Essay 1 - Holzhauer 1 Kristin Holzhauer Econ 110 Prof....

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Holzhauer 1 Kristin Holzhauer Econ 110 Prof. Toumanoff 4 February 2008 Uncertainty, Evolution, and Economic Theory Early in the article Alchian accepts Tintner’s claim of the nonsensical nature of profit maximization. Because of uncertainty, it is impossible to look into the future and predict absolute outcomes for individual firms. Too many variables exist that influence the position and slopes of the supply and demand curves. Tintner states that every course of action a firm follows is accompanied by an array of various outcomes, rather than one perfect solution. Alchian agrees with Tintner’s rejection of profit maximization, but counters the argument by saying that successful firms—those who have recognized positive profits—can be observed and imitated to derive general economic predictions. The economist can only “diagnose the conditions conducive to a greater probability of survival,” rather than select an action claiming to yield maximum profits. Comparative statics methodology lets economists make generalizations about a firm’s direction by analyzing other firms that have experienced similar circumstances. The environment is constantly changing: comparative statics methodology allows for some insight about a firm’s future condition. Economists pull elements from successful firms and formulate theories that are applied by other profit-seekers. These theories can only be postulated so long as they are tried on many occasions; to observe and theorize requires the “conscious willful action” of
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This note was uploaded on 04/07/2008 for the course ECON 110 taught by Professor Toumanoff during the Spring '08 term at Marquette.

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Essay 1 - Holzhauer 1 Kristin Holzhauer Econ 110 Prof....

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