I had the same problem, and reason is also having two versions of ruby 
installed. i working on OSX 10.6.4, but solution should apply for any 
system if your problem has the same cause. Since I don't really use 
macport, my solution is to removed reference to /opt/usr/local/bin from 
my $PATH in ~/.bashrc. so in the end, i have the following line in my 
~/.bashrc (removed some other misc stuff, but you get the idea):

export PATH="/usr/local/bin:/usr/local/lib:$PATH"

I suspect you'll be able to fix it by tweaking where you get your binary 
in $PATH as well. hope this helps.

btw, I think David had to reinstall stuff because the location where he 
pointed $PATH to doesn't have all the executables in the other location 
he was running gem from.

Derek

Memo Memo wrote:
> I was having this problem, after reading the insights from this thread, 
> I realised  running   "which gem" pointed to a certain directory, and 
> "which ruby"  pointed to a different directory.
> 
> I had a local ruby installation, and also a secondary installation under 
> /sw  that I had installed using fink, I just plain removed the 
> installation fink had put in (fink remove ruby), and after that 
> everything worked.

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