Q: What happens if only Psychic Paper is in the discard pile, because you’ve just played, it, and the only card you can copy from someone’s hand is What Do You Want?

A: Remember that Actions do not technically go into the discard pile until completed, though many people simply put them there directly when they use them, that’s a shortcut – which doesn’t matter in most cases. However, there are plenty of weird edge cases like this one where it DOES matter that that’s how they work. If you are still executing Psychic Paper by looking in someone’s hand to find an Action, it is technically not in the discard pile yet, since you’re not done using it until you complete the copied card, in this case, What Do You Want.

So you play Psychic Paper, it waits, not yet in the discard pile, while you look at the people’s hands and find an Action to copy.
Sadly for you, there is NO discard pile, as Psychic Paper is not yet in it, so What Do You Want has no effect.
At that point, the Psychic Paper goes into the discard pile, a wasted play.

It’s not uncommon for a card to be played and have no effect at that time: for example, if you play Exchange Keepers (presumably because you were forced to) and nobody has anything to exchange. Of course, you could not know that your options from someone else’s hand would be so limited when you played the Psychic Paper. It’s just a risk you take in Fluxx.