- New Horizons in Institutional and Evolutionary Economics series
Chapter 6: Individual Choice and Consumption Attributes
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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