HAYEK AS A METHODOLOGICAL INDIVIDUALIST - AI-Econ

HAYEK AS A METHODOLOGICAL INDIVIDUALIST - AI-Econ

HAYEK AS A METHODOLOGICAL INDIVIDUALIST Francesco Di Iorio Southeast University (Nanjing) 1 As understood by Hayek, MI is an explanatory approach to the study of social phenomena that uses two assumptions to explain these phenomena: (i) Human actions must be explained taking into account the meanings that individuals attach to them (interpretative approach / Verstehen)

(ii)Social phenomena must be (largely) explained in terms of unintended consequences of human actions (e.g. traffic jam) 2 MI vs HOLISM According to Hayek, holists and individualists disagree about 2 points: (i) Explanation of action: AUTONOMY vs HETERONOMY AUTONOMY = the causes of action must be sought inside the individuals (what matters is the meaning the individuals attach to their actions) / HETERONOMY = the causes of action must be sought outside the individual (human action must be explained in terms of social determinism) (ii) Ontology of collective nouns (e.g. market, society,

political party, Canadian Army) : NOMINALISM vs REALISM NOMINALISM = collective nouns do not refer to real substances (they refer to a collection of individuals and emergent properties related to their interaction) / REALISM = collective nouns refer to real substances (they are sui generis entities) 3 Holism is largely rejected today; however MI is often criticized This is because MI is regarded as committed to reductionism, where reductionism means an atomistic theory of society that denies: (i) the systemic nature of the social world and the structural constraints imposed on the individuals by

this world (ii) the causal power of social factors that are irreducible to strictly individual properties 4 The equivalence between MI and reductionism does not hold There are two variants of MI: Reductionist (e.g. reductionist economic approaches; social contract theory) Non-reductionist (Popper, Menger, Weber, Hayek, Boudon) 5

The critics of MI argue that the entire individualist tradition is reductionist There are two interpretations of MI in terms of reductionism : (i) MI = idealist reductionism (e.g. Udehn, Bhaskar, Lawson) (ii) MI = semantic reductionism (e.g. Kincaid, Sawyer) 6 MI = idealist reductionism (e.g. Udehn, Bhaskar, Lawson) MI is accused of reducing the social world to the mental

representation of it MI = anti-realist theory of the social world and social constraints (social constraints = pure subjective opinion) MI is wrong because social constraints exist independently of the agents opinion about what he or she is free or not free to do There is a social structure that exists outside my mind and that limits my freedom 7 The interpretation of MI in terms of idealist reductionism seems mistaken MI does not reduce the study of society to the study of purely

subjective opinions According to MI, the social world is not the product of a particular mind, but rather the largely unintentional consequence of intersubjectively shared meanings (collective opinions) Shared meanings create a stable structure of interaction and social sanctions As Hayek pointed out, social systems must be seen as the implications of many people holding certain views, i.e. as the consequences of the fact that people perceive the world and each other through sensations and concepts which are organized in a mental structure common to all of them. From the standpoint MI, grasping peoples common understandings and the typical meanings that they attach to their actions is the first step in explaining the unintended or undesigned nature of social phenomena. 8

IM = semantic reductionism (e.g. Kincaid, Sawyer) MI = social systems must be explained in terms of individuals This means that MI is supportive of a principle of semantic reduction of social properties to individual ones MI is wrong because: (i) social phenomena cannot be analysed without reference to semantically irreducible properties (ii) MI denies that there are semantically irreducible social properties that causally influence action and limit individual freedom 9

The interpretation of MI in terms of semantic reductionism seems implausible because of the following 4 reasons: (i) many individualists openly rejected semantic reductionism: the triviality as well as the vagueness of the statement that the whole is more than the sum of its parts seems to be seldom realized. Even three apples on a plate are more than a mere sum, in so far as there must be certain relations between them (the biggest may or may not lie between the others, etc.): relations which do not follow from the fact that there are three apples, and which can be studied scientifically (Popper) social structures in respect to their parts are higher units (Menger)

A society is more than the mere sum of its parts (Hayek) 10 (ii) The explanations in terms of unintended consequences are semantically irreducible to psychological properties and laws Explanations of this kind are irreducible to the agents mental and behavioral properties (e.g. Hayeks analysis of the market in terms of a self-organizing system) (iii) Methodological individualists (e.g. Menger, Popper, Hayek) acknowledge the existence of emergent properties that causally influence individuals and limit their freedom e.g. Hayek stresses that prices are unintentionally created by human choices (prices unintentionally emerge from the

aggregation of different individual evaluations and distributed items of information) and that they in turn affect those choices, i.e. that the whole economic system causally influence its parts and vice versa 11 (iv) By explanations in terms of individuals MI (as understood by Hayek) does not mean that semantic reductionism is good It means that history and society cannot be explained in terms of supra-individual social substances (holistic ontology) that determine the individuals views and actions (heteronomy) According to MI, the individuals are the ultimate engine of history and social dynamics (this view is consistent with the

contention that social phenomena are semantically irreducible) 12

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