The evolutionary approach to firm survival and behavior proposes that firms do not have to consciously strive to maximize profits and that is because scarcity and competition will ensure the firms' survival and will behave as if they are maximizing profits. Much like the survival of heliophiliac plants, only those plants that do get sunshine will survive. The plants that have survived is understood to have acquired more sunlight than the non-surviving plants. This explanation contrasts starkly with the mainstream picture of accurate foresight and perfect rationality often ascribed to economic actors. Alchian dismisses
profit maximization and
utility maximization as meaningful attributes of firms' survival. He argues that uncertainty and probabilistic outcomes make the maximization of any objective function meaningless. Alchian states that uncertainty arises from two sources: imperfect foresight and human inability to solve complex problems with a host of variables. Uncertainty and a combination of random behavior and foresight lead to probability distributions of outcomes (profits/losses) rather than a unique outcome. Consequently any objective function has to incorporate both returns AND attitudes towards risk, but an objective function cannot incorporate a non-objective function (which is what preferences for risk are) and still be an objective function. Success and viability depend on implementing strategies that yield positive profits; similar to natural selection firms realizing negative profits are more likely to be culled from the population regardless of managerial aspirations. In the long run this leads to a population of firms appearing to share discernible criteria ascribable to successful firms. Competing firms that mimic the behavior of successful/surviving firms will appear to be consciously maximizing profits even though their strategies were developed in the absence of the aforementioned criteria. Alchian notes that the successful firms may not consciously maximize profits but act as if they do because market forces cull firms that fail to yield positive returns. What the goals of the entrepreneurs of successful firms are is not relevant. Market forces affect firm profitability, and in retrospect the historical record will show surviving firms behaving as if the firms had information and foresight. Firms which quickly emulate successful firms (by definition survivors of the market forces) will increase their chances of survival. Whereas firms that fail to adapt, or do so slowly, risk a greater likelihood of failure. Surviving firms evolve in the direction of the more economically profitable firms. Evolution and competition for scarce resources ensure that, in practice, firms do not have to consciously maximize an objective function. Alchian concludes that, despite uncertainty and the lack of knowledge by market participants, economists can still analyze the behavior of firms using the assumptions of profit maximization. The prerequisites for survival in the long run are returns greater than costs, profits in other words. In retrospect economists can compare alternatives and predict which behaviors were more conducive for survival even though such knowledge was unavailable to contemporaneous firms. ==Inspiration==