Property Rights, Consumption and the Market Process

Property Rights, Consumption and the Market Process

New Horizons in Institutional and Evolutionary Economics series

David Emanuel Andersson

Property Rights, Consumption and the Market Process extends property rights theory in new and exciting directions by combining complementary insights from Austrian, institutional and evolutionary economics. Mainstream economics tends to analyse property rights within a static equilibrium framework. In this book David Andersson reformulates property rights theory as an evolutionary theory of the market process.

Chapter 6: Individual Choice and Consumption Attributes

David Emanuel Andersson

Subjects: economics and finance, evolutionary economics, institutional economics

Extract

Consumers have preferences. This is an uncontroversial statement. It is when we develop this statement to elucidate consumer behaviour that theorists diverge. What is clear, however, is that those economists who invoke utility maximization as a behavioural maxim are on weak ground. In the preceding chapter, I explained why I think the instrumentalist justification for profit maximization fails on purely instrumentalist grounds. The evolutionary selection mechanism is not strong enough to extinguish all those firms that do not behave as if they were maximizing profits. As in biology, fitness is not a universal concept, but a localized principle that only requires a firm to be fit enough for a web of interacting producers and consumers. This web is never universal. While it may make sense that firms have a longterm profit constraint, this profit constraint does not equal maximum profits, nor is it the same everywhere (Hodgson, 1999; Potts, 2000). Still, firms in a competitive market need to behave so as to avoid losses in the long run. This is not so for consumers (Dosi et al., 1999), since there is no market mechanism that eliminates those preferences that are not ‘good enough’.1 The problems for the utility-maximizing model do not end here. What we need to ask ourselves is whether the axioms of that model approximate the behaviour of consumers. Herbert Simon (1959) draws attention to the impossibility for human beings to meet the demands for substantive rationality, because of their limited computational...

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