Emergent Systems and Methodological Individualism, Part III: The Costs of Methodological Individualism in Policy Analysis

So far this mini-essay has read like a critical discussion comparing two methodological perspectives and little more. But research methodologies are important not just because of what they can be used to reveal to careful study, but also because of what they might unintentionally conceal. Think of the old saying “When the only tool you have is a hammer, everything looks like a nail.” What is not visible as a nail is not seen as relevant, and perhaps not seen at all. WBut what might serve as a mediocre nail might be quite excellent when used by a different tool from the toolbox. This final essay gives one example of this point.

When combined with moral individualism, methodological individualism leads to profoundly disturbing results in analyzing the social world. Methodological individualism creates caricature figures that blind the analyst to real human beings. The logic behind applying methodological individualism in such cases goes something like this:
The Moral premise:
It is wrong to aggress on peaceful human beings. (This insight is central to moral individualism. I certainly do not question it.)

What methodological individualism adds:
1. Voluntary contracts between legal equals leave both parties better off than they were before making the contract.
2. Interfering by law or force with voluntary contracts makes at least one party worse off than would have otherwise been the case.
3. Therefore interfering by law with voluntary contracts constitutes aggression against at least one peaceful human being.
4. Similarly, requiring a peaceful person to act in a certain way by law is wrong when not acting in that way aggresses against no one.

Murray Rothbard infamously used his understanding of moral individualism and methodological individualism to argue that parents had no obligation to feed their children, even if as a result of their not doing so, their children starved.  I will not critique Rothbard’s argument, believing that no normal person would agree. Instead I will examine why such a repugnant conclusion derives from principles many reasonable people would find morally weighty.

The argument’s logical weaknesses arise from Rothbard’s ignoring the last two “moments” of Berger and Luckmann’s statement that a complete explanation in the social sciences must address three different observations: Society is a human product. Society is an objective reality. Man is a social product. I emphasize, and Paul Lewis demonstrates in great detail,  that these statements should not be read in linear causal terms but as always simultaneous, creating an enduring pattern of relationships out from which both individuals and societies emerge. We are describing emergent phenomena.

Taking one Bergerian moment, that society is a human product, and separating it from the others does not take us to human beings. I believe this helps explain the curious inhumanity of Rothbard’s moral argument. He cannot comprehend human beings from within his position. Very few methodological individualists who are moral individualists would follow Rothbard this far. But the blindnesses towards human well-being arising from their approach to understanding society will still be substantial.

Take the issue of labor unions in society, which have recently become a major news issue. Most methodological individualists who are moral individualists argue that compelling union membership and collective bargaining violates freedom of contract, prevents some people from working for wages they would otherwise accept, and gives some organizations legal privileges denied to the others. Important classical liberals and libertarians are eagerly supporting the attack on labor unions by Wisconsin Republicans. I suspect all of them would employ arguments akin to this or in deep harmony with it.

Once we consider the other two moments” in Berger and Luckmann’s argument the picture becomes more complex, and the policy issues a great deal less clearly cut. The result does not lead to specific policy perscriptions, rather it leads to a richer context within which to think about policy implications.

People live in a society they did not themselves create and must by their very nature take important elements for granted even if they question other elements. If we look at the evolution of market economies we find that they were preceded by aristocracies and other systems where income and possessions were largely determined by political and family connections and social status. Most people within these societies were poor. These preconditions established a social and political context (Berger and Luckmann’s other two “moments”) out of which freer institutions gradually emerged.

In England, for example, when the first factories were built masses of landless people who otherwise might have starved or been confined to a poor house were able to get jobs. However, their bargaining position in seeking those jobs were not equal to that of prospective employers. They had been victims of the existing system of laws and property ownership to a far greater extent than many employers. I am not arguing many employers responsible for this state of affairs. It was simply the institutional and social environment within which early capitalism arose.

In the United States, by contrast, American industrialization began in New Englan.  Mill workers were often daughters of farmers. Avoiding starvation and homelessness were not issues for them. They could say “no.” Early American mill towns, such as Lowell, Massachusetts initially offered good wages for the time, and while by our standards the female workforce was regimented, much of this reflected the cultural attitudes towards women rather than the powerlessness of workers. Women did not usually choose these attitudes, they grew up in a society taking them for granted, and would have had to distance themselves from society a little bit to question such basic assumptions. Of course people can do this, but no one can distance themselves from everything, and so some social attitudes will always be taken for granted.

Only later, when depressions and mass immigration lowered the price of labor in America, did industrial slums so common in England develop in New England.  I can think of no better illustration of how bargaining power influences working conditions, no matter how abstractly equal their status.

These external circumstances constituted different objective realities of material and social relations that systematically weakened English and later American bargaining power vis-à-vis employers. The abstract equality of agreeing to work for someone on mutually voluntary terms was powerfully influenced by the quite different concrete costs for individuals in either party not coming to an agreement.

The bargaining positions of labor and those who hire labor have rarely if ever approached in concrete terms the abstract ideal of two people bargaining for mutual benefit on terms approaching equality. Were this the case we can imagine quite different authority relations arising. For example, employees’ privacy rights on the job might be far stronger. So long as the job gets done, employers have no say whatsoever as to other things they do because they are hiring to get specific tasks accomplished, not controlling a person’s time. That they can control a person’s time when this is unnecessary for the task is evidence of power disparities.

A balanced view of human beings in a real society would seek to address both the issue of individual freedom conceived in terms compatible with methodological individualism and individual freedom as experienced by actual historical human beings constrained by inherited customs and a very skewed distribution of wealth.

