Arguments Against

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Arguments Against
Those who question the validity of the profit maximization postulate put forward the following arguments:- (i) Enlightened businessmen vehemently deny that their object is to maximise profits. Service of society rather than personal profit is said to be their aim. (ii) The profit-maximisation doctrine Would be the rule, if business decisions were taken by th who arc to get the profits. Most business decisions arc ta en by business executives .or salaried managers, rather than by owners of firms. (;;;) TIle objective of profit maximisation is difficult of realisation. If a businessman is to maximise his profits, he must fix a price, so as to equalise marginal revenue and marginal cost. This means that he must be able to estimate demand at all prices and marginal cost at all outputs. This is a fantastically difficult task and is seldom attempted in practice. (il’) Besides being difficult of precise calculation, profit maximisation is also regarded as immoral. “Profit maximisation requires the businessman to use every trick he can think of to keep wages and fringe benefits down, to extract the last possible dollar from the consumer, to sell as low quality merchandise as he can legally hoodwink the customer into buying, to use income solely for the benefits of the stock holder, 10 disclaim any responsibility to the community, to wrangle the lowest possible price from his vendors regardless of its effect on them, and so on.”! (I’) The business policies and practices actually pursued hy businessmen arc not consistent with the profit maximisation doctrine. The calculus of maximisation docs not fit the notions which actually

sway businessmen. They are guided by a sense of fairness, adequacy, etc. They are satisfied with a satisfactory rate of profit instead of pursuing maximum profits with callous disregard for other interests.

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Arguments Against