Sociology methodological individualism background, history and meaning

Methodological Individualism Background, history and meaning Lars Udehn London and New York -vFirst published 2001 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint of the Taylor & Francis Group ©2001 Lars Udehn Typeset in Baskerville by Taylor & Francis Books Ltd Printed and bound in Great Britain by MPG Books Ltd, Bodmin All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Udehn, Lars, 1948Methodological individualism : background, history, and meaning / Lars Udehn. p. cm. Includes bibliographical references and index. 1. Individualism. I. Title. HM1276 .U33 2001 302.5~4-dc21 2001019663 ISBN 0-415-21811-x -viContents List of figures

x

Preface

xi

Acknowledgements

xii

1 Introduction

1

2 Background

7

The social contract

7

The invisible hand

10

Classical economics

11

German historicism

19

Positivist sociology

27

Holism and collectivism

38

3 Psychologism in early social science

41

British psychologism

43

John Stuart Mill

43

Utilitarian economics

49

German psychologism

58

The rise of psychology

58

Wilhelm Dilthey

67

Georg Simmel

73

Psychologism on trial

77

4 Austrian methodological individualism

87

Carl Menger

87

Max Weber

95

Joseph Schumpeter

104

Ludwig von Mises

107

Friedrich von Hayek

114

The Austrian influence

121 -vii-

Society as subjectively meaningful interaction 126 Symbolic interactionism 127 Phenomenological sociology 137 Existentialism 144 Ethnomethodology 150 Social constructionism 160 6 Positivism in philosophy and social science 167 Positivist philosophy 167 British empiricism 168 Logical positivism 173 Positivist social science 179 Systematic empiricism 179 Positivist social theory 189 Homans's theory of exchange 190 German Verhaltenstheorie 196 7 Popperian methodological individualism 200 Karl Popper 200 J.W.N. Watkins 211 Institutional individualism 218 Joseph Agassi 218 Ian C. Jarvie 221 John O. Wisdom 224 Conclusion 226 8 Economics: the individualist science 228 Macroeconomics and microfoundations 230 General equilibrium theory 241 Game theory 250 Conclusion 254

9 The new institutional economics 255 Social organisations 260 The household 261 The firm 265 The state 272 Interest groups 275 Conclusion 275 Social rules 276 Property rights 276 Law 278 Constitutions 281 Evolutionary economics 281 Conclusion 286 -viii10 Rational choice individualism 288 Rational choice sociology 290 James Coleman 292 Raymond Boudon 306 Analytical Marxism 309 Jon Elster 310 John Roemer 316 Structural individualism 318 11 Why methodological individualism? 320 Philosophical background 321 Reductionism 324 Scientific reduction 324 Psychologism 331 Microfoundations 336 Normative individualism 336 Political individualism 337 Humanism 339 Conclusion 345 12 Methodological individualism restated 346 Strong and weak methodological individualism 346 Versions of strong methodological individualism 349 Explanatory methodological individualism 354 Notes 357 Bibliography 388 Index of author names 437 Index 441 -ixFigures 1.1 A graphic representation of methodological individualism 2.1 The theory of the social contract

5 9

2.2 Adam Smith's theory of the invisible hand

11

2.3 Emile Durkheim's rules of sociological method

34

2.4 Social wholes and collectives

40

3.1 John Stuart Mill's psychologistic methodological individualism

49

4.1 Carl Menger's theory of social institutions

91

4.2 Actions and institutions according to Robert Nozick

125

4.3 Individuals in society according to Weber, Mises and Hayek

125

5.1 Society according to symbolic interactionism

136

5.2 Society according to phenomenological sociology

144

5.3 Society according to ethnomethodology

160

5.4 Berger and Luckmann's dialectic of individual and society

161

5.5 A mapping of some sociological theories in a two-dimensional space

165

6.1 Mario Bunge's methodological systemism

186

6.2 Roy Bhaskar's transformational model of the society/person connection

187

6.3 Hedström and Swedberg's typology of social mechanisms

188

7.1 Popperian institutional individualism

227

8.1 The elements of the economic system according to Keynes

232

8.2 The methodological individualism of general equilibrium theory

245

9.1 Social institutions as endogenous variables

286

9.2 Social institutions as endogenous and exogenous variables

287

10.1 Coleman's micro-macro scheme

299

10.2 Methodological individualism according to Coleman

300

10.3 Coleman's micro-macro scheme extended in time

301

10.4 Social structure as a determinant of individual action

303

10.5 Social structure as positions to be filled

305

10.6 Structural individualism

318

12.1 The individualistic research programme, or versions of strong methodological individualism

353

12.2 Deductive-nomological explanations

355 -x-

Preface This book is partly based on my doctoral thesis, Methodological Individualism - A Critical Appraisal (1987). More exactly, chapters 1, 4-7 and 11-12 are revised versions of parts of my dissertation, while chapters 2-3, and 8-10 are entirely new. I estimate the new material to make up about half of this book. Of my previous work, I have used only the first part, which consists of a presentation and clarification of methodological individualism, but not the second, critical, part. The reason for this is not that I am less critical of the original doctrine of methodological individualism today, than I was in 1987, but that I wanted to expand my presentation and explication of this doctrine. One thing, however, makes a critical appraisal of methodological individualism more complicated today than it was in 1987. It is now more obvious than it was before that methodological individualism exists in a number of weak versions, in addition to the strong version that still dominates in economics. These weak versions of methodological individualism are, in my opinion, far less objectionable than the original strong version, which I criticised in 1987. I don't believe, however, that they are unobjectionable, but I will save my objections to a later work. The present book is part of a larger research project, which is going to include three more volumes. The first of these is a history of the individualistic theory of 'man' and society from Greek Antiquity to the rise of social science and of methodological individualism. My work on this volume is almost finished, and I hope that it will be published in about a year or so. A second volume will deal with the obverse of methodological individualism, usually called methodological collectivism, or holism. Also this volume is well on its way and I plan to complete it within the next couple of years. In a third volume, finally, I will return to the critique of methodological individualism, which I began in my dissertation. My intention is to try to carve out a position of my own, which is based on the viable elements of both individualism and holism, but avoids their objectionable features. -xi-

Acknowledgements I have been working on this book for quite some time. My first research on the topic of methodological individualism goes back to the end of the 1970s. Over the years I have been helped in various ways by lots of people and I am afraid that today I do not even remember all who made some contribution to the end result which is this book. My first and greatest debt is to Thomas Coniavitis, who suggested that I should write my doctoral thesis on methodological individualism and who influenced my thinking about it over many years of teaching and discussion. Without him, this book would most probably not have been written at all, and had it been written, it had been different from what it is. My intellectual exchange with Thomas has shaped my own thinking about social theory and methodology in important ways. My thesis was written at the Department of Sociology, Uppsala University, and my supervisors were Björn Eriksson and Ulf Himmelstrand. I am grateful to both of them, not only for the help they gave as part of their duty, but also for help I received after they had finished their assigned tasks. Peter Johnson read the whole manuscript and helped me improve upon many arguments and formulations. I am particularly grateful for his efforts to improve my English. A special thanks goes also to Tommy Törnqvist for intellectual stimulation and, not least, for unfailing moral support. Lola Billås wrote the whole thesis on a PC, with scrupulous exactitude, before I had myself switched to this new technology. Other people, then at the department of sociology in Uppsala, who read parts of my thesis and made valuable suggestions include Göran Ahrne, Tom Burns, Magdalena Czaplicka, Peter Ekegren, Mats Franzén, Kaj Håkansson, Bo Lewin, Peter Sohlberg, Richard Swedberg and Börje Svensson. A special thanks goes to Wodek Rabinowicz and Lars Bergström, then at the Department of Philosophy in Uppsala, who generously offered their philosophical expertise to a dilettante in this field. While helping me to avoid some philosophical blunders, they have no responsibility for those that remain. I am, finally, indebted to Margareta Bertilsson and Sven Eliaeson, who also read and commented on the manuscript to my dissertation. My doctoral thesis was presented and defended at a disputation in Uppsala in 1987. The faculty opponent was Steven Lukes, who is one of the main authorities on the subject of individualism, including methodological individualism. I -xiiam grateful both for his critical remarks and for his valuable suggestions for future revisions of my thesis. Much of the later work on this book has been done at the Department of Sociology in Stockholm. Once more I had the benefit of constant support from Göran Ahrne and Richard Swedberg, who both moved there before me. Richard has commented on some new parts of the manuscript and advised me in many ways on how to improve it. In Stockholm, I have also benefited from discussions about methodological individualism with Patrik Aspers, Christofer Edling, Peter Hedström, Fredrik Liljeros and Per-Anders Lindén. Robert Andersson and Jens Rydgren read my dissertation voluntarily and made me think twice about some matters I had considered settled. In this second phase of my work on methodological individualism, I have finally received much help from Christine Roman, who has been my main discussant about everything that had to do with the writing of this book. Most of chapter 9 of this book, on the new institutionalism in economics, was written while I was a visiting guest at the Max-Planck-Institute for Research into Economic Systems in Jena. I am grateful to the Institutional Economic Unit for inviting me to this extremely favourable milieu for doing research. During my stay there in September-October 1998, I had every opportunity to read, write and discuss what I had written, undisturbed by any burdening duties. I am particularly indebted to Thrainn Eggertssom, who first invited me, and to Annette Mummert, Uwe Mummert, Oliver Volckart, Stefan Voigt and Michael Wohlgemuth for making my stay in Jena both intellectually stimulating and pleasant in every way.

