Do Economists Believe in “Atomistic Individualism”?
| Peter Klein |
To many critics economics goes astray in characterizing people as isolated, autistic, self-interested, individualistic utility maximizers, unconnected from the broader social fabric in which they are embedded. The celebrated Ferraro, Pfeffer, and Sutton paper (AMR, 2005), and the broader “performativity” critique of economics, is a typical example of this attitude. Some heterodox economists even long for a “post autistic” version of the discipline.
As emphasized repeatedly on this blog, however, the criticism is fundamentally mistaken. At heart, it confuses methodological individualism with ontological individualism. The assumption of individual utility maximization, the simplified model of an isolated individual, and the like are principles of explanation, not descriptions (or, a fortiori, prescriptions). Now, I do think that economists have gone astray by emphasizing “rationality,” modeled with consistent preferences, a utility function that is monotonic and non-decreasing, etc., rather than the broader concept of “purposeful action,” as Mises described it, which is what most economists before the formalist revolution seemed to have had in mind.
Anyway, here are some nice quotes from Mises — whose approach is often caricatured as an extreme, outdated example of a ruthless, rugged individualism — on the individual in society.
No other imaginary construction has caused more offense than that of an isolated economic actor entirely dependent on himself. However, economics cannot do without it. In order to study interpersonal exchange it must compare it with conditions under which it is absent. It constructs two varieties of the image of an autistic economy in which there is only autistic exchange: the economy of an isolated individual and the economy of a socialist society. In employing this imaginary construction the economists do not bother about the problem of whether or not such a system could really work. They are fully aware of the fact that their imaginary construction is fictitious. Robinson Crusoe, who, for all that, may have existed, and the general manager of a perfectly isolated socialist commonwealth that never existed, would not have been in a position to plan and to act as people can only when taking recourse to economic calculation. However, in the frame of our imaginary construction we are free to pretend that they could calculate whenever such a fiction may be useful for the discussion of the specific problem to be dealt with (Human Action, 3rd edition, p. 243).
And this, from Theory and History (1985, pp. 251-52):
Let us first examine the concept of society in general. Men cooperate with one another. The totality of interhuman relations engendered by such cooperation is called society. Society is not an entity in itself. It is an aspect of human action. It does not exist or live outside of the conduct of people. It is an orientation of human action. Society neither thinks nor acts. Individuals in thinking and acting constitute a complex of relations and facts that are called social relations and facts.
The issue has been confused by an arithmetical metaphor. Is society, people asked, merely a sum of individuals or is it more than this and thereby an entity endowed with independent reality? The question is nonsensical. Society is neither the sum of individuals nor more nor less. Arithmetical concepts cannot be applied to the matter.
Another confusion arises from the no less empty question whether society is — in logic and in time — anterior to individuals or not. The evolution of society and that of civilization were not two distinct processes but one and the same process. The biological passing of a species of primates beyond the level of a mere animal existence and their transformation into primitive men implied already the development of the first rudiments of social cooperation. Homo sapiens appeared on the stage of earthly events neither as a solitary food-seeker nor as a member of a gregarious flock, but as a being consciously cooperating with other beings of his own kind. Only in cooperation with his fellows could he develop language, the indispensable tool of thinking. We cannot even imagine a reasonable being living in perfect isolation and not cooperating at least with members of his family, clan, or tribe. Man as man is necessarily a social animal. Some sort of cooperation is an essential characteristic of his nature. But awareness of this fact does not justify dealing with social relations as if they were something else than relations or with society as if it were an independent entity outside or above the actions of individual men.
Joe Salerno’s article “Ludwig von Mises as Social Rationalist” provides additional commentary. As Joe emphasizes, for Mises the fundamental “social” relationship is the division of labor, which necessarily places individual actors in a social context. The idea of the isolated individual is a thinking tool, an artificial construct that is useful in reasoning, and nothing more.