Quotation of the Day…

by Don Boudreaux on October 3, 2011

in Myths and Fallacies

… is from Jim Buchanan’s and Geoff Brennan’s 1985 book, The Reason of Rules:

The individual is the unique unit of consciousness from which all evaluation begins.  Note that this conception does not in any way reject the influence of community or society on the individual.  The value structure of an isolated human being may be totally divergent from that of such a person described by membership in one or many social relationships.  The presupposition requires only that societal or communitarian influences enter through modifications in the values that are potentially expressed by the individually and not externally.

This above is fine description of methodological individualism – a scientific presupposition that is too frequently mistaken as being an assumption that each individual’s preferences emerge only from within each individual and are not affected in any significant ways by other people.

….

I choose this quotation today because today is Jim Buchanan‘s 92nd birthday.  Happy Birthday, Jim!

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Greg Webb October 3, 2011 at 12:21 pm

Excellent quote from an excellent economist!

W.E. Heasley October 3, 2011 at 1:10 pm

“The facts of intellectual history require a digression at this point for a brief discussion of a critical error that may have served to stifle much potentially productive effort in political theory. Charles A. Beard supported his “economic” interpretation of the American Constitution in part by reference to Madison’s The Federalist No. 10. Beard’s work and much of the critical discussion that it has aroused since its initial appearance in 1913 seem to have been marked by the failure to distinguish two quite different approaches to political activity, both of which may be called, in some sense, economic. The first approach, which has been discussed in this chapter as the basis for the theory of collective choice to be developed in this book, assumes that the individual, as he participates in collective decisions, is guided by the desire to maximize his own utility and that different individuals have different utility functions. The second approach assumes that the individual is motivated by his position or class status in the production process. The social class in which the individual finds himself is prior to, and determines, the interest of the individual in political activity. In one sense, the second approach is the opposite of the first since it requires that, on many occasions, the individual must act contrary to his own economic interest in order to further the interest of the social class or group to which he belongs. “

“It will be helpful to review the parallel treatment of individual rationality that is incorporated in orthodox economic theory. The economist has not gone very far when he says that the representative consumer maximizes utility. Individual utility functions differ, and the economist is unable to “read” these functions from some position of omniscience. To judge whether or not individual behavior is “rational” or “irrational,” the economist must try first of all to place some general minimal restrictions on the shapes of utility functions. If he is successful in this effort, he may then test the implications of his hypotheses against observed behavior.

Specifically, the modern economist assumes as working hypotheses that the average individual is able to rank or to order all alternative combinations of goods and services that may be placed before him and that this ranking is transitive. Behavior of the individual is said to be “rational” when the individual chooses “more” rather than “less” and when he is consistent in his choices. When faced with a choice between two bundles, one of which includes more of one good and less of another than the bundle with which it is compared, the hypothesis of diminishing marginal substitutability or diminishing relative marginal utility is introduced. Observed market behavior of individuals does not refute these hypotheses; consumers will choose bundles containing more of everything, other things remaining the same; choices are not obviously inconsistent with each other; and consumers are observed to spend their incomes on a wide range of goods and services. With these working hypotheses about the shapes of individual utility functions, which are not refuted by testing, the economist is able to develop further propositions of relevance. In this way, the first law of demand and all of its implications are derived”. – James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy

Scott G October 3, 2011 at 1:53 pm

I just learned the meanings of positivism and teleological this past weekend (from reading Caldwell’s Hayek’s Challenge) .

What does methodological individualism mean? The Wikipedia entry is pretty skimpy.

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