Some Notes on Methodological Individualism: Orthodox and Heterodox Views

Abstract

'Methodological individualism' (MI) is often invoked as a fundamental description of the methodology both of neoclassical and Austrian economics, as well as other approaches, from New Keynesianism to analytical Marxism. Yet there is considerable controversy as to what the phrase means. Moreover, the methodologies of those to whom the theoretical practice of MI is ascribed differ profoundly on the status of the individual economic agent: economics, according to Friedman (1962), is based in the study of 'a number of independent households, a collection of Robinson Crusoes', while for Hayek (1979), 'individuals are merely the foci in the network of relationships'. The one sees individuals as a congeries of isolated atoms, the other as constituted by their mutual relationships. Starting from a recent discussion on the History of Economics Societies email discussion list, the present paper attempts to begin that task of teasing apart some of the issues involved in making sense of the concept of MI. It is argued that at least three distinct polarities are generally conflated in the critique and defence of MI: holism versus reductionism, materialism versus idealism, and top-down versus bottom-up thinking. The paper suggests that clarifying these issues allows us to see a continuity in the methodology of heterodox economics, including Marxist, Austrian, Institutionalist and Post-Keynesian economics, standing in marked contrast to that of orthodox, neoclassical schools, such as Keynesianism, monetarism, new classical macroeconomics and analytical Marxism.