Economics used to be a social science, but this is no longer so.
Today, the field has largely become a study of individual agents acting outside of society, as if societal influences do not affect individuals. The field has come to center upon isolated individuals, focused primarily on how these individuals can maximize their personal “utility” (in other words, benefit or profit) while interacting only through the exchange of commodities.
Approached in this manner, economic analysis becomes significantly more simplistic, which partly accounts for the historical paradigm shift from treating economics as a social science, as it once was, to the modern paradigm of economics focused on methodological individualism. The modern approach makes economics significantly more tractable and straightforward, allowing economists to explain all economic problems through three circumstances: technology, individual preferences and utility and the distribution of talents and wealth.
However, this paradigm of methodological individualism fails to account for a variety of external factors that influence economic variables and phenomena. Approaching economics as a study of isolated individuals results in an understanding of the field that is fundamentally ignorant of the effects that social factors can have on individual utility, as well as the effects that individuals can have on other individuals’ decisions and utility.
Take, for example, a fan at a sports game. The utility that the fan derives from attending the game may be modeled by his or her individual utility function. However, it is rather naive to assume that the fan will derive the same degree of utility if he or she were to attend the game alone versus immersing themselves in the excitement of being surrounded by thousands of fellow fans cheering for their team.
Methodological individualism fails to capture this social effect on individual utility, rendering this approach to economics intrinsically flawed.
The solution to this dilemma is simple: it’s time to approach economics as a social science again, thereby reevaluating and altering the current paradigms to incorporate the variety of social variables and factors that influence economic phenomena.
Social scientists study group behavior because they believe that interactions and relationships between people drive those people to act in a manner inconsistent with those of isolated, self-centered individuals. Influences such as power and wealth drive group dynamics in a different direction. As isolated individuals, people would have economic activities that revolved around basic survival needs such as food, shelter and safety. Their desires would focus on material items that satisfy exclusively practical purposes.
Participation in a community fundamentally changes these tastes and desires, however, raising concerns in regards to the appropriate way to live and proper resource management, so that the community can collectively reach economic goals.
Most college students have considered the social ramifications of going to class in their pajamas or neglecting to clean their room before their parents visit. Any college student, then, is familiar with the effects that social factors have on our determinations of personal utility. The fact that modern economics relies on analyses that ignore these factors should be (and is) deeply troubling.
When we treat it as a social science, economics serves to address phenomena beyond the scope of methodological individualism: the effects of socialization on tastes, the economic and social effects of hierarchy and power and the institutional and social constraints on economic life.
The triumph of methodological individualism as the forefront paradigm in economics has effectively removed the economics profession from its historical role as a source of creative and constructive ideas for social reform. The paradigm limits the scope of the field to largely theoretical discussions with limited potential for driving social change. Social movements, such as those to end poverty or promote greater government transparency, require the council of economists whose theories can provide theoretical and factual foundations for proposed reforms.
Methodological individualism has effectively deprived these movements and organizations of this assistance and has forced the leaders of these movements to turn to other fields for support.
The time has come to embrace a new social paradigm in which we approach economics as a social science. We must again provide economists with the ability to improve society and fuel social and political reform.
Makai McClintock is a Collegian columnist and can be reached at [email protected].