Two anonymous reviewers have read parts of the manuscript and offered some good advice on how to make a book out of it. I recognise one of them as Victor Vanberg, who has written an important book on methodological individualism, himself. I am particularly grateful for his generous comments on my manuscript. I would, finally, like to thank the Swedish Council for Research in the Humanities and Social Sciences (Humanistisk-Samhällsvetenskapliga Forskningsrådet, or HSFR), now a part of The Swedish Research Council (Vetenskapsrådet), for necessary financial support. Without the grants I have received from this source during large periods of my work on methodological individualism, it would have been quite impossible to write a book like this. -xiii-

1

Introduction There has been in the history of social thought a constant battle over the true nature of society and about the best way to understand and explain it. A major divide goes between those who see society as an aggregate, collection, or complex of individuals and those who see society as some kind of ordered whole and/or unitary collective. The former try to explain social phenomena in terms of individuals and their interaction, while the latter maintain that this is not possible without essential reference to the social wholes of which they are part and/or the collectives to which they belong. 1 The opposition between these conceptions of society was inherited by the social sciences and divided them in two conflicting camps. With the emergence of the social sciences, however, the metaphysical issue was increasingly turned into a methodological issue. As we shall see, this does not mean that the metaphysical issue disappeared, only that it receded into the background. There have been many names used to designate the two camps and their respective doctrines. In the twentieth century two (or three) names have been selected as the most common. The battle has been increasingly waged in terms of methodological individualism, and its transmutations, versus methodological collectivism and/or holism. My interest, in this book, is in the former, but in order to understand one side, it is necessary to take a look also at the other side. Above all, it is necessary that there is a genuine divide separating the two doctrines, or else this book would be very much ado about nothing. There are those who see, in this issue, the most fundamental and most important problem of the social sciences: that of the relation between individual and society. According to others, however, individualists and holists are engaged in a sham battle. 2 I believe the first view is more correct. Anyone the least acquainted with the social sciences, knows that it matters which view you adopt in this matter. Methodological collectivists and holists do tend to ask different questions and provide different answers than do methodological individualists. There are important differences also within the two camps, but this is another matter. I also find it hard and a little bit odd to believe that the best minds in the history of social thought should really have engaged, and with so much energy, in something which turns out to be a sham battle. Didn't they notice? When I first started working on the topic of methodological individualism, I -1was often told that the debate about it was over. Several sociologists tried to persuade me that arguments against methodological individualism advanced by Steven Lukes and others are so strong as to render methodological individualism a mere curiosity, or at least harmless. The main point of Lukes was that it is vain to discuss methodological individualism without making clear what conception of 'individuals' you are using (Lukes, 1968; see also Burman, 1979). His argument was addressed in part to the methodological individualist, J.W.N Watkins, who had argued that methodological individualism is, or follows, from the ontological 'truism' that '[a]ll social phenomena are, directly or indirectly, human creations' (Watkins, 1952a: 28).

Today, we know that the debate about methodological individualists was not over. With the recent upsurge of rational choice, a new wave of methodological individualism has swept the social sciences. One of the most influential advocates of this approach, Jon Elster (1986b: 66; 1989b: 13), 3 has recently repeated Watkins's claim that methodological individualism is trivially true, but since it is impossible for a methodology to be at all true, I suppose that Elster really means metaphysical, or ontological, individualism. 4 J.W.N. Watkins was more correct on this point, at least, since he recognised that his truism is an ontological thesis rather than a methodological rule. But, as he later himself admitted (1952b: 186f), he was nevertheless wrong to assume that the latter follows from the former. Even if ontological individualism is trivially true, it does not follow that methodological individualism is the only, or even the best, way to explain all social phenomena (Lukes, 1968; Kinkaid, 1997:4, 16f). As Ernest Gellner (1956:176) put it some time ago, with respect to history: 'History is about chaps. It does not follow that its explanations are always in terms of chaps'. Today, it is fairly common to accept ontological individualism, but deny methodological individualism. 5 I am not going to argue against ontological individualism, here, but I deny that it is trivially true. It is only if stated in a trivial enough way, that ontological individualism is true, but this says little, or nothing, about the real issues involved in the debate about it (cf. Miller, 1978; 1987:115). If, for instance, methodological individualism is only intended to deny that society is literally an organism endowed with a mind, or consciousness, which exists apart from the minds of individuals, then, it is of course true, but as Miller points out, even the archholist, Hegel, maintained that the world spirit is manifested in the actions of individual human beings and nowhere else. 6 Also, to suggest that the 'truth' of methodological individualism is secured by the fact that social wholes are made up of individuals and their relations to one another is to beg the fundamentally important questions: 'What is an individual?' and 'What is a social relation?' 7 The issue between methodological individualists and their critics, then, is genuine, but this does not mean that the debate has always been about the real issues involved. Far from it. There has been too much confusion surrounding the meaning and implications of the two positions, for a really fruitful debate to take place. This sad fact, has, no doubt, contributed to create the impression of a sham battle. To an astonishing degree, the disputants have argued at cross-2purposes, and without a manifest intention to understand the opposite point of view. There has been a marked tendency among representatives of both sides to misinterpret and misrepresent the ideas and arguments put forward by the other side. The reason for this is, probably, that the issue of methodological individualism versus collectivism and holism is felt to be important, not only for purely scientific, but for extra-scientific reasons as well (cf. Kinkaid, 1997:2ff). First of all, it seems to be inextricably mixed up with some of people's most entrenched, and most strongly-held beliefs about human nature and society. Second, these beliefs seem to be closely linked to their moral and political convictions. Third, there is clearly a connection with fundamental beliefs about science and its growth. Finally, there is a more crass reason for social scientists to have strong opinions about methodological individualism. It seems to have territorial implications. Many social scientists, especially sociologists, have, no doubt, rejected methodological individualism, because they believed that it implies psychologism, or the reduction of sociology to psychology. If so, methodological individualism would rob sociologists of their discipline. For all these reasons, the debate between methodological individualists and their critics has been more confused than usual in social science and philosophy. It may be maintained - and sometimes I have been inclined to think so myself - that the debate between methodological individualists and methodological holists concerns one of those eternal issues which will never be settled by social science, philosophy, or by any form of argument. If so, it is, of course, mere waste of energy to write a book about it. Now, obviously, this is not what I believe. While, I still think that the issue between individualists and holists might never be finally settled, once and for all, I do believe that it is possible to make some progress. The aim of this study is to bring some clarity about the meaning of one side of the divide: methodological individualism. 8 This is much needed, since, as David-Hillel Ruben (1985:132) has maintained: 'methodological individualism has never been stated with enough clarity and precision to permit its proper evaluation'. Now, I do not cherish any illusions about what can be

accomplished by way of remedy, but I do hope to be able to shed, at least, some light on this controversial doctrine. I will try to do so by writing the history of methodological individualism. As far as I can see, there is no other way to contribute to our understanding of a doctrine than by looking at the various statements and uses of it in the history of ideas; in this particular case, in social science and philosophy. Since no doctrine can reasonably be interpreted as the sum total of all statements about it, at first I imposed two criteria of adequacy: Statements about methodological individualism must be consistent, and the doctrine stated must be significant. By the latter criterion, I mean that methodological individualism must be stated in such a way that it fits those social scientific theories and approaches which are generally considered individualistic. While working with this book, I have decided to drop both criteria. The -3reason is that the idea of methodological individualism has developed in curious ways, and is hard to recognise these days. It would, of course, be possible to stick to the criterion of consistency and rule out what is not consistent with the original version of methodological individualism as being something else. When an increasing number of people begin to believe that this else is methodological individualism, however, this strategy becomes problematic. In this situation, I have decided to take a less essentialist approach and accept the development of new versions of methodological individualism, different from the original one, but, nevertheless, versions of methodological individualism. The criterion of significance is, of course, dependent upon that of consistency, but it is still possible to conceive of some social scientific theories as being paradigm cases of methodological individualism and other theories as being more or less individualistic, compared to these paradigmatic cases. There are several possible ways of approaching the task I have set myself. The most obvious way to proceed is, probably, to scan the literature for explicit statements of the doctrine of methodological individualism. Another way is to concentrate on the uses of methodological individualism in social science and history. There might be other ways, as well, but these are the ways I have followed. In order to clarify and, perhaps, justify the second route, I make a distinction between methodological individualism as a principle, or programme, of social research, and methodological-individualism-in-use; social science that is in line with this principle, or programme, without being explicitly based upon it. It is, of course, possible to suggest, or accept, theories that comply with the strictures of methodological individualism, without being committed to, or even be aware of this principle, or programme. If we have to do with theories rather than particular explanations, it is possible to speak of 'theoretical individualism', and if it is a general theory, of the 'individualistic theory of society'. When I use these expressions, in this book, I understand pieces of social science, which qualify as methodological-individualism-in-use. This study, then, seeks the meaning of methodological individualism in the short history of this doctrine. Methodological individualism goes back to the nineteenth century, and the various attempts to lay the foundation of the social sciences. The individualist theory of society is much older, of course, but this is a topic I will treat in another book. 9 How do I choose what to include in this history? Who are the main representatives of programmatic methodological individualism and which theories are paradigms of methodologicalindividualism-in-use? There is no certain way to decide these things and, in the end, you have to rely on previous knowledge and rules-of-thumb, as your main guides. A first rule I have tried to follow, is to concentrate on those social scientists and philosophers, who themselves are adherents of methodological individualism, to the exclusion of those who merely comment upon it, or criticise it. A second rule I have followed, is to pay most attention to those methodological individualists who are singled out as most important by the scientific and philosophical communities. 'Most important', in this case, means most cited in the literature. Equally, when it comes to method-4-

