e-notes

John B. Davis. 2003. The Theory of the Individual in Economics. London: Routledge.

This intriguing study of the individualist foundations of contemporary economics reads like a deceptively accessible introduction to the subject. The diligent reader will find though that this slim volume is packed with insight beneath the surface that requires time to properly digest, in a way that will only be apparent to that rare kind of reader equally widely read as the author across economics, philosophy, and the histories of these two disciplines.

One can learn a lot about the conceptual context of the theory of the individual in economics. At its original core the Cartesian dualism between autonomous human subjectivity and objective nature, the platonist foundations of this subjectivity being replaced by Locke's grounding of it in sensory experience. It was the Lockean individual that became the corner stone of the neoclassical tradition in economics, with the subsequent development of this tradition responding to the tensions inherent in Locke's conception. The outcome, a theory of the abstract individual as the locus of axiomatic choice, did away with Locke's psychological subjectivism, as an attempt to clarify individual choice. The unintended result, according to Davis, was a theory of the individual that had become disassociated from human psychology altogether. More strongly even, he attests the absence of a coherent and explicit account of the individual in modern economics. He accepts that there is an 'abstract individual' conception present, but argues that ultimately, this conception is not powerful enough to distinguish between 'single person' and many person' individuals. It fails to sufficiently individuate its individuals.

Davis draws here from Hume's critique of Locke's idea of personal identity. As an empiricist sceptic, Hume failed to detect his self as a substance, but instead attested a collection of various ever changing perceptions. Applied to economics, one has no grounds for attributing a preference ordering to an individual since there is no theory of the individual apart from this ordering. Hence, the economic self could well consist of many competing selves. And indeed recent economic literature has begun exploring the implications of this point, to the extent that the market without may be matched by a market within, leaving the question where one individual ends and the other starts a moot question.

Ironically, Davis points out, ensuring a unified self in this literature boils down to solving an internal 'social choice' problem through the imposition of a dictator. But since the internal and external world of choice are formally equivalent, why prefer docators here while markets there?

Let us just follow one dimension of John Davis's overall argument here in a bit more detail: The core conception of the individual in economics, her suggests, has recently shifted from early neoclassical subjectivism to computational functionalism. Computational functionlalism, as a theory of mind, holds that brain states are computational states of mental algorithms, and that two individuals share the same type of mental state if they function in a causally equivalent way in respect to their physial environment.

The new economic individual is therefore a preference computing programme that can be implemented in different entities, without prejudice whether these entities are individual human beings, particular 'modules' within a human brain, economic entities such as firms and markets, or non-human entities such as animals, machines, or Martians. No wonder thus that rats have proven in (controversial) experimental settings to epitomise revealed preference theory just as well as that subset of our contemporaries that ensures that there is never a ten dollar note on Times Square ('Even if there was, somebody would have already picked it up'). An interesting point of contact here to Mirowski's [i]Machine Dreams[/i], who argues that markets should be regarded as a prime species of algorithmic life (noting that in experimental settings, zero-intelligence computational agents have appeared to be indistinguishable in aggregate terms from human agents).

One of the many fascinating issues Davis raises in this context is that the theory of preferences that lies at the heart of Arrow's theory of social choice, and Arrow-Debreu general equilibrium theory may constitute an attempt to create a fully extensionalist economic semantics. Whereas Quinean extensionalist semantics rules out propositional attitudes, this new preference theory rules out subjective value judgements, to the effect that choice is the result of a mental algorithm. This is the origin of course of behavioural economics as it is called today, where, following the footsteps of Herbert Simon, choice is simulated my computer programmes.

Davis finds that with economists abandoning general equilibrium and axiomatic preference theory in the 1970s as core components of contemporary economics, economics keeps evolving around a plethora of alternative conceptions of individuality, none of which have evolved into a new dominant perspective. They share, at lest in the mainstream literature, a more or less pronounced calculative bias, which prompts Davis to point to Searle's criticism of computational functionalism. Meaning as a form of consciousness differs radically from the idea that we are driven by mental software that directs our economic behaviour. Davis turns thus to semantic externalism as starting point both for an alternative theory of the individual and an alternative economics.

Posted at : May 16th, 2006 - 11:10 am
Filed under : Reviews
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