Enforced maximisation : competition, evolution and selection
The theory of 'enforced maximisation' claims that whatever decision procedures individuals and firms adopt, maximisation of utility for individuals and profits for firms will be selected for by the forces of competition. Competition thus enforces maximisation. Evolutionary arguments are typically employed to support these claims, either individually or jointly. A behavioural economic theory may have three basic components: a theory of preferences, of beliefs, and of the behaviour of individuals in social institutions (particularly firms). To each of these the approach of enforced maximisation has been applied. Becker has argued that people have stable self-interested preferences as the result of selection along sociobiological lines; Muth has argued that individuals' beliefs can be assumed to be represented in a rational expectations fashion, because if they did not do so an arbitrage profit would result, and rational agents would therefore exploit it. Friedman has argued that firms' can be assumed to be profit maximisers because if they did not, analogous to natural selection, they would go out of business. This thesis argues that these claims are individually unsustainable, and in seme form jointly inconsistent. The demonstration uses a series of criteria for deciding between rival explanations. First, it is argued that the sociobiological account of preference formation is deeply problematic, particularly in its account of self-interest and altruism. Second, it is demonstrated that the selection-based argument for the rational expectations account of belief-formation fails. Third, it is shewn why profit maximisation is not necessarily enforced by the market. Finally, the selection for firm's profit maximisation behaviour relies on selection of utility maximising individual behaviour, and such a reliance may be inconsistent with the programme of the theory of 'enforced maximisation'.