The profit maximisation criticised by economists
The profit maximisation theory has been severely criticised by economists on the following grounds: 1. Profits Uncertain: The principle of profit maximisation assumes that firms are certain about the levels of their maximum profits. But profits are most uncertain for they accrue from the difference between the receipt of revenues and incurring of costs in the future. It is, therefore, not possible for firms to maximise their profits under conditions of uncertainty. 2. No Relevance to Internal Organisation: This objective of the firm bears little or no direct relevance to the internal organisation of firms. For instance, some managers incur expenditures apparently in excess of those that would maximise wealth or profits of the owners of the firm. They are observed to emphasize growth of total assets of the firm and its sales as objectives of managerial actions. 3. No Perfect Knowledge: The profit maximisation hypothesis is based on the assumption that ...