Ready for more real economics? Ever hear of the “methodological individualism” critique of neoclassical economics? I struggled to make heads or tails of it for some time, but I think I get it now, or part of it, anyway. Want to hear my take? Fine. I’ll tell it.
Let me mention first why I couldn’t make heads or tails of it for some time. The word “methodological” made me think it was mostly about positive economics, the false but simple engineering models of neoclassical economics that ostensibly allow one to predict economic events. I didn’t understand the critique because in that positive context there is no presumption any particular element of an engineering model is real or true or factual. It’s not a description of reality, nor is it accretive or accumulative science eschewing elements known to be factually false. As far as I know, anything may appear in false but simple engineering models. If we’re going with assumptions like perfect knowledge, perfect rationality, who cares if it’s based on individuals in isolation? Criticisms of it seemed to me taking the conceit of economics as science far too literally. However, it eventually dawned on me both positive and normative economics have methods and methodologies, and the critique may involve the methods of normative economics and ethical philosophy rather more than the methods of predictive engineering models or of accretive scientific inquiry. Sure enough, I found that if I thought of the “methodological individualism” critique as a critique of the method used in normative economics, neoclassical welfare economics in particular, it made rather more sense. Let’s discuss why.
The ethical argument in modern normative neoclassical welfare economics concerns the preference ranks of individuals. These preference ranks are meant to be not questioned within the ethical half-framework of neoclassical welfare economics: people just prefer what they prefer. However, although one may find discussions of individual preference ranks over apples, oranges, widgets, what have you, in neoclassical welfare economics, one doesn’t find discussion of individual preference ranks over interpersonal ethics, equity, economic and political systems, etc. Why do you suppose the ciphers of economic theory are restricted in that way? I mean, real people have preferences relating to those things, surely, and one supposes associated preference ranks, and we could talk oddly and express those individual preference ranks in terms of “utility.” Nothing jumps out at me from the definition of preferences; however, I can think of some practical reasons, for example, economists want to present themselves as arbiters of the normative or ethical issues relating to political and economic systems, arrangements, outcomes. Obviously, things get a bit awkward if economists, looking down from above, busy themselves telling everyone what sort of economic arrangements are normatively optimal if at the same time the ciphers themselves have preferences over those same issues which are not to be challenged by economists. Indeed, the entire argument in neoclassical welfare economies begins to break down if the ciphers have preferences over resolving interpersonal ethics, allocating resources, reintroducing the very ethical issues at that level economists are supposedly making exogenous, setting aside at their level. Everything works out much better if the ciphers meant to represent people in the ethical theory of neoclassical welfare economics are simply conveniently considered to have no preferences about interpersonal ethics, fairness, justness, equity, aping what economists are meant to be doing.
But what are we to make of an ethical theory involving not real people under real conditions, but arbitrarily restricted ciphers in a fairy land of fanciful assumption? The purported significance in reality of the ethical argument presented in normative neoclassical welfare economics is unclear. Is the argument people should not, in fact, have preferences about interpersonal ethics? They should strive as a point of ethics to imitate the ciphers of economic theory? So neoclassical welfare economics, rather than an ethical half-theory is an ethical full theory opposing interpersonal ethics? Rather than viewing exogenous interpersonal ethics, equity, resolution of interpersonal conflicts of preferences, allocation of resources, as something that must be added to get normative conclusions, they’re viewed as something that must be kept out to get normative conclusions? Is the point of the normative argument in neoclassical welfare arguments the only normative, ethical issues that matter are intrapersonal, and interpersonal issues as justice, fairness, equity, welfare, the resolution of interpersonal conflicts of preferences as say over resources, are irrelevant? I would suggest that interpretation is bad economics. It’s not real neoclassical welfare economics. It’s a purposeful, rhetorical, misleading misinterpretation of it that, frankly, doesn’t pass the laugh test. Everyone wants an ethically justifiable society including interpersonal ethics. Once one gets one’s head out of the lazy positive engineering model of anything goes because it can all be false anyway, and into the rigor of concepts, language, factual premises required for serious ethical arguments applicable to reality, the situation suddenly becomes more rather more complex.
Conclusion for today? Just be aware of the sort of rhetorical stratagems, omissions, logical lacunae, neoclassical welfare economics and even more so anti-democracy bad economics in the conservative style rely upon for effect. It’s just one example among many, but an interesting one.
