Armen Alchian, an American economist born in Fresno, California, is in many ways like Ronald Coase. Like Coase, Alchian has published only a few articles, but very few are unimportant. And like Coase's, many of Alchian's articles are widely cited.

Many students and others who read economics are disturbed by economists' assumptions that companies maximize profits. One of their objections is that managers of companies do not know enough to be able to maximize profits. In 1950 Alchian presented a thoughtful response to this objection in his first major article, "Uncertainty, Evolution and Economic Theory." Alchian argued that even though all companies may not maximize profits, those that survive will be ones whose managers, by luck or by design, came close to maximizing profits. Therefore, those that we observe will have maximized profits. So for the long term at least, argued Alchian, for economists to derive the standard conclusions from the profit-maximization assumption, they do not need to show that all companies try to maximize profits.... MORE