ological-individualism-in-use. I have presented those theories and approaches which are commonly cited as individualistic and actually there is more agreement on this than on the exact meaning of methodological individualism. In order to illustrate the differences there are between various versions of methodological individualism, I am going to make use of some graphic representations (see Figure 1.1). More specifically, I will use a scheme I have borrowed from the philosopher Arthur Danto (1965a). As we shall see, many others have used similar schemes to represent the relations between individual and society, action and structure, or micro and macro. As I use Danto's scheme there are two levels, representing the individual and society, respectively. The arrows represent the direction of explanation according to methodological individualism proper, or of causality in the case of ontological individualism.

Figure 1.1 A graphic representation of methodological individualism Source: Adapted with modification from Danto (1965a: 269) A word of warning should be voiced immediately against interpreting this simple scheme too literally. Individualists and collectivists usually understand both individual and society in different ways. To assume that we can talk about the individual and society in a neutral way is, therefore, an illusion (Lukes, 1968:123ff; Archer, 1995:34ff). If necessary qualifications are made, however, I think the Danto's two-level scheme is a useful tool for making the differences between various versions of methodological individualism visible. Two more clarifications need to be made before I get on to my real task. This study is all about the meaning of methodological individualism, and not at all about its merits, if any. This does not mean that I am, somehow, neutral in the debate between methodological individualism and its critics. I belong to the critics, even if I am far less critical of the recent, weak versions of methodological individualism than I am of the original, strong version. Even so, I have refrained from passing explicit judgement on methodological individualism in this work and I have tried, seriously, to give a fair account of its background, history and meaning. I hope that I have succeeded. Finally, I am a sociologist, interested in the other social sciences and in philosophy, but, nevertheless, a dilettante, outside my own discipline. I have tried to -5understand the intricacies of economics and philosophy, in particular, and I hope I have succeeded reasonably well, but I may, of course, have failed in some respect. If so, I hope that my failure does not seriously damage the overall quality of this work. -6-

2

Background The individualist theory of society has a long history in Western thought. Since I will try to tell this history in another volume, I will not go into details here. My purpose in this chapter is merely to provide a brief background to the rise of the specifically methodological version of individualism. For this purpose, I will first present the two main versions of the individualist theory of society which preceded methodological individualism; the theory of the social contract and the theory of spontaneous order, as it took shape in Adam Smith's idea of the market as an invisible hand. This idea laid the foundation of economics and it is often assumed that classical economics was not only the first social science, but also the first example of methodological individualism. I am going to argue below that, as such, it was not an altogether clearcut example, although I agree, of course,

that it was more individualistic than the views of most of its critics. Classical economics was mainly a British phenomenon, but in Germany, and to a lesser degree in France, there was a massive reaction against the individualism of the Enlightenment, of utilitarianism and of classical economics. The main expression of this reaction is the cultural movement known as Romanticism, whose most significant manifestation in the human sciences is German historicism. In France there emerged a doctrine which shared some elements with both British and German thinking, namely the positivist sociology of Auguste Comte. Methodological individualism emerged, I believe, as an individualist counter-reaction to the anti-individualist reaction of German historicism and the sociologism of positivist sociology. If this belief is correct, it becomes necessary to include the latter two intellectual currents as important parts in any account of the background of methodological individualism.

The social contract The individualist theory of society goes back, as far as we know, to Greek Antiquity, where it was advanced, in particular, by the Sophists and by the Epicureans. The former invented the theory of the social contract and saw all social institutions as man-made conventions. The latter adopted the theory of the social contract and added to it an atomist metaphysics and a hedonist psychology. The individualist theory of society disappeared with Antiquity and was -7replaced by a more holistic and collectivist view of society in the Middle Ages. It reappeared in the Renaissance and culminated with the Enlightenment. The most important figures are Thomas Hobbes (1588-1679) and John Locke (1632-1704), at least from an individualist point of view. Of these, I believe Hobbes is the most important as a representative of a theoretical, and perhaps also methodological, individualism, while Locke is more important as a representative of political individualism. The point of departure of most theories of the social contract, and Hobbes's theory is no exception, is the 'state of nature'. In Hobbes's version, the state of nature is characterised by a war of each individual against all other individuals. In such condition, there is no place for industry; because the fruit thereof is uncertain; and consequently no Culture of the Earth; no navigation, nor use of the commodities that may be imported by Sea; no commodious Building; no Instruments of moving, and removing such things as require much force; no Knowledge of the face of the Earth; no Account of Time; no Arts; no Letters; no Society; and which is worst of all, continual feare, and danger of violent death; and the life of man, solitary, poore, nasty, brutish and short. (Hobbes, [1651] 1968:186). The reason for this sad state of things is that there is no law and no common power to fear. But why is there need for a power to fear? Do people abide by law only for fear of consequences? According to Hobbes: Yes! Human nature is such that individuals seek only their own gain, and above all, glory, without regard for others. Without a law to prevent them, they will invade one another in order to take what they want, or to prevent others from taking what they want. Happily, human beings are not only self-interested, they are also rational, and this is their salvation. Hobbes's state of nature is no place you would choose to inhabit, if there were an alternative. Now, since human beings are rational they realise that they would all be better off in a state of society where there is law and justice and, therefore, peace. Hence, they enter a contract where they give up their natural right to everything and authorise an absolute sovereign to institute justice. This is a schematic version of Hobbes's theory of the social contract. It is a theory, which is extremely individualistic, in the sense that it starts with natural, or pre-social individuals and explains the institution of society, or the state, solely in terms of the human nature of these individuals (Peacock, 1986:11-13; Pizzorno, 1991). Since human beings, according to Hobbes, are

rational egoists, it is possible to see his theory of the social contract as a piece of rational choice analysis (see, e.g., Hechter, 1989:60). It has been suggested by Steven Lukes (1968:119; 1973:110) that Hobbes was also the first to articulate the principle of methodological individualist (see also Watkins, 1955b: 132f; [1965] 1973:34), but this is more doubtful. The closest you get to an articulation of methodological individualism, in the writings of Hobbes, is his advocacy of the method of resolution and composition, which is similar to the synthetic method suggested by Friedrich von Hayek (see p. 117). After Hobbes, the theory of the social contract was propagated by Benedict -8Spinoza (1632-77), Samuel Pufendorf (1632-94), John Locke (1632-1704) and Jean-Jacques Rousseau (1712-78), among others. Of these, Spinoza and Rousseau were not individualists at all. Pufendorf was an individualist, but with some reservations. Locke, however, was certainly an individualist, but he was primarily a political individualist and only secondarily a theoretical individualist. Like Hobbes, Locke took his point of departure in the state of nature, defined negatively as the absence of government. He did not share Hobbes's view of the state of nature as a state of war, however. When Locke turns to the state of nature in the second volume of Two Treatises of Civil Government ([1690] 1960), he depicts it as a state of freedom, equality and reason. According to Locke, reason is the law of nature telling every man 'not to harm another man in his Life, Health, Liberty and Possessions' (p. 311). When Locke returns to the state of nature later on in Two Treatises, however, he paints another picture, closer to that of Hobbes. It is now a state of uncertainty, where the individual is 'constantly exposed to the Invasion of others'. This makes him willing to quit a Condition, which however free, is full of fears and continual dangers; And 'tis not without reason, that he seeks out, and is willing to joyn in Society with others who are already united, or have a mind to unite for the mutual Preservation of their Lives, Liberties and Estates, which I call by a general name, Property. (Locke [1690] 1960:395) Once in the condition of society, individuals see its advantages and consent to put themselves 'under an obligation to every one of that society', and 'to submit to the determination of the majority' (p. 376). The social contract, or compact, of Locke, is not limited to the original contract and it need not be explicit. People may also give their tacit consent to a Government, which fulfils its chief end; 'the preservation of their property' (p. 395). The theory of the social contract, in one form or another, is the main theory of society before the eighteenth century. It is also the first paradigm of an individualist theory of society, or of methodological-individualism-in-use. Using a, nowadays, common, if problematic, way of representing the relation of individuals to society, as two distinct levels of reality and/or analysis, I suggest the following representation of the theory of the social contract.

