thanks, Gil. On 8/3/07, Gil Skillman <[EMAIL PROTECTED]> wrote: > > I'm reposting this, hoping for an answer. In economics, what uses does > > methodological individualism have in the actual attempt to understand > > the world (that is, beyond mere ideology)? I can think of two so far: > > > > 1) the free rider or collective action problem: it's really hard for a > > group of people to attain collective goals because some will be in it > > for themselves. > > AKA the prisoners' dilemma problem.
The collective action problem involves more than two people, while the classic PD does not. They're not exactly the same thing under two different names (as "AKA" suggests), though there is some clear overlap in that both point up the conflict between individual and group interests. > > 2) the "representative agent" model, in which macroeconomists lazily > > believe that looking at the effects of individual constraints and > > incentives tell us how aggregates of people behave. > > (Not so sure about "laziness." Admittedly it's a modeling shortcut, like > two-class-based approaches to social analysis. There's an active debate > in mainstream macro re the uses and limitations of the representative > agent approach. The representative agent (RA) model is classic laziness. Instead of looking at whether a redistribution of income, perhaps due to price changes, between groups might have an effect on (say) aggregate consumption, they simply assume that it doesn't, by methodological fiat. (It's the equivalent of some crude Chicago-schooler who only looks at perfect competition and rules out monopolistic competition by appeal to Stigler's dissing of the latter model.) RA models ignore the lessons of the collective action problem and fall for the fallacy of composition. And even general equilibrium theorists are critical of RA models. This tells us to see them as merely being a _first_ step toward a more complete understanding of the phenomena being studied. The problem with RA models is not the models _per se_, since after all, they are often logical, beautiful, rigorous, symmetrical, and all those good things and sometimes are consistent with perceived data. Rather, the problem is with the practitioners of the RA _method_, who do not see these models as being (at best) a first step toward a more complete analysis. > ... and perhaps > > (3) Coordination problems, where groups *may* achieve mutually preferred > outcomes, but, as experimental evidence suggests, also may not (e.g. if > risk considerations dominate maximal payoff considerations). Not the same > as prisoners' dilemma problems; e.g., indefinite repetition of the game > not necessary to achieve socially prefered outcome as a subgame perfect > equilibrium. Russell Cooper has a nice, very readable book on this, > discussing GT models, experimental evidence and macro applications. coordination problems (with or without their being solved) fits under #1 above, I think. The "free rider problem" is not simply about the failure of coordination but also the cases where coordination succeeds. Some economists presume that the free riders always win, but I'd bet that it's a small minority. > 4)strategic bargaining models a la Ariel Rubinstein, which helped > distinguish the effects on relative bargaining position of voluntary exit > from vs. forced termination of incumbent relationships--a distinction > for which there is both experimental and econometric evidence. Models and > real-world applications discussed extensively in, e.g., Jacobsen and > Skillman, Labor Markets and Employment Relationships. I'm sure that's a good book and that you're sending out free review copies to all of pen-l. But I don't think that this kind of research adds a new kind investigation as much a different and likely better way of _doing_ the existing investigation. That is, it's a lot like other bargaining models, but improves the technical details. That's a worthwhile goal, I am sure, but it's not what I was asking about. I guess the problem is that I did not make it clear that there's a difference between (1) doing microeconomic research (looking at individual cases or models of them) and (2) engaging in methodological individualism (MI). The latter involves not only looking at individualistic models (constrained maximization, etc.) but also involves some methodological "thou shalt nots." Micro research is different from a commitment to MI. MI says that you _should not_ look at the feedback from the macro-level to the micro-level, for example. Advocates of MI -- such as Elster -- tell us that (by the very nature of the universe I guess) causation runs from parts to the whole but _never_ from the whole to the parts. That is, even though a lot of micro-research is valid, its practitioners (wedded to MI) typically ignore the feedback from economic institutions to affect the consciousness, preferences, and motivations of economic actors. They are also typically married to the static world-view of equilibrium economics, so that they miss out on the dynamic interactions between the micro- and macro- and middle levels. Of course, they often reify their models, but those who reject MI also fall for that trap. BTW, I think Elster's "free rider problem" critique of Althusserian structuralism or Hegelian holism in social research is valid. As with many other valid critiques, however, it fails to present a coherent alternative. Also, a lot of his research is extremely interesting and useful and relevant. But we always have to be aware of the limits of his MI when reading it. > 5) principal-agent relationships, defined broadly for present purposes as > any stackelberg (leader-follower) situation involving imperfect or > incomplete information--this would include signalling, efficiency wage, > and more generally adverse selection and moral hazard situations. I guess I wasn't clear what I was looking for. All of these seem to fit in the general framework of my #1. the last part of Gil's list under his #5 concerns the "economics of information." A lot of that was developed a long time ago. Smith, for example, knew about adverse selection in loan markets (as did bankers). Of course, being empirically-oriented, classical economists never assumed that there could be such a thing as "perfect information," so they could never have developed an economics of imperfect (and asymmetric) information. However, people in the insurance industry were pretty familiar with it: it's where the terms "adverse selection" and "moral hazard" come from. > ...and, really, > > 6) all of applied (at least micro) mainstream economics,which is pretty > much entirely based on methodological individualism, and which routinely > and massively yields testable predictions that are then brought to the > data via more or less rigorous econometric tests. Of course this vast > empirical enterprise can be criticized (as can that of any paradigm), but > it manifestly involves "actual attempts to understand the world" in its > theoretical terms, complete with vigorous and ongoing debates on given > empirical claims (such as, for example, the disemployment effects of > minimum wage legislation). Anyone asserting that this enterprise > represents a manifestation of "mere ideology" would seem to shoulder a > pretty hefty burden of proof, whatever one thinks of the paradigm or its > tentative empirical conclusions. This is standard micro, which I was familiar with. I didn't say anything _was_ "mere ideology." It's quite possible for any research to be a mixture of ideology and a more objective understanding of the world. (In fact, I would guess that 99 44/100 % of research combines these -- all except my own, of course. ;-)) I referred to going _beyond_ mere ideology because a lot of the public presentation of neoclassical research is nothing but ideology. For example, in economic textbooks and intro lectures, individualism is often -- if not usually! -- merged with libertarianism and faux libertarianism (neoliberalism). Even more sophisticated analysis suffer from the fetishism of commodities -- a more structurally-based ideology -- which keeps them from transcending the limits of methodological individualism. The RA method is a result of that, as was the bogus theory of rational expectations. However, even though much of neoclassical economics is neutered Smith or warmed-over Say does not mean that it says absolutely nothing valid about the world. It can say a lot of more scientific stuff that is missed in the public presentations (in intro lectures, textbooks, etc.) As with Elster's work, it is much more productive to read neoclassical economics fully conscious of the MI ideology that usually is attached to it. Similarly, it's a good idea not to listen to the sales spiels on TV without applying critical thinking. have a good weekend, -- Jim Devine / "The more you read and observe about this Politics thing, you got to admit that each party is worse than the other. The one that's out always looks the best." -- Will Rogers
