Thursday, April 4, 2013

Geoffrey Hodgson on the Mirage of Microfoundations

Geoffrey Hodgson discusses microfoundations in the video below and the problems with the view that macroeconomics needs neoclassical microfoundations in a conference held in June, 2010 in Suomenlinna, Helsinki, Finland.

I summarise the key points below.

An interesting point made by Hodgson (from 7.30 onwards) is that the current vogue for game theory in mainstream economics is essentially the result of the failure of the neoclassical microfoundations project, with its unrealistic assumption of utility-maximising agents with rational expectations.

The properties of the social world require analysis of human relations (and possibly emergent properties), not just analysis of individuals, even though one must not reify social structures. One need not reify social structures as “something more than an interacting pattern of individuals” when stressing the importance of social relations in economic life (as discussed in Hodgson 2012: 41).

From 15.00, Hodgson discusses the problematic “methodological individualism” approach in economics (see also Hodgson 2007): once “methodological individualists” recognise the importance of social relations, social structures and downwards causation, then the very label “methodological individualism” becomes inaccurate, misleading and invalid.

Hodgson raises the thorny question of human free will and intentionality. What causes human intentionality? He then points out a serious error of George L. S. Shackle: the notion of an “uncaused cause” or causal dualism that Shackle invoked to explain intentionality (also discussed in Hodgson 2000 and 2004: 61). Remarkably, Ludwig Lachmann seems to have held the same erroneous opinion! (Hodgson 2000: 58). Whether humans have free will or not, there is a mountain of scientific evidence that our conscious actions and mind are determined or, at least dependent on, the structure of the brain and its activity: the conscious human mind and its intentionality are emergent properties of the brain (Hodgson 2000: 59). An emergent property can effect downwards causation on lower-level things: so this explains our intentionality.

I also note that King (2012) also has a discussion of Hodgson’s views on microfoundations.

Finally, I stress that the sound is not exactly the best!




Video streaming by Ustream


BIBLIOGRAPHY

Hodgson, Geoffrey Martin. 2000. “Shackle and Institutional Economics: Some Bridges and Barriers Geoffrey M. Hodgson,” in Stephen F. Frowen and Peter Earl (eds.), Economics as an Art of Thought: Essays in Memory of G.L.S. Shackle. Routledge, New York. 51–75.

Hodgson, Geoffrey Martin. 2004. The Evolution of Institutional Economics. Routledge, London.

Hodgson, Geoffrey Martin. 2007. “Meanings of Methodological Individualism,” Journal of Economic Methodology 14.2: 57–68.

Hodgson, Geoffrey Martin. 2012. From Pleasure Machines to Moral Communities: An Evolutionary Economics without Homo Economicus. University of Chicago Press, Chicago.

King, J. E. 2012. The Microfoundations Delusion: Metaphor and Dogma in the History of Macroeconomics. Edward Elgar, Cheltenham.

9 comments:

  1. "One need not reify social structures as “something more than an interacting pattern of individuals” when stressing the importance of social relations in economic life."

    I find this approach incoherent. Either social structures are, in fact, something more than "an interacting pattern of individuals" or the Austrians/methodological individualists are right and "society" doesn't exist. It's either/or. If you're vague on this point your argument is not clear and, to my mind, doesn't qualify as a valid argument.

    This leads Hodgeson to make a quasi-religious argument. For those familiar with theological debate an "uncaused cause" is... in fact...

    http://en.wikipedia.org/wiki/Cosmological_argument

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    1. "I find this approach incoherent. Either social structures are, in fact, something more than "an interacting pattern of individuals" or the Austrians/methodological individualists are right"

      But the Austrians' narrow or strict definition of "methodological individualism" is precisely that social reality is fully explained by only individuals (see Hodgson, Geoffrey Martin. 2007. “Meanings of Methodological Individualism,” Journal of Economic Methodology 14.2: 57–68).

      This is Hodgson's point: the proper method is BOTH individuals AND social relations at the same time. Once anyone admits this (with the "AND social relations" addition), then "methodological individualism" has already collapsed.

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    2. I disagree. This is vague to the point of meaninglessness from the point-of-view of methodology. It's just a cop-out. Like King's "bridge" metaphor. One entity has to have more influence. Either the individual has more influence and then society is ultimately just a big mass of individuals being directed by individuals. Or society has more influence and individuals are, to a very large extent, constrained/determined in their actions.

      CORRECTION: I thought that Hodgeson was talking about the "uncaused cause" above. It was not him, it was Shackle. Sorry. I misread.

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    3. I am not sure, but I think this just reduces to ontology: realism versus nominalism.

      On a moderate (non-Platonic) realism, you can say that certain abstract things like society can have real, if not concrete, existence, in that they are instantiated in particular real things, the set of people and their behaviour in an institution, for example.

      On nominalism, nothing but concrete particulars exist, and everything else is nominal. So society or institutions cannot.

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    4. It is neither one or the other absolutely, nor is it both absolutely.

      Whether an individual is passive and influenced by social institutions (determinism), or whether an individual is active and influences social institutions (free will), is up to the strength/choice of the individual's ego.

      I could if I wanted, simply adopt all the norms and conventions and ideas associated with the prevailing institutions, or I could if I wanted go out and positively change those institutions, as much as an individual can change such institutions.

      The passive ego will tend to have the philosophy that our activity is determined/caused, whereas the active ego will tend to have the philosophy that our activity is spontaneous/uncaused.

      But for every individual, there is a determined component and there is a free will component. The "locations" of the "boundaries" of each of these components differs from individual to individual, and can be slightly moved to varying degrees individual to individual, but neither component is the sole component.

      However, the rational part of man, the part upon which man acts with a purpose, teleologically, that part must be regarded in terms of methodological individualism. The innate, the instinctual, the socially determined, this part can only be explained holistically.

      Economics deals with the former aspect of man. Biology/evolution/anthropology deals with the latter aspect of man.

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    5. If you are saying that BOTH certain kinds of individual action (upwards causation) and certain kinds of social influence on individuals (downward causation) are important, then that is a reasonable comment, but just raises the points discussed by Hodgson here:

      http://socialdemocracy21stcentury.blogspot.com/2013/04/hodgson-on-methodological-individualism.html

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    6. No. We're not talking about metaphysical Truth here. We're talking about methodology. Either we can be wishy-washy and say that causality runs both ways -- in which case we are saying nothing of worth. Or we can determine methodologically which is more important. I've argued already why the macro trumps the micro. It's a numbers game society/social institutions have more influence on individuals than individuals have on society/social institutions.

      And, at the metaphysical level, no you could not just start making up new norms and rules. That would be impossible. Your norms and rules would always already, for example, require that you use the norms and rules of language to transmit them. So, you're not free to do what you want. Unless you want to stop speaking in any language that anyone else understands and invent your own. In which case you would be diagnosed as schizoid or psychotic and put in a mental hospital. Society has FAR more control over people than the Western myth of "freedom" would have us believe. But we're inclined not to see this because it offends us.

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    7. "It's a numbers game society/social institutions have more influence on individuals than individuals have on society/social institutions..."

      Yes, fair enough, I can certainly see why this is a powerful argument for the view that the social world has the overwhelming and dominate role.

      But are you going to really say that individuals have no role at all?

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    8. Yes. Pretty much.

      Can SOME individuals have influence? Sure. But its a rarity.... Keynes did... not much else...

      We need to be very realistic about the world and that's that!

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