Figure 2.1 The theory of the social contract -9-

The invisible hand After Locke, there was a break with the theory of the social contract, at least as a theory of society. Social theory developed in a less rationalist and less individualist direction. In France and Scotland, there emerged the insight that social institutions are not conscious inventions, but have developed gradually and unintentionally. In the terminology, recently made popular by Friedrich von Hayek,

most social institutions are 'spontaneous orders'. Following the Scottish philosopher Adam Ferguson (1723-1816), he maintains, that they are the result of human action, but not of human design (Hayek, 1948:7). Among the most important critics of the theory of the social contract was another Scottish philosopher, David Hume (1711-76), who dismissed this idea as a mere fiction invented for political purposes ([1741/2] 1963:452ff). The most important application of the idea that social institutions are the unintended consequences of the intentional actions of individuals would turn out to be the market. In this case there was a special twist to the idea of spontaneous order, because of its somewhat miraculous power of turning self-interested individual action into a collective good. The first to make this idea well known was the Dutch born physician Bernard Mandeville (c. 1670-1733), who moved to England and wrote his infamous Fable of the Bees (1714/29/32), with the more telling subtitle, Private Vices, Public Benefits. The argument of Mandeville is that many selfish and even some vicious actions, such as crimes, are turned into public benefits. The most famous use of the idea of spontaneous order, transforming private self-interest into collective benefit, is of course Adam Smith's theory of the market working as if governed by an invisible hand. (1723-90). In The Wealth of Nations (1776), he suggested that an individual, while intending only his own gain, is in many cases 'led by an invisible hand to promote an end [the public interest] which was not part of his intention' ([1776] 1937:423). It is common among more recent methodological individualists to trace this doctrine back to the idea of spontaneous order, as suggested by Bernard Mandeville, David Hume, Adam Ferguson and Adam Smith. The most well-known example is Friedrich von Hayek, but he is not alone. 1 It is my impression that this interpretation is most common among social scientists and philosophers who share a commitment to classical liberalism, which suggests a relation between methodological and political individualism. Be that as it may, those who trace the origin of methodological individualism to Mandeville and the Scottish philosophers have been anxious to point out that this version of individualism is, not only less rationalistic, but also less radical than that of the theory of the social contract. It is pointed out that the Scottish version of individualism takes its point of departure in the human individual as a social being, with a language and other social institutions. I agree with this interpretation, but suggest that this version of methodological individualism is different, not only from that implicit in the theory of the social contract, but also from all explicitly stated versions of this principle before Joseph Agassi suggested the principle of institutional individualism (cf. Song, 1995). -10Figure 2.2 Adam Smith's theory of the invisible hand

Classical economics The individual and isolated hunter and fisherman, with whom Smith and Ricardo begin, belongs among the unimaginative conceits of the eighteenth-century Robinsonades, which in no way express merely a reaction against over-sophistication and a return to a misunderstood natural life … Smith and Ricardo still stand with both feet on the shoulders of the eighteenth-century prophets, in whose imaginations this eighteenth-century individual … appears as an ideal whose existence they project into the past. Not as a historic result but as history's point of departure. As the Natural Individual appropriate to their notion of human nature, not arising historically, but posited by nature. This illusion has been common to each new epoch to this day. (Marx, 1857-8: 83) This quotation is from the first page of Marx's Grundrisse. A similar charge was made in the famous section on commodity fetishism in Capital, vol. 1 ([1867] 1976), where he observes that 'political economists are fond of Robinson Crusoe stories' (p. 169). 2 Marx was not the only one and not the first to accuse political economists of excessive individualism. Similar accusations were part of the standard critique directed at classical economics from the quarters of German and English Romanticism. 3 In his Past and Present (1843), Thomas Carlyle (1795-1881) had called economics 'The Dismal Science' preaching the 'Gospel of Mammonism' and reaching strange conclusions:

We call it a Society; and go about professing openly the totalest separation, isolation. Our life is not mutual helpfulness; but rather, cloaked under due laws-of-war, named 'fair competition', and so forth, it is mutual hostility. We have profoundly forgotten everywhere that Cash-payment is not the sole relation between human beings; we think, nothing doubting, that it absolves and liquidates all engagements of Man. 'My starving workers?' answers the rich mill-owner: 'Did not I hire them fairly in the market? Did I not pay them, to -11the last sixpence, the sum covenanted for? What have I to do with them more?' - Verily Mammon worship is a melancholy creed. (Carlyle [1843] 1965:148f) Carlyle was a conservative, but he was cited with approval by Marx and Engels in the Communist Manifesto ([1848] 1967:82), and it is not hard to see why. There is a close affinity between the conservative and the radical, socialist critique of captalism in the nineteenth century. This is even more obvious in the writings of John Ruskin (1819-1900), who was also a conservative, but exerted a strong influence on the guild socialists. Ruskin took a more scholarly approach to economics than did Carlyle, and made a detailed, if not very pertinent, critique of the theories of Ricardo and John Stuart Mill. The ideal economy, for Ruskin, was that of the household, which is a moral economy, governed by moral principles of the organisation of labour and of the distribution of its fruits. Political economy, therefore, ought to be a moral science, rather than a catallactics, or theory of exchange (Ruskin, 1857-62). 4 In the critique of political economy by Carlyle and Ruskin are mixed theoretical, political and moral considerations. Economics is both theoretically and morally individualistic and by moral individualism, is understood self-interest. This is typical of the nineteenth century. Usually, no distinction was made between theoretical and methodological considerations on the one hand, and political, economic and moral considerations on the other hand (cf. Sowell, 1974: ch. 1 and Vanberg, 1975: ch. 1). As we shall see, the term 'methodological individualism' was introduced to make the distinction between methodological and political individualism. 5 The view that classical economics was individualistic is not a story made up by its critics, however. As we have already seen, it is common among defenders of methodological individualism to trace the origin of this doctrine to the Scottish Enlightenment and this tradition included Adam Smith, the acknowledged founder of classical economics and, therefore, the father of economic science. But were Adam Smith and the other classical economists methodological individualists? There is no clear answer to this question, for several reasons. First of all, the classical economists, before John Stuart Mill, did not engage very much in methodological discussion and not at all systematically (Sowell, 1974:112). By the time of John Stuart Mill, however, classical economics had become individualistic. Smith, however, was not a radical individualist, like Mill, and it was only later that his model of the market as a spontaneous order was turned into a paradigm of strong methodological individualism. In the theory of general equilibrium, first suggested by Walras and more recently developed by Arrow and Debreu (among others), we find an economic theory without any social institutions. The individualism of classical economics was more political and economic than theoretical and methodological. The classical economists favoured a free market with limited government, but their view of society was not radically individualistic and they did not advocate an individualistic methodology. Their -12approach to society is more aptly described by the term 'institutionalism'. It is true, though, that Adam Smith's analysis of the market as if steered by an invisible hand, when stripped of the institutional element, has turned into a paradigm of an individualist theory of society, or of methodological individualism-in-use.

Thomas Malthus's (1766-1834) An Essay on the Principle of Population ([1798] 1970) seems to be rather different from Smith's Wealth of Nations. The pessimistic argument of the book is based on two postulates: 'First, That food is necessary to the existence of man. Second, That the passion between the sexes is necessary and will remain nearly in its present state' (p. 70). From 'these fixed laws of our nature', together with some additional assumptions, Malthus arrives at the following conclusion: 'Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetic ratio' (p. 71). This is an extremely individualistic argument, without a trace of social institutions, or historical relativity. But appearances are deceptive. The word 'unchecked' is important, indeed. The laws about the increase of population and food, are subject to a ceteris paribus clause (pp. 112f). As a matter of fact, Malthus' discussion is unusually rich with observations on social institutions, which counteract the tendency to shortage of food. It may also be pointed out that, despite appearances to the contrary, Malthus was not an advocate of an abstract-deductive approach to political economy. He was very careful to support his laws by empirical evidence and in his Summary View of the Principle of Population (1830) he maintains that they are inductive generalisations, derived from experience. But this was after the intellectual exchange with his friend David Ricardo. On the other side of the Channel, Jean-Baptiste Say (1776-1832) also defended a more inductive and more 'holistic' approach to economics. Without denying the utility of the abstract-deductive method, which he himself frequently used, he maintained that all principles of economics must be based, not on hypotheses, but on observation of facts and derived from these facts by induction ([1803] 1971: xxvf, lii). Like Malthus, Say criticised Ricardo for starting from abstract hypotheses and then reasoning in a straight line, without ever comparing his conclusion with observed facts. 'From that instant nothing in the author's work is represented as it really occurs in nature' (p. xlvii). In order to be of practical utility, however, the science of political economy must be based on observed facts. Say's economist par préference was Adam Smith and, like the latter, he was some kind of methodological institutionalist. He seems to have gone further in a holistic direction, however. Not only did he advocate the approach of social economy, but he obviously conceived of society as an organism of interrelated parts (Forget, 1999:53ff). He did not, however, wish to include politics in the science of political economy. Economics is a science of the production, distribution and consumption of wealth, but not of the government, or state, conceived of as a household, writ large. Jean-Baptiste Say clearly did not contribute to making classical economics more methodologically individualistic. He was, however, an advocate of laissez-faire and Say's law of the market, -13which says that markets are always cleared (Sowell, 1974: ch. 2), libertarian economists.

