Micro-macro dynamics and complexity

The whole is greater than the sum of its parts. That, in a nutshell, is the concept of emergence which justifies the existence of macroeconomics as a field of study distinct from microeconomics.

Mainstream economics places great store on ‘microfoundations’, and new classical macroeconomics aims to do away with the macro side of things by assuming that the hyper-rational representative individual or agent is the basic building block of its models.

Complexity and systems theory has a lot to offer those who accept the need for microfoundations in economics, but in a way that macroeconomic objects emerge from them, and cannot be predicted from simply examining a single ‘representative’ micro agent.

If this is the correct way to proceed, then macro objects can be said to emerge from the interactions of micro agents. The latter can be different from one another, in form and behaviour, but still produce an emergent order which can be studied and used to further understanding and inform economic policy.

As micro agents interact and produce coherent macro relations, structures and processes, the latter also act to shape micro-level behaviour. There is thus a two-way interaction between micro and macro, or a micro-macro dynamics.

This video, while not focusing exclusively on economics, covers what is an important part of the nature of the objects studied (ontology) in many strands of heterodox or non-mainstream economics. It touches, simplistically, on the difference between a pure free market and socialist economy, whether such things exist or not, but much of it is useful and is worth a view, keeping economics in mind.

In an economics employing a micro-macro dynamics, the micro agents might be individuals, classes, households or firms, while the macro structures and processes might be the national or international economy.

The nature of the social world: a touch of philosophy

599px-The_Blue_Marble“The…argument is against methodological individualists, such as Popper (and Margaret Thatcher who claimed that ‘society’ does not exist!), who argue that all explanations can be couched in terms of an individual person’s beliefs and actions. The first refutation concerns emergent properties. There are attributes of people that concern physical properties such as height or weight; there are attributes that we share with other animals such as pain or hunger; but there are many attributes, essentially human ones, that are unavoidably social, for example ‘bachelor’, ‘banker’, or ‘nun’. These are only intelligible within the context of a social institution or practice. The second argument is that many activities we undertake, most obviously perhaps language, must already exist and be available for people to learn and then use. As Wittgenstein argued, there can be no such thing as a private language – every time anyone has a conversation, uses a credit card, or waits for a train they are assuming the existence of a structured, instransitive domain of resources, concepts, practices, and relationships. The successful occurrence of social activities warrants the existence of causally efficacious, although unobservable, social structures.”

John Mingers (2014), Systems Thinking, Critical Realism and Philosophy

Mingers makes a good argument for the relevance of what are variously called structures or systems in social science. There are objects we can think about that are larger than the individual, such as society, which cannot be directly observed while their effects can be. This produces a rational for examining the economy of a nation, particular industries, social groups such as class etc. Continue reading