A century of methodological individualism part 1: Schumpeter and Menger

2009 marks the centenary of methodological individualism (MI). The phrase was first used in English in a 1909 QJE paper by Joseph Schumpeter. Yet after 100 years there is considerable confusion as to what the phrase means. 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. However, the methodologies of those to whom the theoretical practice of MI is ascribed differ profoundly on the status of the individual economic agent, some adopting a holistic and some a reductionist standpoint. The purpose of the research of which this paper is part is to uncover and evaluate some of the meanings of the phrase methodological individualism (MI). This first paper considers the contributions of Joseph Schumpeter, who was the first to use the term, and of Carl Menger, considered by many to be the founder of MI. The approach adopted is to apply the intellectual apparatus developed in Denis (2004) to the arguments of these writers. This constitutes a test of that apparatus: is it able to clarify the standpoints to which it is applied? The conclusion reached is that both Schumpeter and Menger adopt a reductionist ontology in the sense of Denis (2004)

A century of methodological individualism part 2: Mises and Hayek

2009 marks the centenary of methodological individualism (MI). The phrase was first used in English in a 1909 paper by Joseph Schumpeter in the Quarterly Journal of Economics. Yet after 100 years there is considerable confusion as to what the phrase means. MI is often invoked as a fundamental description of the methodology both of neoclassical and Austrian economics, as well as of other approaches, from New Keynesianism to analytical Marxism. However, the methodologies of those to whom the theoretical practice of MI is ascribed differ profoundly on the status of the individual economic agent, some adopting a holistic and some a reductionist standpoint. The purpose of the research of which this paper is part is to uncover and evaluate some of the meanings of the phrase methodological individualism (MI). The first paper in the series, "A Century of Methodological Individualism Part 1: Schumpeter and Menger" (Denis, 2009), considers the contributions of Joseph Schumpeter, who was the first to use the term, and of Carl Menger, considered by many to be the founder of MI. The present paper considers the contributions of von Mises and Hayek. The conclusion drawn is that Mises and Hayek based their methodological stance on fundamentally different ontologies, with von Mises building on the reductionism of previous writers such as Schumpeter and Menger, and Hayek, on the contrary, adopting a holistic ontology more in line with Adam Smith, Marx and Keynes. From an ontological perspective this leaves Hayek as something of an outlier in the Austrian tradition

Collective and individual rationality: Robert Malthus’s heterodox theodicy

This paper forms part of a research project investigating conceptions of the relationship between micro-level self-seeking agent behaviour and the desirability or otherwise of the resulting macro-level social outcomes in the history of economics. I identify two kinds of conservative rhetorical strategy, characterised by reductionism, and by holism plus an invisible hand mechanism, respectively. The present paper extends this study to Malthus, focusing on the various editions of his Essay on Population and his Summary View of the Principle of Population. Like the reductionist (Friedman, Lucas) and holistic (Smith, Hayek) proponents of laissez-faire, Malthus, too, is a defender of ‘the present order of things’ and an advocate of dependence on spontaneous forces. Malthus starts out within the eighteenth-century providentialist paradigm epitomised by Adam Smith and Dugald Stewart, but he later abandoned providentialism, adopting a more reductionist standpoint. Like Smith and Stewart, he takes a conservative political stance and opposes radical reform of society. But in taking up the arguments of the leading reformers of the day, Godwin and Condorcet, he is drawn by the logic of his argument to a position very far removed from Smith’s stoic optimism. The weapon he deploys against the reformers is the principle of population, by means of which he is able to portray the present state of society as something natural, eternal and inevitable, something in common with the animal and vegetable kingdoms. Though a potent weapon against the utopians, at the same time the principle of population undermines providentialism In the First Essay he tries to mitigate this by presenting a theodicy to reconcile his theory with a version of providentialism, but within weeks of publication he begins work on its replacement, a secular and reductionist argument that individual self-interest can guide us to socially desirable outcomes