Relations Between Micro and Macro Levels
| Nicolai Foss |
Levels issues, micro-foundations, methodological individualism and collectivism, etc. have long been O&M favorites (e.g., here, here, here, and here). While the O&M bloggers are card-carrying methodological individualists, we also (like all other economists and management scholars) acknowledge that macro matters, in the sense that it may be meaningful to think of variables placed at macro levels exerting an influence on decisions made at micro variables (as in the Coleman diagram; see here). The question is, what is the nature of this “relation”?
It is tempting to think of it as causal, so that “downward causation” is involved. However, many argue that downward causation is problematic: If macro phenomena exist in virtue of micro phenomena, how can macro phenomena meaningfully exert an influence on the very things they exist in virtue of? Relations between levels are rather constitutive than causal. Causality refers to intra-level relations, not inter-level ones.
In a recent paper, forthcoming in the analytical philosophy journal, Erkenntnis, Dutch philosophy professor Jack Vromen uses a sophisticated version of this argument (developed by Carl Craver and William Bechtel here) to attack my work on micro-foundations with Peter Abell and Teppo Felin (various summaries and references are here). Thus, we err, Vromen claims by thinking, for example, of routines and capabilities as macro variables that exert an influence on individuals; rather, routines and capabilities are mechanisms that causally link inputs into a firm to its behavior and performance and in which individual actions and interactions are involved as constitutive elements.
I will deal with this specific argument later (a response to Vromen is being finessed), but observe that the general argument seems dubious. It is of course correct that if we define macro entities in terms of micro parts, we cannot satisfy the conditions for a causal link between the entities and their parts. But nobody really argues that macro entities and micro parts cause each other per se. Rather, properties of these, which are logically separable, can stand in a causal relationship (HT to Peter Abell for this point). Sure, industries are constituted by individual consumers and firms. Does this mean that one cannot speak of a price change “causing” certain changes in consumer or firm behaviors? Of course not; a specific property of industry prices (i.e., that they assume a certain value) cause certain changes in the properties of individuals and firms, for example, the profit maximizing input mix of firms change.