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One Analogy Can Hide Another: Physics and Biology in Alchian’s “Economic Natural Selection”

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  • Levallois, C.

Abstract

Today, Alchian's "Uncertainty, evolution and economic theory" (1950) is hailed by evolutionary economists as a most important piece, which resumed an evolutionary brand of theorizing in economics after the eclipse of the interwar period. On the other hand, Alchian's article is also cherished by standard economists who consider it to be a powerful defense of the maximization principle in the theory of the firm. Our examination of the early intellectual life of Alchian shows that it was his involvement in military systems analysis at the Rand Corporation that led him to reckon that uncertainty was a fundamental obstacle to marginal analysis. We then demonstrate that Alchian's economic natural selection is a statistical argument which, if phrased in biological parlance, owes its logic to statistical mechanics. This invites to reconsider the strong opposition usually made between evolutionist and mechanist modes of thinking.

Suggested Citation

  • Levallois, C., 2008. "One Analogy Can Hide Another: Physics and Biology in Alchian’s “Economic Natural Selection”," ERIM Report Series Research in Management ERS-2008-083-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:14278
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    References listed on IDEAS

    as
    1. Frederic S. Lee, 1984. "The Marginalist Controversy and the Demise of Full Cost Pricing," Journal of Economic Issues, Taylor & Francis Journals, vol. 18(4), pages 1107-1132, December.
    2. Amadae, S.M., 2003. "Rationalizing Capitalist Democracy," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226016535, December.
    3. Dopfer,Kurt (ed.), 2005. "The Evolutionary Foundations of Economics," Cambridge Books, Cambridge University Press, number 9780521621991.
    4. R. L. Hall & C. J. Hitch, 1939. "Price Theory And Business Behaviour," Oxford Economic Papers, Oxford University Press, vol. 0(1), pages 12-45.
    5. Hirshleifer, Jack, 1977. "Economics from a Biological Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 20(1), pages 1-52, April.
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    More about this item

    Keywords

    Armen A. Alchian; Rand Corporation; Ronald A. Fisher; evolutionary economics; statistical mechanics; theory of the firm;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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