Methodological individualism

Part of a series on the
Austrian School
Principal works Capital and Interest Human Action Individualism and Economic Order Man, Economy, and State Principles of Economics
Theory Austrian business cycle theory Catallactics Creative destruction Economic calculation problem View of inflation Malinvestment Marginalism Methodological individualism Praxeology Roundaboutness Spontaneous order Subjective theory of value Theory of interest
Organizations Cato Institute Foundation for Economic Education George Mason University The Independent Institute Liberty Fund Ludwig von Mises Institute Reason Foundation
People Eugen Böhm von Bawerk Walter Block Thomas DiLorenzo Frank Fetter Roger Garrison Friedrich Hayek Henry Hazlitt Robert Higgs Hans-Hermann Hoppe Steven Horwitz Jesús Huerta de Soto Israel Kirzner Ludwig Lachmann Fritz Machlup Carl Menger Ludwig von Mises Robert Murphy Ron Paul Lew Rockwell Murray Rothbard Joseph Salerno Friedrich von Wieser
Related topics Austrian School economists Economic freedom Perspectives on capitalism
Business and economics portal

Methodological individualism is the view that social phenomena can only be understood by examining how they result from the motivations and actions of individual agents. The use of methodological individualism is identified with economists of the Austrian school, among others.

Methodological individualism in economics

In economics, people's behavior is explained in terms of rational choices, as constrained by prices and incomes. The economist accepts individuals' preferences as givens. Becker and Stigler provide a forceful statement of this view:

On the traditional view, an explanation of economic phenomena that reaches a difference in tastes between people or times is the terminus of the argument: the problem is abandoned at this point to whoever studies and explains tastes (psychologists? anthropologists? phrenologists? sociobiologists?). On our preferred interpretation, one never reaches this impasse: the economist continues to search for differences in prices or incomes to explain any differences or changes in behavior.

Criticisms

Economist Mark Blaug has criticized over-reliance on methodological individualism, "it is helpful to note what methodological individualism strictly interpreted ... would imply for economics. In effect, it would rule out all macroeconomic propositions that cannot be reduced to microeconomic ones, ... this amounts to saying goodbye to almost the whole of received macroeconomics. There must be something wrong with a methodological principle that has such devastating implications."

Further reading

• Kenneth J. Arrow (1994), "Methodological Individualism and Social Knowledge," American Economic Review, 84(2), p p. 1-9.
• Kaushik Basu (2008), "Methodological Individualism," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
• Friedrich A. Hayek (1948), Individualism and Economic Order.
• Geoffrey Hodgson, (2007) "Meanings of Methodological Individualism", Journal of Economic Methodology 14(2), June, pp. 211–26.
• Harold Kincaid (2008), "individualism versus holism," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
• Steven Lukes (1968), "Methodological Individualism Reconsidered," British Journal of Sociology 19, pp. 119–29.
• Ludwig von Mises, "The Principle of Methodological Individualism", chapt. 2 in Human Action, Eprint.
• Joseph Schumpeter (1909), "On the Concept of Social Value", Quarterly Journal of Economics, 23(2), February, pp. 213–32.
• Lars Udéhn (2002), "The Changing Face of Methodological Individualism", Annual Review of Sociology, 28, pp. 479–507.