The Selective Filter of Economic Environment: A Substitute for Bounded Rationality - An Institutionalist Approach

Abstract

Launched on institutional channel by George Tintner and Armen Alchian, the principle according to which the competitive environment is the one which operates the selection forcing individuals to behave rationally was and remained a subject of methodological disputes. Once in the market, the economic agents have only one alternative: in order to manage and to make profit they must behave as if they knew everything about rationality and efficiency. This approach transformed Armen Alchian into a "heretic" in the field of institutionalism and "converted" Milton Friedman and Fritz Machlup to institutionalism.The current complex and very competitive economic environment moves the focus of thinking detached from this principle upstream. The "myopic actors" of Armen Alchian are threatened to disappear. His environment of selection based on accepted rules becomes one of continuous self-selection operable not passive but ex ante.