The economy. Society. The environment. These are concepts which are endemic in social science. They can be described as ‘wholes’, structures or systems. They also, for all intents and purposes, involve human activity. Perhaps the environment is more ambiguous, depending on how it is defined. No-one can deny that humans have a major influence on it, and that a big part of why we study it is to understand our impact, what we can do to minimise the harm we inflict, and to improve it, both for our own sakes and for the sake of nature as a whole.
Holism is the idea that wholes or systems have a determining influence on their constituent parts, such as the impact of the economy on the individuals involved in its functioning. Taken to an extreme, it means that individuals lack free will, and that human agency, or intentional human action, is pretty much irrelevant.
The opposing idea is atomism, the idea that the separate individual members of any system are determinant. The thinking which follows from this can be used to suggest that the individual members of a society do indeed have free will, and that individual human agency is the key element that determines social outcomes.
In practice, much of social science, including economics, politics and sociology, employs concepts and understanding somewhere in between the two extremes of holism and atomism, even if this is not acknowledged.
The position one takes on holism versus atomism has a substantial influence on the kind of investigation, knowledge and understanding that result. If these are used to inform government policymaking, they can affect the lives of many, for good or ill.
As mentioned in the opening paragraph, social scientific approaches which tend to be more holistic can also be described as more structural or systemic. Some more examples might be the state, firms, households, families, social classes, the community or even an ecosystem.
As with all concepts (words, even!), they are human-created, and since they involve humanity (nature or ecosystems need not, but often do), are legitimate objects of study for varieties of social science, not least for schools of economic thought.
Approaches which acknowledge a degree of holism involve relations between individuals which are more than the sum of their parts. In modern terms, they are ’emergent’ from their components, dependant upon but not reducible to the latter.
Furthermore, all such systems can be seen as evolutionary processes, subject to and engaged in constant change. This has been acknowledged by social theorists and economists including Marx and Veblen.
The limits of the human nervous system which governs our perception of all things, coupled with the idea of constant change in ourselves and our environment, mean that theoretical systems and models that we create are necessarily partial, and never final. This implies that there is no final or ultimate singular truth, at least not in science, social or otherwise. All scientific systems must have theoretical or defined boundaries, even if these are human-created, temporary and partial, in order to isolate them for investigation. Taking a step back from the notion of establishing boundaries, it is also important to recognise the openness and complexity of social systems. There remains a need for human agency, whether on the part of individuals or collectives, even if one attaches more importance to the holistic or systemic. Given that all social scientific approaches to understanding involve both agency and structure, individuals and systems, or parts and wholes, even the extreme positions at either pole, it can be misleading and dangerous to ignore one or the other.
To further illustrate some of these points, I offer some examples of schools of economic thought and what they imply for understanding society and the economy, as well as what kind of human response (agency) they legitimate, whether in the form of policy or otherwise.
Neoclassical economics
The neoclassicists dominate today’s mainstream. While the latter contains many sub-divisions, it starts with the incentives faced by individuals, or methodological individualism, and can then add a potentially limitless catalogue of ‘market imperfections’ which are used to give rise to economic and social outcomes.
Not all neoclassicists are right wing or anti-state intervention, witness progressives like Paul Krugman and Joseph Stiglitz. But neoclassical theory is ahistoric and asocial, and insists on microfoundations in the form of individual consumers or firms classed as rational maximisers coming together via market exchange as the basis for legitimate micro- and macroeconomics.
All of this results in a lack of richness in its understanding of the economy as a system emergent from human society, and an easily formed bias in favour of ‘free’ markets and limited state intervention. It thus tends to neglect all sorts of economic problems and their solutions which might be more holistic, structural or social, rather than being more the fault of the individual(s) involved.
Post-Keynesian economics
In contrast to neoclassicism, post-Keynesianism, which draws more heavily than the Keynesian mainstream on the original writings of Keynes and his colleagues and followers at Cambridge University, favours more structuralist approaches to economics. There can be holistic ideas and macroeconomics can have its own structural foundations, with less emphasis on the individual and the necessity of microfoundations.
Economists working in this school usually favour state interventions at all levels (regional, national and global) to reduce unemployment, increase economic and financial stability, reduce inequality and generally improve economic and social performance in a progressive direction.
A more holistic approach to theory gives rise to the idea that problems such as unemployment or poverty are more structural or social rather than being the fault of the individual, and therefore require solutions which involve government intervention rather than leaving things to ‘the market’.
Many post-Keynesians, as with Keynes himself, look to intelligent reforms in order to remedy the worst defects of capitalism and save rather than abolish it, though some can be more left wing and even socialist. But for most, establishing a ‘middle way’ between free market capitalism and statist socialism is a common desire.
Marxist economics
Classical Marxists follow Marx in taking an extremely holistic approach. For them, the social problems of capitalism cannot be solved within the system itself and therefore require its abolition, either through reform or revolution, and its replacement with socialism and, finally, communism. They wish to see a classless society, and an end to markets, exploitation and the social injustices which pre-socialist societies inevitably sustain.