Significantly, only as people understand themselves to be free and also have an opportunity to make informed use of that freedom will it have a chance to be genuinely realized. At a minimum they need easy exposure to different points of view regarding issues of importance to them when such differences exist. Only in this way can they have the opportunity to question the “objective” social institutions and beliefs with which they grew up. They also need the freedom to cooperate with others of their choosing in ways unforeseen by others. This is why education is regarded as important by decent individuals.

If we were to look at labor unions from this perspective at least two modifications from the usual pure antagonism towards organized labor would arise.

First, while it is true that unions have abused their prerogatives, been corrupt, and have sought to restrict membership access to protect higher wages, these are variants of behavior all organizations tend to take in seeking to make their environment more secure and beneficial to themselves. They apply in one form or another to any organization seeking economic benefits: corporations, partnerships, professional associations. In a slightly more abstract form, they apply to all instrumental organizations wherever they may be found. I have argued in papers so far unchallenged that the interests of instrumental organzations are at best not the same as the interests involved in maintaining Hayekian spontaneous orders.

Reading Hayek’s chapter 10 “Why the Worst Get on Top” in his The Road to Serfdom, and doing so with an eye as to how many of his arguments apply to instrumental organizations in general can be eye-opening. His specific target, totalitarian parties, constitute an extreme case of a much more widespread phenomena, common to the logic of creating a organization devoted to a hierarchy of ends.

When instrumental organizations benefit from emergent processes they generally support them.  New entrepreneurs are often in this group because they take advantage of the market’s openness to pursue opportunities others do not see.  However when organizations are threatened by spontaneous orders they often seek to override or manipulate them.  Established businesses threatened by changes they do not control and are not insulated against are an example.  In the US no one has accomplished this insulation from disruptive market forces more successfully than the American financial industry although many other areas of corporate life, such as military production, have also been securely protected from pure market relations.

What is unique about unions is not that they seek and sometimes gain political privileges, but rather that they are the vehicles by which many of the least powerful members of society increase their ability to compete with far more powerful interests in influencing the legal and economic framework within which they live.

This carries us to the issue of collective bargaining. At an abstract level the criticisms against it made by economists thinking in terms of methodological individualism are correct. But when looked at from a deeper perspective, arguments over collective bargaining becomes more complex, their implications less clear. When equality among potential contractors does not exist, the stronger party can and often will play the weaker parties off against one another, using the old political principle of divide and conquer.  Jay Gould put this point bluntly during an earlier time much like this one, except that its wealthy got so by creating things: “I can hire one half of the working class to kill the other half.”  Those willing to work for less within this context are often the weakest members of a bargaining group.  They would be able to make more if they held together as a unit.

This weakness has two dimensions: first, the weakest need the money more and believe they will lose if they hold out for higher wages, and second, their existence strengthens the bargaining power of the other side.  We have disparaties in knowledge and in the  resources enabling waiting.  Only conditions of perfect equilibrium would negate this situation, and there is no reason to believe perfect equilibrium will arise at a single point when knowledge is limited and fragmented and power to enter into or reject a contract is unequal.

So what we have in fact are tension between two different types of failure to maintain optimally free contractual circumstances for people. On the one hand imposing collective bargaining reduces the freedom of some to work for wages that are lower than what others will work for. On the other hand, its absence enables the more powerful party to pay lower wages and offer fewer other benefits than might otherwise be the case when one unit negotiates with another unit. My point is not that one alternative is always better than another, rather it is that we cannot tell in advance, without looking at the actual circumstances involved, what kind of trade-offs should be made when all reasonable possibilities fall far short of genuine equality of contract not just formally but also concretely.

Lest someone think I have gone too far in this statement, most readers would argue that it should not be an enforceable contract to sell oneself into indentured servitude for life to pay medical bills for a sick child.

For classical liberals to disproportionately attack unions over other organizations that receive benefits through the law is both scientifically indefensible and morally depraved. It is a version of Rothbard’s error of placing so much concreteness in an abstraction that real human beings are lost from sight.

The second change would be to rethink the employee/employer relationship itself rather than taking it for granted as is currently done. Employment relations usually reflect the outcome of bargaining under substantively very unequal conditions. The organizations benefiting from that inequality have acted to preserve their advantages. Many early American individualists now praised by libertarians and classical liberals such as Lysander Spooner and Benjamin Tucker were well aware of this issue and troubled by some of the implications of wage labor as it was developing in America. Unfortunately their descendents almost universally ignore their concerns. This is so despite modern governments planning for an “optimal” level of unemployment as a matter of public policy. Such “optimal” levels systematically weaken one side of the bargaining over employment, and it is not the employers.

There are examples of very different voluntarily contractual labor relations that preserve far greater equality between the contractees.  Some have proven successful even under the challenges of international trade and modern technologies. For example, the Spanish Mondragon cooperatives employ close to 100,000 workers within a variety of enterprises, compete within a market economy open to the world, and their worker-owners retire with full pay. Mondragon has accomplished this for over 50 years. Their web site is here.  But alternatives to traditional authority relations in production have received essentially zero attention from market liberals content with their model of formal equality and freedom of contract while ignoring history and the social embeddedness of everything human.

Adopting an emergent order informed analysis of markets and of society in general deepens and broadens the kinds of issues able to be addressed within the broad liberal paradigm.  When informed by the concept of emergence, Peter Berger and Thomas Luckmann’s model offers such an approach, one able to incorporate the insights arising from methodological individualism, but doing so in a way  making these insights far more useful for addressing problems faced by actual human beings.

Small edits and the Gould quote added on March 1.