Methodological Individualism

[ku]

I've just read a thread where someone labelled a country as uncivilized and I replied by bringing up the topic of methodological individualism. I thought that I might start a thread about the topic.

 

Below is an example of how group thinking leads to fallacious thinking and how reasoning from the micro foundations helps explains contradictions that arise from looking at the world with eyes that see only grand entities (e.g. countries, nations, religions) rather than more fundamental entities (e.g. individuals, atoms, energy):

 

From the Stanford Encyclopedia of Philosophy entry on Methological Individualism: “Methodological individualism became important, not as a way of avoiding the political thought-crime of 'collectivism,' but rather as a way of avoiding demonstrably fallacious inferences about the dynamics of collective action. For example, the traditional 'interest group' theory of democratic politics generally presupposes that groups who share a common interest also have an incentive to promote that interest, by lobbying politicians, funding research, and so on. Olson's major contribution was to have driven home the point that the existence of such a common interest just as often generates a free-rider incentive. Individuals would benefit from acting to promote that interest, but they would benefit even more by sitting back while the other members of the group acted to promote it. As a result, no one may act to promote it. However, Olson confined this observation to large groups. The prisoner's dilemma, on the other hand, demonstrated the ubiquity of this incentive structure.”

 

What I'd like to explore is any criticism of the principle of methodological individualism. Can everything or is everything explained through reduction or do some phenomena naturally operate at a higher level?

[-Demosthenes-]

From an economical point of view, the classical struggle between capitalism and socialism? On one side those who think like Adam Smith, who believe if everyone did what was best for themselves then the society as a whole would receive the most benefit. The "invisible hand" theory, that the economy will take of itself if everyone tries to take care of themselves.

 

On the other side those like Karl Marx point out the inevitable "screwing over" (paraphrasing) of the "proletariat" (the lower class). And we saw this in 1870-1900's in the US. Big business=bad, but dose that mean socialism=good, or a little socialism=good?

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A strong case by Milton Friedman for the first side (capitalism) says that corporations have no social responsibility. He has some good points, corporations aren't people, so they don't have responsibilities like people do. But the most intriguing point, that a corporation that spends on helping the community is actually taxing the stock holders. Here's a rhetorical:

 

-Corporation Executive

 

-Corporation - Makes 1 million dollars

 

-Stock Holders - Each gets 1% of profits a year

 

Each stock holder (if the executive keeps all profit) will get 1% of a million dollars or $10,000. But if the executive spends $100,000 on the community (charitable donations, ect) then the profit will only be $900,000, and each stock holder will only get $9,000. In effect the corporation executive is taxing each stock holder $1,000 and spending it how he wishes on the community.

 

First of all should an executive be able to spend money promised to stock holders, and second does this give a lot of power to a corporation and it's executive? In reality they are like miniature governments taxing and spending and the stoke holders are the citizens. This is sometimes known as the "Stock Holder Theory."

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Robert Hay and Edmund Gray could call Milton Friedman's philosophy a "Phase I" philosophy of business, this is where the only obligation the corporation has is to maximize it's profits. They also wrote, however, about a "Phase II" philosophy, or a "Stake Holder Theory" where not only the stockholders looked out for (as in Phase I) but also the "stake holders," the customers, employees, suppliers, creditors, and most importantdifference, the community. The "stake holders" are all the people that the corporation should be looking out for. This "Phase II" makes more sense, to me, than "Phase I."

 

They also wrote about "Phase III," but they also recognized it's problems. This is where the corporations main goals are social goals. Not only does this bring a lot of government power into the picture, but can hurt businesses.

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As for a general society view, John Stewart Mill said that the individual good was a societal good. Personally I'd mix this with so Thomas Hobbes and even some stoic ideas. We need to do what we can for ourselves, and should do what we can for others because this is all we really can do. And in the end on a grander scale we need a government to make sure we don't hurt each other.