Varied Reiterations... Lachmann vs. Nozick redux

Commenting on developments in neuroeconomics, Greg Mankiw concludes that despite all the fuss economics is still fundamentally about large scale phenomena like inflation and unemployment that we  economists have not yet completely mastered.  But as far as microfoundations are concerned, Mankiw sides with David Laibson and suggests that we will have to start at the neuron and build up from there.

The discussion reminds me of the debate that took place on April 6, 1976 at the Austrian Colloquium at NYU (an account by Don Lavoie can be found in The Austrian Economics Newsletter, 1 (2) 1978 --- available at Mises.org).  Robert Nozick (personally the sharpest individual I have ever met) presented his paper criticizing Austrian methodology to the colloquium.  Nozick argued that if the critique of aggregation that Austrian methodological individualism insisted on was valid, then why stop at the level of the individual.  Instead, reduce human action to the cell and molecules that explain the action.  Nozick thought he had pushed the Austrian economists into a reducto ad absurdum with regard to the critique of aggregation.

Ludwig Lachmann (among the most insightful thinkers I have ever met) responded back to Nozick that his understanding of intellectual challenge of the science of human action was flawed.  It is not predictive power that is being sought, but understanding the meaning of purposive human action.  Reduction to the neuron, in other words, will at best explain how the mind forms purposes, but it will do little to help us understand the interaction of purposive human actors.  Austrian economists, Lachmann insisted, are methodological individualist because it is only at the level of the individual that we can attribute meaning to human action.

One of James Buchanan's pet phrases he used in class all the time was "It takes varied reiterations to force alien concepts upon reluctant minds."  If you think about it, most of the debates that take place in economics and political economy are nothing really new.  Perhaps new language and new techniques are introduced to address the issue, but more often than not the fundamental issue at stake is something that has been debated before by economists and philosophers.  Such is the case, I would contend, with the search for microfoundations in economics via neuroeconomics.  The relevant argument in economics is the one Lachmann provided to meet Nozick's critique. 

The Whig Theory of the history of ideas that suggests that the growth of knowledge is a linear progression toward greater truth, must be countered with a Contra-Whig Theory that sees how knowledge can be lost in the scientific quest and that we can head down intellectual dead-ends and have to back-track and rebuild the path forward.  This is especially true in the policy sciences where the inferiority complex with respect to the natural sciences makes those who practice them vulnerable to technique feitshism and where the quest for political power and influence can ofter undermine the quest for conceputal understanding and truth seeking.

Comments

[AJE]

Also see Foss on this : http://organizationsandmarkets.wordpress.com/2006/08/23/methodological-individualism-and-the-selfish-gene/

[Rafe Champion]

The Nozick argument is invalid because the point is to find the level of aggregation that works for the problem in hand. You do not improve your navigation when you are driving your car by learning more about the physics of internal combusion.

The appropriate level for economics and the human sciences is the "action frame of reference" that can be found in praxeology, Talcott Parsons (1937) and Karl Popper's situational analysis. A draft paper on this topic [sans discussion]can be found here http://oysterium.blogspot.com/2006/07/success-and-failure-of-talcott-parsons.html

with a draft of the discussion here
http://catallaxyfiles.com/?p=2064