Maximisation, optimisation and all that–interesting post

In links on April 4, 2010 by ariew


2 Responses to “Maximisation, optimisation and all that–interesting post”

  1. Alas, William Davies is a sociologist who is examining economic rhetoric through tinted glasses. Profit maximization and utility maximization are not behaviors to be modeled, but are decision rules associated with theoretical constructs. Moreover, maximization is a form of optimization. So is minimization (of cost, of regret,…) So making a distinction between optimizing and maximizing is, at best, jesuitical.

    I am, of course, intrigued by biological analogy. But tying the current interest in bio-mimicry (which is more like hippie mysticism than most of the fads I have seen in the past year) to such pseudo-biological terms as “systemic risk”, “toxic assets”, and “financial contagion” and calling it a new basis for economics and management is shabby thinking.

  2. Randy’s right, as always. I’ll just add that there are several classic papers on biological metaphors in business administration and industrial economics, and on the evolutionary reasoning that purportedly justifies constructs like profit maximization. In case anybody’s interested:

    Alchian, A. A. 1950. Uncertainty, Evolution, and Economic Theory. Journal of Political Economy, LVIII: 211-221.

    Penrose, E. T. 1952. Biological Analogies in the Theory of the Firm. American Economic Review, 42: 804-819.

    Friedman, M. 1953. The Methodology of Positive Economics, Essays in positive economics. Chicago: University of Chicago Press.

    Winter, S. G. 1964. Economic Natural-Selection and the Theory of the Firm. Yale Economic Essays, 4(1): 225-273.

    Nelson, R. R., & Winter, S. G. 1982. An evolutionary theory of economic change. Cambridge, Mass.: Belknap Press of Harvard University Press.

    There’s also an interesting discussion in Jon Elster’s Nuts and Bolts for the Social Sciences (Cambridge, 1987).

    For some recent applications, see:

    Silverman, B. S., Nickerson, J.A., and Freeman, J.B. 1997. Profitability, Transactional Alignment, and Organizational Mortality in the U.S. Trucking Industry. Strategic Management Journal, 18: 31-52.

    Teece, D. J., Rumelt, R., Dosi, G., & Winter, S. 1994. Understanding Corporate Coherence – Theory and Evidence. Journal of Economic Behavior & Organization, 23(1): 1-30.

    Argyres, N., and Bigelow, L. 2007. “Does Transaction Misalignment Matter for Firm Survival at All Stages of the Industry Life Cycle?” Management Science, 53 (8), 1332-1344.

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