Austrian Economic Perspectives on Individualism and Society: Moving Beyond Methodological Individualism

188 Pages·2014·1.324 MB·English

by  Guinevere Liberty Nell (eds.)

Austrian Economic Perspectives on
Individualism and Society
Austrian Economic Perspectives on
Individualism and Society
Moving Beyond Methodological Individualism
Edited by
Guinevere Liberty Nell
austrian economic perspectives on individualism and society
Copyright © Guinevere Liberty Nell, 2014.
Softcover reprint of the hardcover 1st edition 2014 978-1-137-37140-9
All rights reserved.
First published in 2014 by PALGRAVE MACMILLAN® in the United States—a
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ISBN 978-1-349-67685-9 ISBN 978-1-137-36884-3 (eBook)
DOI 10.1057/9781137368843
Library of Congress Cataloging-in-Publication Data
Austrian economic perspectives on individualism and society : moving beyond
methodological individualism / edited by Guinevere Liberty Nell.
pages cm
Includes bibliographical references and index.
1. Austrian school of economics. 2. Individualism. I. Nell, Guinevere Liberty,
1976-
HB98.A955 2014
330.15'7—dc23
2014021994
A catalogue record of the book is available from the British Library.
Design by Amnet.
First edition: November 2014
10 9 8 7 6 5 4 3 2 1
Contents
List of Figures and Tables vii
Introduction 1
I Surpassing Methodological Individualism
1 Methodological Individualism and Society:
Hayek’s Evolving View 7
Andy Denis
2 From Methodological Individualism to Emergence,
Ecology, and the Fluid Self: Exploring the Shift
from Misesian to Hayekian Social Science 21
Gus diZerega
II Spontaneous Order and Society
3 Spontaneous Order and the Social Individual:
Hayek, Democracy, and Public Choice 47
Guinevere Liberty Nell
4 On the Varieties of Spontaneous Orders: From Cultures
to Civil Societies and the Orders In Between 81
Troy Camplin
III Further Implications for Mind and Society
5 A Danse Macabre of Wants and Satisfactions: Hayek,
Oakeshott, Liberty, and Cognition 107
Corey Abel and Leslie Marsh
vi Contents
6 The Internal and the External Freedoms: How Hayek’s
Ideas on Mind and Society Can Help Achieve Marx’s
Utopian Dreams 141
Guinevere Liberty Nell
List of Contributors 173
Index 175
List of Figures and Tables
Figure 4.1 90
Table 2.1 39
Introduction
Economists are frequently criticized for seeing the world through the
narrow lens of the economic, seeing individuals as purely self-interested
and profit seeking, and failing to see the importance of community. Even
economists recognize these failings, and new branches of economics like
behaviorism have been introduced in part to address them. However,
neoclassical economics, including Austrian economics, still relies upon
incentives based in self-interest, and the rooting of all behavior in indi-
vidual action and preferences, in order to model and predict outcomes.
Is this defensible, necessary, and right? Are there any alternative ways
to model behavior that are consistent with Austrian theory? What are the
pitfalls of relying upon methodological individualism and self-interest,
and of neglecting community or underestimating the importance of soci-
ety and culture?
In putting together this volume, which is a kind of follow-up to the
collection I put together on Austrian Theory and Economic Organiza-
tion published in August 2014, I expected to be flooded with potential
contributors, since the subject is so important and so interesting. To
my surprise, there was significantly less interest in this book than in the
other. Why should this be? The reasons given ranged from “everything
on that subject has already been said” to what seemed like concerns that
saying anything new on the subject might take the theorist outside the
framework of Austrian theory and methodology, which is grounded in
individual action. Hence, this collection presents the thoughts of just six
Austrian-inspired economists willing to burst out from those boundaries
and seek answers only visible when Austrian theory is open to the insights
of other (generally heterodox) schools, or when critically analyzing the
foundations of Austrian theory.
This volume brings together a wide spectrum of theoretical angles, all
inspired by or in conversation with Austrian economics, to explore these
questions and consider possible routes to a more well-developed view of
humanity and society, which might in turn help to build foundations for
2 Introduction
further explorations of the organizational topics raised in the first volume.
The first section tackles methodological individualism head-on, explor-
ing Friedrich Hayek’s view and the shift in the school from the views of
early Austrian Ludwig von Mises to that of Hayek. Did Mises ground
the school too much in the individual, more so than the founder of the
Austrian school, Carl Menger, would have wanted? This is impossible to
know, but many Austrians today believe that Hayek, with his sponta-
neous order framework and his work on cognition, has given Austrian
models a more dynamic and modern approach, which can be joined with
Complex Adaptive Systems (CAS) theory. This is often the aspect of Aus-
trian economics that other schools of economics see as promising.
