Ritchie discovers another piece of the economics puzzle

I don’t find this surprising at all. If people maximise it is their overall well-being that they seek to enhance.

If he\’d actually paid attention to his economics courses at Southampton all those years ago he would have known this.

People maximise utility, not income, leisure, work, sleep, sex or any other one thing.

All of that blackboard economics that he so derides is based upon this point. And he would have found his attempts to understand that blackboard economics greatly improved if he\’d bothered to learn it while he was being taught it rather than trying to rediscover it (with the inevitable charging off down blind alleys that such autodidacticism involves) from first principles.

The myth of profit maximisation is just that: a myth. It’s one perpetuated by big business as an argument for unbridled growth. But no one in their right minds thinks it enhances well being.

For example, he could avoid making that mistake.

The first statement comes from a survey of small business owners. They do indeed, like all other people, seek to maximise utility. Big business does not seek to maximise utility….\’coz it\’s not a person, see? The people within it do, but not the business itself. So we cannot take the known and well described motivations of individuals and apply the same motivations to something that is not a person.

We can, if we\’re being careful about it, say that big business is a group of people: but then we have to ascribe the motivations of groups of people to it, not individuals.

3 thoughts on “Ritchie discovers another piece of the economics puzzle”

  1. Ritchie read economics? At Southampton!? It was known as a pretty sound, solidly orthodox place when I was a student

    Tim adds: Accounting and economics he read….

  2. Tim – just out of interest, as you seem to know Ritchie pretty well (not in the biblical sense , of course), has he ever had a proper job? Because it doesn’t look like it. I’m just a dumb engineer and sometime businessman, and in the real world I’ve spent about 40-odd years maximising profits for my employers and eventually for me. The alternative is that my employers, or latterly me, would go bust and I’d be on the dole. Are all lefties dickheads? (I’m new to all this stuff.)

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