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Archive for October 1st, 2010

Max U at the Firm Level

Julie Nelson, a foremost feminist economist, has a new paper in the GDAE Working Paper series. The title is, “Does Profit-Seeking Rule Out Love? Evidence (or Not) from Economics and Law”. As anyone who has taken introductory microeconomics knows, our dear friend “Max U” for individuals has it’s firm-level counterpart, profit maximization. Remember that these are not tested observations, but assumptions underlying neoclassical theory. Nelson problematizes “Max P” by arguing that it need not preclude altruistic actions from firms toward society. She points out that the distinction between money and love is an unhelpful abstraction at best, and at worst,

 Rather, this essay will demonstrate, the idea was invented and has maintained its power to shape our thinking through mutually‐reinforcing historical, social, and political processes. The rhetoric of profit maximization serves to distort, rather than illuminate, our social reality

The essay is fascinating- Nelson traces the roots of Max P, as well as challenging ideas that it completely dominates empirically or is legally mandated. She concludes by serving some alternative approaches to economics, particularly emphasizing a view of the economy as relational. Most importantly, she problematizes the idea of commoditatization, arguing that we should not assume that something has become commoditized once it has entered a market. Instead,

Commercial relations, in fact, are often themselves saturated with social meaning and relationality. Rather, it is the entry of narrow, profit-maximization values and related specific structures that, by reducing the value of everything to its contribution to a “bottom line,” threaten to drain human meaning.

Nelson’s paper is a helpful reminder of some ways in which our economic models of the world shape the world.

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