If Austrian economics can shake its image as ideologically fixated upon
laissez-faire, this dynamic and literary (nonmathematical) complexity may
influence other schools and help lead them away from their simplistic
assumptions about rational self-interest. Austrians who want other schools
to see the benefit and potential of Austrian ways of thinking should
explore the divergence between the Misesian framework rooted in individ-
ual “human action” and the more flexible “spontaneous order” framework
that Hayek introduced, which need not be rooted solely in the individual.
In the first chapter, Andy Denis explores Hayek’s views. He argues that
Hayek is inconsistent. His earlier writings that introduce “the intentional
stance,” Denis argues, have much of interest, but his assertions of the
individualist nature of his methodology depend on an erroneous divi-
sion between nature and society. Later writings, in which the “intentional
stance” is extended to the macro-economic level, avoid these errors, mak-
ing his overall vision more consistent.
Gus diZerega (chapter 2) explores the shift among Austrian economists
from the Misesian insistence upon a strict methodological individualism
rooted in individual action to a dynamic macroeconomic spontaneous
order-based framework. He argues that Hayek described the market as
a complex adaptive system shaping “distributed knowledge” (knowledge
known to no one in its entirety) through a process of discovery, and that
such an order cannot be understood through the a priori logic of human
action. Humans are social beings, and hence even freedom is a social con-
cept. Social interactions must be available: being “free” on a desert island
is not a realm of human freedom because human beings are “irreducibly
social.” Hence, diZerega argues that it is time to demote methodological
individualism from its primary role in much of social science to just one
(important) “moment” among three that shape society.
The second section explores spontaneous order and society. Nell
(chapter 3) considers how recognition of the “social individual,” that is,
one who is shaped by society, changes the predicted outcomes within the
Introduction 3
spontaneous orders of society, including markets, culture, and democ-
racy. If rational self-interest of individuals is not taken as the root of all
action, can the assumptions and conclusions of the “public choice” school
be defended? How does this change the direction that Austrian models
should take? Expectations, habits, and culture are endogenous to the sys-
tem: they emerge from the system itself. Culture affects an individual’s
“nature,” including her habits, preferences, and the way she responds to
the incentives of the system. Culture and custom may be more important
than even the legal institutions, so a decentralized, evolving democratic
system, with transparency and public conversation integrated and internal
to the system and its coevolving culture, may produce far more efficient
public programs, and the economy may not need to be laissez-faire to
be growth promoting and poverty reducing, even according to Austrian
models. The inclusion of a democratic process theory in addition to mar-
ket process theory may allow Austrians to study this branch of inquiry.
Troy Camplin (chapter 4) fills out this section with a study of the
various types of spontaneous orders in any given society, looking at cul-
tures, civil society, and the orders “in-between.” He argues that even those
most dedicated to an individualistic worldview recognize that humans are
social, but that this is not in conflict with human individuality. Instead,
our sociality drives our individualism, and our individualism keeps socie-
ties dynamic. He argues that it is vital that we work to create the condi-
tions for the emergence of healthy institutions (which are also kinds of
self-organizing processes), which will support the emergence of healthy
spontaneous orders, healthy cultures, and healthy civil societies, which
requires existence of rule of law, flexible law over rigid legislation, free-
dom of entry and exit, and freedom of communication. Furthermore, he
argues, culture can have a very strong impact on the nature of the institu-
tions and spontaneous orders because culture can create “perverse orders.”
The third and final section considers further implications for “mind
and society.” How does an approach recognizing that we are all intercon-
nected and not merely rational self-interested individuals affect our views
not only on culture and the economy but also on our understanding of
ourselves? What does Hayek’s work on cognition offer to our understand-
ing of society? Corey Abel and Leslie Marsh (chapter 5) start off this sec-
tion with a discussion of the theories of Hayek and Michael Oakeshott,
and their understanding of liberty, mind, and society. This deep explora-
tion offers a foundation for a more balanced and reasonable debate over
the extent of liberty possible in a good society, as well as a more complex
understanding of the individual actor within the society.
Finally, this section concludes with an exploration of Hayek’s view on
cognition (the “internal”) and his views on society (the “external”), both