6

is an article of faith for most

It is fair to say, I believe, that economics became more individualistic with David Ricardo (17721823). At least, it became more abstract, and this led to a more individualistic approach, simply because it was social institutions and relations which disappeared in the process of abstraction. In the case of Ricardo, there is some justification for Marx's complaint in the quotation above. Ricardo frequently places his abstract reasoning in 'the early stages of society' (Ricardo, [1817] 1973: passim), as if it were a fully fledged market society. It is this lack of historical insight which Marx objects to with some justice. 7 It should be pointed out, though, that Ricardo is still looking at the distribution of wealth, as a matter of its division among the three classes in society: 'the proprietor of the land, the owner of the stock or capital necessary for its cultivation, and the labourers by whose industry it is cultivated' (p. 3). This makes it possible to talk about 'the holism of the Classicals' (Greaves, 1996:2). Economics would definitely become more individualistic with the rise of the neoclassical school of economics. In 1820 Malthus published his Principles of Political Economy, partly as a reply to Ricardo, who had criticised his theory of rent. This is not my business, but besides this disagreement there is a more principal one concerning approach and method. Malthus sides clearly with Smith against Ricardo ([1820] 1989:22f), and this means that he is sceptical about the excessive simplification and generalisation, which follows with using mathematics, or geometry, as a model for economic theory (pp. 1ff). He is also critical of the unwillingness of some economists to test their theories, but, nevertheless, to use them as guides to political practice. Malthus repeats these complaints in

Definitions in Political Economy ([1827] 1971 1ff), where he also criticises Ricardo for breeding confusion by using familiar economic terms in unfamiliar ways (pp. 28-36). This critique of Ricardo's way with words was echoed by Nassau Senior (1790-1864) in An Outline of the Science of Political Economy ([1836] 1965:5), where he also repeated some other complaints, made by Malthus, against Ricardo. Senior shared Ricardo's view of economics as an abstract-deductive science, resting on a small number of indubitable general propositions, from which inferences are drawn, which, if our logic is impeccable, are as true as the premises. According to Senior, inferences about the nature and production of wealth are universally true, whereas those about its distribution are affected by 'disturbing causes', in the form of 'the peculiar institutions of particular countries' (p. 3). But no matter how general and how true the economist's conclusions, they do not authorize him in adding a single syllable of advice. That privilege belongs to the writer or the statesman who has considered all the causes which may promote or impede the general welfare of those he addresses, not to the theorist who has considered only one, though among the most important, of those causes. The business of a Political Economist is neither to recommend nor to dissuade, but to state those general principles, which it -14is fatal to neglect, but neither advisable, nor perhaps practicable, to use as the sole, or even the principal, guides in the actual conduct of affairs. (Senior [1836] 1965:3) The voices of Malthus and Senior were two in a choir. The critique against Ricardo's use of the abstract-deductive approach was massive, even from those who used such an approach themselves. There were mainly two charges: (1) Ricardo failed to see that abstraction is also simplification and (2) he made illegitimate use of his abstract theory as a basis for political recommendations, later called the 'Ricardian Vice' (Schumpeter, 1954:472). It is commonly assumed that Ricardo owed his method to his close friend James Mill (1773-1836), while Mill owed his knowledge about economic matters to Ricardo (Hutchison, 1978: ch. 2). Against this view, Samuel Hollander (1985:1) has argued that '[a] sharp distinction should be made between the methodological orientations of James Mill and David Ricardo'. While Ricardo never published anything substantial about the method of economics, Hollander maintains that he had a fairly sophisticated view of the nature and limitations of economic analysis in his unpublished writings (pp. 15-36). That, in fact, he did fully recognise that abstraction is simplification. According to Hollander, then, Mill is the one to blame, not Ricardo. In a forceful reply to Hollander, Hutchison (1994:91) describes this view as 'odd', since it is to deny 'plain fact', 'for which there is abundant evidence'. Allen Oakley (1994) grants that Ricardo may have been a more sophisticated methodologist than commonly believed (p. 132), but it remains the case that the public impression given by Ricardo to his contemporaries and immediate successors was that he espoused a severely abstract-deductive methodology as the one most appropriate to political economy' (p. 134). There is no doubt whatsoever that James Mill was a champion of an abstract-deductive methodology, based on the model of mathematics, and used it without hesitation, as a basis of political recommendation. In the Preface to The Elements of Political Economy (1820b), it is written: 'My object has been to compose a school-book of Political Economy, to detach the essential principles of the science from all extraneous topics, to state the propositions clearly and in their logical order, and to subjoin its demonstrations to each' (p. 204). He goes on to draw an analogy between demonstrations in political economy and in mathematics, which says something about his view of economic theory. In the introduction he makes another analogy: 'Political economy is to the State, what domestic economy is to the family' (p. 210). This view of economics was later deemed seriously wrong by the Austrian methodological economists. Friedrich von Hayek called it 'false individualism' (pp. 119f). If political economy is a matter of state, there must be a sharing of subject matter between economics and political science. But this is not all. According to Mill, there is also a sharing of approach. In his famous 'Essay on Government' (1820a), Mill used an economic approach to

politics, much like the recent theory of public choice. Bentham, who

8

Mill's main source of inspiration was Jeremy

-15provided his view of human nature: 'We may allow, for example, in general terms, that the lot of every human being is determined by his pains and pleasures; that his happiness corresponds with the degree in which his pleasures are great, and his pains are small' (pp. 55f). This is Bentham's first assumption. His second assumption is that it is the business of government to maximise happiness in society. A more remote source of inspiration was Hobbes, who provided Mill with two more assumptions: (1) that the principal means used to maximise happiness are wealth and power, and (2) that individuals, unless prevented, will use their power to appropriate the wealth of others. The task of government, then, becomes that of preventing individuals from interfering with the property of others. 9 The question Mill tried to answer in his Essay was this: What is the best form of government, on the assumption that it is made up of individuals, who pursue their own selfish ends? The answer he reached differed from that of Hobbes. Instead of an absolute sovereign, Mill recommended a representative system. But then the original question reappears. There can be no doubt, that, if power is granted to a body of men, called Representatives, they, like any other men, will use their power, not for the advantage of the community, but for their own advantage, if they can. The only question is, therefore, how they can be prevented? In other words, how are the interests of the Representatives to be identified with those of the community? (Mill [1820a] 1978:75) The answer Mill came up with was a form of representative democracy, which, however, excluded women on the ground that their interests are included in that of their fathers or their husbands, as the case may be (p. 79). Mill's essay was bound to create controversy. The conservatives disliked it, because they rejected any form of democracy and those more radical than Mill himself - eventually including his own son John Stuart Mill - were disappointed with his exclusion of women. The most effective critique came from the historian Thomas B. Macaulay (1800-59), in a famous article in Edinburgh Review (1829). Macaulay's critique was directed, not at this or that conclusion, but at the approach as such - an approach which, according to Macaulay, makes it possible to reach any conclusion whatsoever: 'Our objection to the Essay of Mr Mill is fundamental. We believe that it is utterly impossible to deduce the science of government from the principles of human nature' ([1829] 1978:124). What proposition is there respecting human nature which is absolutely and universally true? We know of only one: and that is not only true but identical [tautological]; that men always act from self-interest. This truism the Utilitarians proclaim with as much pride as if it were new and as much zeal as if it were important. But in fact, when explained, it means only that men, -16if they can, will do as they choose. … If the doctrine that men always act from self-interest, be laid down in any other sense than this - if the meaning of the word self-interest be narrowed so as to exclude any one of the motives which may by possibility act on any human being, - the proposition ceases to be identical; but at the same time it ceases to be true. (Macaulay [1829] 1978:124f) Macaulay's argument made a deep impression upon the younger Mill, who also was disappointed with the reply of his father (Mill [1873] 1961:96f). By the time of Macaulay's attack, John Stuart was already in a state of mental crisis, due, at least partly, to increasing doubts about his inherited worldview. The theory, method and politics of Benthamite utilitarianism no longer seemed to

