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

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.

Number of Pages in PDF File: 24

Keywords: evolutionary economics, statistical mechanics, Rand Corporation, Ronald A. Fisher, Armen A. Alchian, theory of the firm

JEL Classification: C44, M31, M, A12, D40, D21, B41, B31, B25

working papers series