George Stigler on do business owners maximise profits?

Entrepreneurs often do not know why they survived in competition. George Stigler in his autobiography told this wonderful story about how you could not get businessmen to admit in a survey that they maximise profits.

You go to their office and asked them: Do they maximise profits?

Their answer would be, of course, not. I am here to provide employment to my workers and put a small amount aside for the education of my children.

The surveyor would then ask them: if you do were to raise your prices, do you expect to increase your profits?

The businessman answers no.

The surveyor how would then ask them: if you were to cut your prices, do you expect to increase your profits?

The businessman answers no.

The survey would then ask: can you point to a time in the last 12-months where you substituted profit for some other objective?

At this point of time, you would be thrown out of their office as some sort of lunatic.

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