provide all the answers. Macaulay's article was the last nail in the coffin of his father's absolute intellectual authority. What escaped the notice of both Macaulay and John Stuart Mill, however, is the fact that James Mill did not derive his conclusions from assumptions of human nature alone. Equally important for his argument are the institutional arrangement; monarchy, aristocracy, democracy, different voting rules, etc., within which the play of individual interest takes place. The approach of James Mill was that of institutional individualism. It is arguable that John Stuart's psychologism was more individualistic than the geometric method of James Mill. Eventually John Stuart would reject the geometric method altogether, and especially in politics, where he came to believe that the assumption of economic man simply does not work (see p. 47). Before he reached this conclusion, however, he wrote his classic article 'On the Definition of Political Economy and the Method of Investigation Proper to It' (1836). In this article, the younger Mill still believed that the abstract-deductive method of economics, and the other social sciences, is strictly analogous to the geometric method of Euclides. Unlike the elder Mill, however, he did realise, with perfect clarity, that abstraction is also simplification and, as a corollary, that abstractdeductive theories are inadequate guides to political action, and the more abstract, the less adequate. In the article 'On the Definition of Political Economy' Mill made a clear distinction between economics as a science and as an art: 'Science is a collection of truths; art, a body of rules or directions for conduct' (1836:410). Political economy is a science, not to be confused with the art of domestic economy. More specifically, it is a moral - or psychological - science (p. 414). As such, it depends on the laws of mind, or human nature, but not upon these alone. According to Mill, we must distinguish between the individual (1) in isolation from other individuals, (2) in interaction with other individuals and, (3) 'as living in a state of society, that is forming part of a body or aggregation of human beings, systematically co-operating for common purposes' (p. 417). Mill calls the science of (3) 'social economy', or the 'science of politics'. Political economy is not social economy, however, 'but a branch of that science'. -17It does not treat of the whole of man's nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging of the comparative efficacy of economic means for obtaining that end. It predicts only such of the phenomena of the social state as take place in consequence of the pursuit of wealth. It makes entire abstraction of every human passion or motive, except those which may be regarded as perpetually antagonizing principles to the desire of wealth, namely, aversion to labour and desire of the present enjoyment of costly indulgences. These it takes, to a certain extent, into its calculations, because these do not merely, like other desires, occasionally conflict with the pursuit of wealth, but accompany it always as drag or impediment, and are therefore inseparably mixed up in the consideration of it. (Mill [1836] 1950:420) This is the first clear statement of the character and methodological role of economic man in the history of economic thought. Mill's next step is to maintain that this is the procedure of political economy, not because 'any political economist was ever so absurd as to suppose that mankind are really thus constituted, but because this is the mode in which science must necessarily proceed' (p. 421). Even so, the assumption of wealth maximisation, is a fairly good approximation to the truth about men and women in their economic endeavours. Mill goes on to deny that political economy is based on induction. It is, on the contrary, essentially 'an abstract science' and its method is 'the method a priori' (p. 424). Just like geometry starts from an arbitrary definition of a line, political economy starts from an arbitrary definition of man. They are both equally removed from reality and their conclusions are only true 'in the abstract' (p. 425). Mill defends the use of the geometric method in social science, by pointing out that experiments are not feasible. I still find it a bit surprising that he saw the geometric method as the only alternative to experiment, especially, since he goes on to acknowledge the existence of disturbing causes (pp. 429ff) and to argue that because of them, the operation of laws in society give rise to tendencies only. In geometry, there are neither causes, nor tendencies.

Except for the misleading analogy with geometry, Mill's characterisation of political economy stands out as the first really adequate attempt to grasp the nature of economics as a science. In his most important work on the method of science, A System of Logic (1843), Mill abandoned the view that political economy uses a geometric method and in his Principles of Political Economy (1848), he departed from a strict use of the abstract-deductive method. Instead of neglecting disturbing causes, he frequently introduced them in his analysis. One example is his discussion of the division of the produce, which is said to be 'the result of two determining agencies: Competition and custom' ([1848] 1976:242). The final statement of the method of classical economics is J.E. Cairnes's The Character and Logical Method of Political Economy (1875), which is a work largely -18based on the position of Mill. Cairnes defends political economy against enemies, such as Comte, and he defends the Ricardian abstract-deductive version of economics against the alternative conceptions of Say and Senior. He is very emphatic about the importance of the ceteris paribus clause in the case of all economic laws ([1875] 1965:61ff) and he seems to believe that the laws of economics depend upon those of physics and psychology (pp. 52, 72). Sometimes he also includes institutions among the facts that are given to economic analysis. In the considerations just adduced, we may perceive what the proper limits are of economic inquiry - at what point the economist, in tracing the phenomena of wealth to their causes and laws, may properly stop to consider his task as completed, his task as solved. It is precisely at that point at which in the course of his reasonings he finds himself in contact with some phenomenon not economic, with some physical or mental fact, some political or social institution. So soon as he has traced the phenomena of wealth to causes of this order, he has reached the proper goal of his researches; and such causes, therefore, are properly regarded as 'ultimate' in relation to economic science. Not that they may not deserve and admit of further analysis and explanation, but that this analysis and explanation is not the business of the economist - is not the specific problem which he undertakes to solve. (Cairnes [1875] 1965:53f) This quotation is interesting mainly because it is a fairly clear - maybe the first - statement of what economists today would call exogenous variables, or givens. From my point of view, however, it presents a problem: like John Stuart Mill, Cairnes clearly senses the importance of social institutions for the functioning of the market, but, like the former, he is not equally clear about their role in economic analysis and explanation. As I have already said, he usually mentions only the physical and mental facts and laws on which, not only economics, but 'historical, political and, in general, social investigation' depend. Political economy belongs 'neither to the department of physical nor to that of mental inquiry', but occupies 'an intermediate position'. The phenomena it investigates depend on 'physical, physiological, and mental causes' and are explained by 'the concurrence of physical, physiological, and mental laws' (p. 52). The conclusion I draw from these statements is that Cairnes believed that social institutions can be explained by the physical, physiological and mental laws. If this interpretation is correct, Cairnes - like Mill - was a psychologistic, rather than an institutional individualist (see pp. 218-27).

German historicism It has been pointed out, that the French and the British saw history as the advance of civilisation, whereas the Germans, with characteristic disdain for -19science and capitalism, saw themselves as the carriers of culture (Elias [1939] 1968:3-34). This particular manifestation of German nationalism, would survive well into the twentieth century and reached a peak during the First World War (Kusch, 1995:212ff). As a nation characterised by its culture, the Germans attached great value to the humanities and especially to history. Because of this, the dominating approach to man and society in Germany was historicism.

There is a certain confusion surrounding the term 'historicism' (Iggers, 1995). According to the well-known view of Karl Popper, it denotes 'an approach to the social sciences which assumes that historical prediction is the principal aim, and which assumes that this aim is attainable by discovering the "rhythms" or the "patterns", the "laws" or the "trends" that underlie the evolution of society' (Popper, 1957:3). But this is not what most people understand by 'historicism'. One problem with Popper's view, is that it includes many philosophers and historians from Antiquity to the Enlightenment, who also saw history as a law-bound process, but who did not manifest the most typical marks of 'historicism', such as historical relativism. The solution to this puzzle is that Popper made a distinction between 'historicism' and 'historism' (p. 17). What most people today understand by 'historicism' is what Popper, in accordance with an earlier convention, called 'historism'. In this second sense of 'historicism', is denoted a doctrine which emphasises the historicity and individuality of human beings and societies. 'The essence of historism is the substitution of a process of individualising observation for a generalising view of human forces in history' (Meinecke, [1959] 1972: lv). 10 All social phenomena, such as languages, myths, laws, customs, social institutions, even man herself, are products of history. As such they differ between times and places. Since human beings also change with history, historicism rejects the idea, defended most strongly in Great Britain, of a constant human nature. In this chapter, I want to add a third meaning to the term 'historicism'. 'Historicism', as I use this term, also means a reduction, or subordination, of other disciplines to history. This form of 'historicism' was a distinctive feature of the human sciences in nineteenth-century Germany. Philosophy, economics, jurisprudence, linguistics, were dominated by historical schools and, more or less, transformed into historical sciences. Theoretical economics had no place at all in this intellectual milieu. Sociology was also resisted, but less so than economics. As I have already mentioned, German historicism did not share the French adoration of science and technology, but, above all, it rejected the positivist claim of unity of method between the human and the natural sciences. But what about psychology? Before I turn to this question, I will give a brief sketch of the development of German historicism, because it was this doctrine, or some of its elements, that methodological individualism was created to defeat. It should be pointed out at the beginning, however, that methodological individualism, as an explicitly stated principle of social science, emerged in a milieu dominated by German historicism, and adopted many of its ideas. In a rich and fascinating study of Carl Menger and the Origins of Austrian Economics (1990), Max Alter argues that the largely unknown roots of Austrian Economics are in -20German historicism and Romanticism. I find his argument, on the whole, convincing and recommend Part I of his book as a somewhat richer presentation of German historicism than the one I give here. The roots of historicism are to be found in Romanticism, and in the beginning there was an almost complete overlap between the two movements. Romanticism, of course, was broader, since it included literature and the arts. It is a commonplace to see Romanticism as a reaction against the Enlightenment. If the latter was characterised by rationalism, mechanism, individualism and utilitarianism, the former was a manifestation of irrationalism, vitalism, collectivism and culturalism. Against rationalism it emphasised emotion and will, against mechanism it posited life and organicism, against individualism it cherished the reality and value of nation, state and community and against utilitarianism it posited the Greek ideals of autonomy, virtue and self-realisation. A common source of Romanticism and historicism is the philosophy of history of Johann Gottfried Herder (1744-1803). In a prize-winning 'Essay on the Origins of Language' (1772), he criticised the Enlightenment view that language is the result of an agreement to use words in certain ways ([1772] 1966:100f). Language is the result of organic growth (p. 113). 'Least of all is it agreement. An arbitrary convention of society' (p. 119). In his first important contribution to the philosophy of history, Auch eine Philosophie der Geschichte zur Bildung der Menscheit (1774), he poured scorn and irony on the philosophy of history of the French Enlightenment and its belief in linear development, progress and ultimate superiority of European civilisation ([1774] 1967 102). Against this view, Herder maintains that each people, like each individual is a unique individuality, which cannot be compared to other peoples (pp. 41, 61). All peoples, however, are part of humanity and contribute to its culture. Despite his humanism, Herder is most famous as the father of nationalism.

