Wholes and parts: economics in the spirit of Keynes

A nice little post at the link below from Lars P. Syll quoting John Maynard Keynes on what he calls ‘organic unity’. Another way of putting it is that the whole can be more than the sum of its parts. This is the basis for the discipline of macroeconomics as distinct from microeconomics. Modern mainstream macroeconomics insists on ‘microfoundations’ and neglects the concept of organic wholes, which runs against the spirit of Keynes and his wish to establish a distinct macroeconomics.

Organic wholes can be seen as emergent from, but irreducible to their constituent and interacting parts. Thus while one can still pay attention to microfoundations (the parts), the behaviour of a larger whole can be very different from that deduced from simply adding the behaviour of the parts together.

In economics, the parts might be individuals, firms or households, while the larger wholes might be an economy at the national or global level. Of course, one could think of these concepts in ways which reach beyond the discipline of economics, which conflate wholes and parts and provide useful insights: an individual can be thought of as a ‘whole’ rather than a ‘part’, with the parts defined biologically, such as organs, cells etc, with the whole human being and its functioning as emergent from but irreducible to its constituent parts.

Returning to economics, a national economy can be analysed as a part of the global economy, leading to the possibility of certain macroeconomic paradoxes. So an economy can be seen as both a whole and a part, depending on how we look at it.

The unpopularity of the principle of organic unities shows very clearly how great is the danger of the assumption of unproved additive formulas. The fallacy, of which ignorance of organic unity is a particular instance, may perhaps be mathematically represented thus: suppose f(x) is the goodness of x and f(y) is the goodness of y. […]

via Additivity — a dangerous assumption — LARS P. SYLL

One thought on “Wholes and parts: economics in the spirit of Keynes

  1. One of the most important insights into erroneous economic reasoning.

    Stützel has introduced the below terminology to understand fallacies of composition, so common in economics:

    “Three types of statements can be made about groups and individual economic units that compose the economy, their interrelations and the aggregate economy:
    – First, there are statements that are true for individual economic units or groups. Those are partial statements. Applied to the theatre example: An individual or a group can improve its view by standing up.
    – Second, there are relational statements that explicate the exact conditions under which partial statements hold true. Those statements will show that the success of an individual’s or a group’s actions depend on the actions of its complementary group. For instance: A group of spectators can only improve its view by standing up if the complementary group does not stand up.
    – Third, there are statements that are true for the aggregate economy. They are called global statements. For instance: If all spectators stand up, nobody has improved his view. 6
    Using this analytical framework, the definition of a fallacy of composition can be stated more precisely: A fallacy of composition is the application of partial statements to the aggregate economy.

    (from Lindner p. 5)

    https://www.boeckler.de/pdf/p_imk_wp_100_2012.pdf

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