One of the most important insights King makes is this: the idea of reducing macroeconomics to neoclassical microeconomics is an instance of the strong reductionist fallacy.
Strong reductionism has already failed, not only in biology, but also (more importantly) in the social sciences (King 2012: 226). There are fundamental emergent properties in macroeconomic systems that make their reduction to microeconomics impossible (King 2012: 226).
For example, a lower-order set of parts in a biological system may interact in ways that cannot be inferred by reductionist analysis (King 2012: 51). The principle of “downward causation” consists in the manner by which a “whole” (a system broadly defined) may affect, constrain or influence its parts.
In economics, we see macroeconomic phenomena that are irreducibly social in nature.
Nor does the strong version of methodological individualism work (King 2012: 60; see also Hodgson 2007). For interactions between individuals may cause “emergent properties” or (that is to say) novel properties not displayed by, or deducible from, the individuals in isolation.Social Democracy For The 21st Century
King on Post Keynesian Approaches to Microfoundations
Lord Keynes
King gives two reasons for the continuing attraction of the neoclassical microfoundations delusion: physics envy and politics in the age of neoliberalism (King 2012: 229). Reductionist ontological thinking in economics is nothing less than the attempt to reduce macroeconomics to the aggregate of micro behaviour, and the assumption of individual rationality implies a socially rational outcome (King 2012: 229, quoting Denis 2009: 14). In other words, this method produces the delusion that laissez faire results in the best economic outcomes.
Bingo. But nothing new to the readers of this blog.
3 comments:
I am puzzled by the argument here. Several distinct issues seem to be getting smeared together. Whether or not macroeconomic phenomena can be reduced to microeconomic behavior, it does not follow from any such reductionist thesis that the microeconomic behavior is rational. And even if you make empirically implausible assumption that the underlying microeconomic behavior is rational, it doesn't follow that the macroeconomic phenomena that supervene on them them are "socially rational" - whatever that means exactly. There is a big market failure literature that demonstrates many ways in a which behavior that is rational for each of a collection of individuals can generate aggregate outcomes that are decidedly suboptimal.
Even the physicists recognize the phenomena of emergent behavior: More is Different.
@ bbbar
Yes, the point he makes at the outset that the trick is reversing reductionism and getting from quantity to quality.
In consciousness studies, this is called "the hard problem."
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