Handbook of Economics and Ethics
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Handbook of Economics and Ethics

Edited by Jan Peil and Irene van Staveren

The Handbook of Economics and Ethics portrays an understanding of economic methodology in which facts and values, though distinct, are closely interconnected in a variety of ways. From theory building to data collection, and from modelling to policy evaluation, this encyclopaedic Handbook is at the intersection of economics and ethics.
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Chapter 35: Individualism

John B. Davis


John B. Davis The term ‘individualism’ has functioned as one of the main organizing principles of economics for over a century. Yet despite this, considerable ambiguity still surrounds the discipline’s use of the term. In particular, there is a lack of clarity on (i) its methodological interpretation and ultimate value as an organizing principle, (ii) the conception of the individual that is appropriate to reasoning in economics and (iii) the normative implications of the standard view of individuals in economics. These three issues are addressed in this chapter. Competing views of individualism Individualism in economics – often termed ‘methodological individualism’ – is the view that individuals should figure centrally in all economics-related explanations. In contrast, holism – or ‘methodological holism’ – is the view that social groups and other social aggregates should figure centrally in such explanations. Schumpeter coined the former term a century ago (Schumpeter 1908; and compare 1909), later defining it as an explanation that focused on the ‘behavior of individuals without going into the factors that formed this behavior’ (Schumpeter 1954, p. 889). He distinguished this from ‘sociological individualism’, the – in his view ‘untenable’ – idea that ‘all social phenomena resolve themselves into decisions and actions of individuals that need not or cannot be further analyzed in terms of supraindividual factors’ (ibid., p. 888). This last is what many economists and other social scientists today regard as the meaning of methodological individualism. For example, Elster defines methodological individualism as ‘the doctrine that all social phenomena (their structure and their change) are in...

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