In his main work, Reflections on the Philosophy of the History of Mankind (1784-91), he maintains that 'every nation is one people, having its own national form, as well as its own language: the climate, it is true stamps on each its mark … but not sufficient to destroy the original national character' ([1784-91] 1968:7). 'Time, place, and national character alone, in short the general cooperation of active powers in their most determinate individuality, govern all the events that happen among mankind' (p. 159). Herder is often mentioned together with the Italian philosopher Giambattista Vico (1668-1744), because of the similarity of their views of history and society. Vico was the first to grasp clearly the differences between nature and history and, therefore, also between the methods used in the two sciences. Among other things, Vico maintained that we understand what is created by human beings, in a way different from the way we understand nature (see Berlin, 1976: xvi-xix). The reason for this is that human beings express themselves in their creations. There is no constant human nature, however, but humanity changes with the course of history. This means that we must understand each human creation as the expression, not only of a particular human being, but above all, of a human being belonging to a particular culture at a particular time and in a particular -21place. The fact that social institutions, like law, language, government, etc, are human creations, does not mean that they are constructions, made by design. Vico was a critic of the theory of the social contract. Like Mandeville, though independent of him, he argued that social institutions and nations are the unintended consequences of intentional human activity. Following Aristotle, he maintained that they grow, like organisms; that they are natural growths. All these ideas were shared by Herder, especially the idea of 'expressionism', to borrow a useful term from Isaiah Berlin. 'Expressionism [is] the doctrine that human activity in general, and art in particular, express the entire personality of the individual or the group, and are intelligible only to the degree to which they do so' (Berlin, 1976:153). What led Herder to adopt and develop this idea, was his interest in the origin and development of languages and their various uses, especially in poetry (pp. 169-72). It is in language, above all, that we find the character, spirit, or soul, of a people (Volksseele), or what we, nowadays, call its culture (pp. 194-9). 11 The idea of natural growth was also to become of tremendous importance in German historicism. It was shared by the conservative founder of the Historical School of Law, Friedrich, Karl von Savigny (1779-1861), who insisted that law is, or should be, the result of historical development, not of rational construction and by his student Karl Marx, who constantly maintained that society is a natural growth (naturwüchsig). In The Vocation of Our Age for Legislation and Jurisprudence (1814), written in the wake of French occupation, Savigny rejects all attempts to introduce the Code Napoleon in German legislation. He is also concerned about the foreign element of Roman law. German law must be based on German legal tradition. The reason is that, like in the case of language, there is an 'organic connection of law with the being and character of the people … Law grows with the growth, and strengthens with the strength of the people, and, finally dies away as the nation loses its nationality' ([1814] 1975:27). The main task of German jurisprudence is the study of German customary law, which must be the basis of all German law. 'We shall then possess a truly national law; and a powerful expressive language will not be wanting to it. We may then give up the Roman law to history, and we shall have, not merely a feeble imitation of the Roman system, but a truly national and new system of our own' (p. 154f). It may be pointed out that this, originally holistic, view of social institutions, was adopted by the methodological individualists Carl Menger and Friedrich von Hayek, who both suggested individualistic models of the growth, or evolution of, social institutions. An important role in the development of German historicism must also be assigned to German idealist philosophy and, in particular, to the philosophy of Hegel (1770-1831). In his Philosophy of Right (1821), Hegel maintained that 'The state is the actuality of the ethical idea' ([1821] 1967:155) and of 'concrete freedom' (p. 160). As such, it 'has supreme right against the individual, whose supreme duty is to be a member of a state' (p. 156). The theoretical justification for this subordination of the individual to the state is that the state is an organism, such that each member is a part of this organic whole and depend -22-

upon the other parts for his/her existence and thriving. This is the 'organic', or, as it is sometimes called, the 'metaphysical' theory of the state, which was common to Romanticism and idealist philosophy, and which was eventually adopted also by most historians. Hegel's theory of the state was part of his philosophy of history, which owes a lot to the ideas of Herder. Before the state, there is the people and a people is a 'spiritual individual', which expresses itself in 'its religion, its cult, its customs, its constitution and political laws, the whole scope of its institutions, its events and deeds. This is its work: This one people. People's are what their deeds are' (Hegel, [1837] 1953:89f). Each people has a history of its own and passes through different stages, according to a principle of differentiation, which turns each spirit into a particular national spirit. Each national spirit, in its turn, is only a moment in the development of the 'world spirit' towards self-consciousness, absolute knowledge and freedom. The idealist theory of the state as an ethical idea was adopted by the most famous of all German historians and historicists, Leopold von Ranke (1795-1886). Most people probably think of him as an 'empiricist' historian who introduced the critical method to the discipline in the form of new and more severe standards of documentary evidence and who saw the task of the historian as finding out how it really was (wie es eigentlich gewesen). But Ranke was also a defender of the idealist and metaphysical theory of the state as 'a spiritual reality' (Ranke, [1836] 1973:110), 'a living thing, an individual, a unique self' (p. 112). Because of the role of historians and of historicism in the creation and consolidation of the German nation-state, it is possible to see the former as its servants and the latter as its ideology (Iggers [1968] 1983:17-28). Ranke was the head of its conservative branch. Due to the importance attached to the state in nineteenth-century Germany, economics took the form of political economy, or Nationalökonomie. 'For the German economists the symbiosis of state and economy was self-evident' (Tribe, 1988:5). Because of the strength of historicism in the German universities, economics assumed the form of history. In Germany, the Historical School dominated economics well into the twentieth century, or until the Nazis seized power. The founder of the Historical School of Economics, was Wilhelm Roscher (1817-94). Other members of the Older Historical School, were Bruno Hildebrand and Karl Knies. The Older Historical School adopted some of the typical ideas of historicism, in general. According to Roscher, for instance, the national economy is an organism, and the task of political economy (Staatswirtschaft) is to find the law of development of this organism (1843:4). Towards the end of the nineteenth century, there emerged a Younger Historical School in Economics, with Gustav Schmoller as its head. Other members were Lujo Brentano and G.F. Knapp. The Younger Historical School had thrown off most of the romanticist baggage, but retained the view of economics as political economy. It was characterised, above all, by detailed empirical investigation of economic institutions. The German Historical School of Economics was to -23become the immediate object of attack for the Austrian methodological individualists.

12

To sum up my presentation of historicism, so far, I suggest that it comprises the following holistic doctrines: I Organicism: The state and/or society is conceived of as an organism. This idea has two elements: (1) Organisms are wholes, where each part depends for its existence and functioning upon the other parts and upon its place in the whole. This doctrine is the traditional opposite of the individualist theory of the state and society. (2) As other organisms, social institutions and societies grow. The implications of this idea are not clear, however. According to one idea of organic growth (2a), it implies that history is irrational and unpredictable, because there is novelty in the development of life. According to a second idea of organic growth (2b), it implies Aristotelian teleology. Like natural organisms, societies originate as germs, or embryos, and grow until they reach their fully developed form. For some organicists, development is arrested at the stage of perfection, for others, societies also decay and die. Still others, understand by organic growth (2c) only spontaneous development. This is the thesis that social phenomena are the unintended consequences of human activity.

