> mac os x lion with rvm (with jewelrybox gui) and ruby v 1.9.3 as 
> default. 
>
> I tried gem install rails, gem install railties, and gem list does 
> show rails and railties, both version 3.2.3 are present. 
>
> > rails new myproject 
> /System/Library/Frameworks/Ruby.framework/Versions/1.8/usr/lib/ruby/ 
> 1.8/rubygems.rb:777:in `report_activate_error': Could not find RubyGem 
> railties (>= 0) (Gem::LoadError) 
>         from 
> /System/Library/Frameworks/Ruby.framework/Versions/1.8/usr/lib/ 
> ruby/1.8/rubygems.rb:211:in `activate' 
>         from 
> /System/Library/Frameworks/Ruby.framework/Versions/1.8/usr/lib/ 
> ruby/1.8/rubygems.rb:1056:in `gem' 
>         from /usr/bin/rails:18 
>
> I get the same error when I run rails -v. 
>
> ruby -v shows 1.9.3, but rails seems to be picking ruby framework 
> version 1.8 above - is that the problem? If so, how can I get rails to 
> use ruby 1.9.3 instead? 
>
> Thanks 
> Anand

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