Armen Alchian

Quotes From

“Uncertainty, Evolution, and Economic Theory” (1950)

• Where foresight is uncertain, “profit maximization” is meaningless as a guide to specifiable action.#
• The greater the uncertainties of the world, the greater is the possibility that profits . . . go to venturesome and lucky rather than to logical, careful, fact-gathering individuals.#
• [Economic tools] are made more powerful if they are not pretentiously assumed to be necessarily associated with, and dependent upon, individual foresight and adjustment.#
• Although [profit maximization] is a far more extreme objective when definable, only [realized positive profits] is the sine qua non of survival and success.#
• Neither perfect knowledge of the past nor complete awareness of the current state of the arts gives sufficient foresight to indicate profitable action. . . . [T]he consequence of this is that modes of behavior replace optimum equilibrium conditions as guiding rules of action.#
• Imitation affords relief from the necessity of really making decisions and conscious innovations, which, if wrong, become “inexcusable.” Unfortunately, failure or success often reflects the willingness to depart from rules when conditions have changed; what counts, then, is not only imitative behavior, but the willingness to abandon it at the “right” time and circumstances. Those who are different and successful “become” innovators, while those who fail “become” reckless violators of tried-and-true rules.#
• If profit maximization (certainty) is not ascertainable, the confidence about the predicted effects of changes, e.g. higher taxes or minimum wages, will be dependent upon how close the formerly existing arrangement was to the formerly “optimal” (certainty) situation.#
• Like the biologist, the economist predicts the effects of environmental changes on the surviving class of living organisms; the economist need not assume that each participant is aware of, or acts according to, his cost and demand situation.#
• It is straightforward, if not heuristic, to start with complete uncertainty and nonmotivation and then to add elements of foresight and motivation in the process of building an analytical model. The opposite approach, which starts with certainty and unique motivation, must abandon its basic principles as soon as uncertainty and mixed motivations are recognized.#

“Why Money?” (1977)

• It is a general prevalence of double coincidence of information rather than wants by both parties that would avoid the use of money.#