Apart from human agency, which takes the form of class struggle, Marxism is dominated by structural or holistic categories. Even capitalists and workers are seen by Marx as personifications of impersonal forces against which they are powerless in the face of historical evolution with an inevitable direction. While there is no doubt that Marx’s writings provide us with a rich analysis, combining insights from German philosophy, English political economy and French socialism, and a ruthless critique of everything, it renders individual agency rather powerless against the grand forces of history. This led those engaged in overturning their nation’s institutions in order to establish socialism to engage in mass murder, repression and authoritarian politics, and resulted in economic systems which ultimately proved to be inefficient and stagnant when compared with capitalism in all its forms. Marx’s forceful writings and his neglect of the individual surely played a part in this.
Institutional economics
Modern institutional economists such as Geoffrey Hodgson draw on the work of Thorstein Veblen and others in their understanding of modern economic systems. Like Veblen himself, they give more attention to the role of human agency and its relationship to social structure than Marx and many Marxists.
As forms of social structure, institutions can be defined as established systems of formal and informal rules that structure social interactions. Examples include the state, the legal system and all forms of regulation, corporations and the family.
Institutionalist economists take something of a social and historical approach. Institutions, and structures more generally, both constrain and enable the behaviour of individuals. Thus human agency is to some extent limited but can also be empowered. It can transform institutions that impact the behaviour of individuals across a society, thereby creating social and economic change, such as when a government enacts a new policy. Agency and structure therefore condition and potentially transform one another.
Institutionalism, at least in its more traditional form, tends to be progressive when it comes to policy, and applies theories of evolution to society and the economy. It has some overlap with post-Keynesianism in its preference for reform rather than destructive revolution, and readily gives rise to ideas which describe a variety of forms of capitalism, institutionally speaking, and different ways in which capitalism can flourish, in contrast to the more extreme theoretical visions of many Marxists as well as libertarian free marketeers. Thus ‘many middle ways’ under capitalism are possible, as opposed to impossible utopias of the far left and right.
Ecological economics
This school is pretty holistic in that it considers interactions between the economic, social and natural in shaping systemic outcomes. It sees the economy as embedded in and dependant upon society, and society embedded in and dependant upon the planetary eco-system. Thus human impacts on the latter shape everything else and a socioeconomic system which undermines the eco-system will at some point destroy the conditions for life on earth, including our own.
Its implications for policymaking tend towards the radical, variously calling for far-reaching reform or the replacement of capitalism. This might involve a steady-state (zero growth) economy or even degrowth (shrink the economy in order to restore a sustainable ecological footprint). Less radically, it can call for a decoupling of resource use from economic growth, so that the former can be sustained even while the economy continues to grow. It also tends to call for policies which reduce inequality.
In sum, ecological economics argues for sustainable development in all its economic, social and environmental forms. It can also call for smaller scale development and greater localism, in order to reduce the damaging impact of economic activity on the environment. This could come at the cost of reduced efficiency, but if large scale corporate activity is really unsustainable, then there may ultimately be no choice in the matter.
The concept of nature may be the most holistic of the lot, even surpassing Marx’s idea of a social totality. In the long run evolution of life on Earth, from the advent of humanity to the development of civilisation, and the emergence of the economy as we understand it, we could say that nature has been a constant. Its laws began before us, though through human understanding, or lack of it, we have had an increasing impact on it. Now we need our understanding to solve the downsides of our activities, while preserving civilisation. Even if it is not right on all counts, ecological economics provides a bigger picture than other schools of economics in its vision of all life on Earth and its refusal to separate the economy and society from their natural foundations. This would seem to be a positive outcome of a holism which stimulates constructive responses from humanity and aims to solve our greatest challenges in the form of climate change and eco-system collapse.
Some final thoughts
There are potential dangers in taking an extreme holistic or atomistic viewpoint when it comes to social science, not least in economics and political economy. Either can potentially lead to doomed attempts to impose a new system on society and even the death of millions. There are dangers from strong holistic or structuralist approaches to the economy that wrongly attribute every ill to a lack of state intervention, just as there are from similarly blaming the individual, who can often be the victim rather than the perpetrator.
The purpose of the state is to act as a collective agency to protect and empower the individual in the society over which it has jurisdiction. It can do tremendous good, but also great harm. To greatly simplify, more left wing political thinking tends to favour structural, social or holistic explanations and solutions, while the right favours individualism. But of course the individual can only be defined in relation to larger groups, from the family and community to society as a whole, except perhaps for a fictitious actor alone on a desert island, and even that can be disputed. In a world that is in many ways interconnected economically, socially and environmentally, it is inevitable that a range of holistic and structural visions and understandings become relevant. They can limit or empower us, and therein lies great potential for improving the lot of humanity.
The Political Economy of Development 