There is also the idea of philosophy of history that history has a goal and/or meaning. This idea is not necessarily associated with organicism, but is more theological in origin. While organicism, tends to be materialistic, philosophy of history tends to be idealistic. It conceives of history as the development of mind, spirit, or reason. This view of history, brings me to the second important idea of early historicism: II Objective idealism: Like the natural organism of an individual human being has a mind, the social organism has a mind of its own. The ideas and values of a people (Volk) are expressed in their language, customs, laws, constitution, myths, literature, etc. All these social institutions are but various expressions of the soul, or spirit, of the people. In the well-known case of Hegel, objective idealism takes the form of a teleological philosophy of history, but this is an exception. Most versions of objective idealism, are content to point out the historical and geographical variability of folk spirits, but refrain from forcing them into a pattern of development, or succession. The main legacy of Romanticism, then, was holistic, but there was also, especially in the early phase, a fairly strong tendency of individualism. German individualism, however, was different from French and British individualism and the difference is caught very well by Georg Simmel ([1917] 1950:81), who calls the latter quantitative and the former qualitative. As the term 'qualitative' suggests, -24German individualism highlights the individuality and uniqueness of human beings, rather than their equality. Because it tends to give pride of place to great individuals, or personalities, it has also been called 'aristocratic' individualism (Köhler, 1922:48). Aristocratic individualism is both methodological and ethical: as a methodology, it assigns an important role to great individuals in historical explanation; as an ethic, it assigns more value to great individuals than to lesser ones. In Germany, qualitative individualism was represented, in particular, by Goethe, Schiller and Wilhelm von Humboldt, and, later, by Friedrich Nietzsche, but it also influenced some British philosophers and historians, such as Coleridge and Carlyle, and, to some extent, also John Stuart Mill (see p. 44). I find it convenient to divide qualitative individualism in three forms: political, historical and expressive. I Political individualism: While liberalism in Great Britain and France was characterised by quantitative individualism, the German version of liberalism was distinguished by qualitative individualism. In The Limits of State Action (1791-2) Humboldt saw political individualism, in the form of a minimal state, as a precondition for the free development of individuals, as did many other leading figures of German Romanticism. According to George G. Iggers ([1968] 1983:7ff, 40ff), it was the experience of French dominion and the wars of liberation (1792-1815), which turned most German intellectuals, including Humboldt, into nationalists and defenders of a strong state. The historian Johann Gustav Droysen is a case in point, but also Max Weber would be an example. II Historical individualism: Historicism inherited, from Romanticism, the admiration of great individuals and personalities, and a corresponding contempt for, or at least lack of interest in, the destiny of the common people, or 'masses', as they were commonly called. This historical individualism originated in Germany, but it is best epitomised by the Briton Thomas Carlyle, who wrote in his On Heroes, Hero-Worship and the Heroic in History: ([1841] 1975:239, 235, 266) that 'the history of the world is but the biography of great men'. Historical individualism was opposed by many historians - especially Marxists - and there ensued an intense debate about the role of the individual in history. III

Expressive individualism: I will end my short presentation of historicism, with a note about method. Historicism was, from the very beginning, closely associated with the study of language and this is probably the reason for the importance attached to the hermeneutical method, or art of interpretation. Vico had suggested that we understand human creations better than nature. Also Herder, -25 had mentioned Einfühlung as a way to understand human expressions. The most important founder of hermeneutics, however, is the great theologian Friedrich Schleiermacher (1768-1834). He developed hermeneutics into an astonishingly sophisticated art of interpretation, to which I cannot here, of course, do justice. An important point for my purposes is that he made a distinction between subjective, psychological interpretation and objective grammatical interpretation of language. 'Understanding has a dual direction, towards the language and towards the thought' and '[n]either language nor the individual as productive speaking individual can exist except via the being-in-each-other of both relationships' (Schleiermacher [1809-10] 1998:229). Both types of understanding are contextual: 'every utterance has a dual relationship, to the totality of language and to the whole thought of its originator' (Schleiermacher [1809-10] 1998:8). The consequence of this is the famous hermeneutic circle: 'The vocabulary and the history of the era of an author relate as the whole from which his writings must be understood as part, and the whole must, in turn, be understood from the part' (p. 24). There is a hermeneutic circle also on the psychological side (pp. 90ff), but both moments rest on knowledge, not on intuition, or empathy, even though he admits that some people have a 'talent for knowledge about individual people' (p. 11). Wilhelm von Humboldt was also an important pioneer in the study of language, but his idea of hermeneutics is more romantic than was that of Schleiermacher. Humboldt pays lip service to Ranke's view of the historians' task, which is to 'present what actually happened' ([1821] 1967:57), but actually, he is against this view. According to Humboldt, literal truth is strictly impossible. The reason for this is that the essence of truth is hidden from observation. When all the facts are collected, there remains the intuitive understanding of their 'inner causal nexus, on which, after all, their inner truth is solely dependent' (p. 58). Humboldt's account of the historians' task is suggestive, but impressionistic. It is not clear, for instance, what 'inner truth' refers to: if it is the subjective truth of the individuals acting in history, if it is some kind of objective truth inherent in their creations; a work of art, a system of ideas, or a historical event, or if it is the inner truth of the historian. One thing is clear, however: according to Humboldt, the task of the historian involves an important element of artistic creativity. Among professional historians, it was Johann Gustav Droysen (1808-84) who, more than anyone else, tried to develop the method of verstehen in history. Droysen was engaged in a two-front war against the critical method of Ranke, on the one hand, and the scientific history of Buckle, on the other hand. A liberal like Humboldt, Droysen was opposed to the conservative Ranke for political reasons. In the eyes of Droysen, Ranke's critical method would reduce history to a sterile concern with mere facts, thereby robbing it of its role in the education (Bildung) and emancipation of mankind (MacLean, 1982). A similar concern, made him reject also the scientific history of Comte and Buckle. The problem with scientific history is that it is deterministic and aims at prediction. 13 Once again like Humboldt, Droysen saw history as an art, not as a science. 14 The method of verstehen was launched in opposition to both critical and scientific -26history, as a way of introducing moral agents, or subjects, in history (cf. Burger, 1978). Droysen made a distinction between nature and history in terms of the categories of space and time. The method of the natural sciences is explanation (erklären), that of history, understanding (verstehen) (Droysen [1858] 1977:22, 150f). History deals with the traces left by human beings. Every such trace left is the expression of an individual "I", but, nevertheless, an individual possible to understand. 'With human beings … we have an essential kinship and reciprocity of nature: every "I" enclosed in itself, yet each in its utterances disclosing itself to every other' (pp. 121f). The impression created by this translation is that Droysen's method of verstehen is radically individualistic. This is not the case, however. For Droysen, psychological interpretation is only the third, of four, forms of interpretation. The other three, are (1) pragmatic interpretation, (2) interpretation of conditions and (4) interpretation of moral forces and ideas ([1858] 1977:149ff).

Of these, the first and third are clearly individualistic, while the second and fourth are not. Pragmatic interpretation is concerned with instrumental action; what the historical remains reveal about the ends of historical actors, while psychological interpretation digs deeper into their personalities. The conditions of action include, among other things, social institutions, while moral forces and ideas include cultural entities like religions, ideologies and worldviews. There is nothing to indicate that Droysen saw social institutions and cultural phenomena as psychic, or, in any other way, individualistic, as did some later advocates of the method of verstehen. On the contrary, Droysen is safely anchored in the tradition of historicism, collectivism and holism (Iggers [1968] 1983:110ff; MacLean, 1982:355).

Positivist sociology In France, the dominating approach to the scientific study of 'man' and society was positivist sociology. The first positivist sociologist, of some importance, was Henri St Simon, who is the source of many ideas, including that of a coming industrial society. 15 More important, however, was his secretary Auguste Comte, who introduced, not only the terms 'positivism' and 'sociology', but also that of 'altruism'. By 'positivism', Comte understood a science based upon observation of facts, as distinguished from religion based upon faith and metaphysics based on speculation. According to his famous law of the three stages, religion is the first, metaphysics the second, and positive science the third stage in the development of the human mind. 'Sociology' is the highest, but also the least developed and least exact, in the hierarchy of the sciences: mathematics, astronomy, physics, chemistry, biology and sociology. The reason sociology is the least developed and the least exact is that it deals with the most complex phenomena. Except for this, however, there is no gulf between natural science and social science. Their methods are essentially alike. Comte's positivism, then, is a methodological monism. It may be noted that, neither economics, nor psychology is part of Comte's -27ladder. The reason economics is missing is that Comte saw it as part of sociology; the allencompassing science of society as a whole. The mistake of economics is to analyse the economy in isolation from the rest of society and from its history (Comte [1836-42] 1974:446-50). It may be noted that Comte's critique of economics is not directed at Adam Smith, who is mentioned with great admiration. Since I am partly engaged in a terminological survey, it may also be noted that Comte uses the term 'spontaneous order', made famous by Friedrich von Hayek and in a similar manner, to designate those social phenomena, including the market, which are not consciously designed. 16 The term 'altruism' was also introduced with an eye on economics and the assumption of rational egoism, or self-interest. If the altruistic instincts did not exist in us, the mutual services that this activity of industry calls out would certainly not be able to create them. Were this dismal hypothesis a true one, the reciprocal assistance of man to man would never become gratuitous, and the only moral influence that this aid would have, would be to develop a constant prudence of interest. (Comte [1851-4] 1975:407) Psychology fares even worse than economics, since it has no place at all in Comte's system. A first reason for this is that the mind is unobservable and therefore inaccessible to positive investigation. A second reason is that the self is multiple rather than unitary. The idea of an I, or a self is a fiction created by religion and metaphysics. According to Comte ([1836-42] 1974:3, 380ff), there is nothing in between the biological and social organism. Psychology is an ideology and, as such, superfluous. The affective and intellectual faculties it is used to explain is better explained by (phrenological) physiology. Psychology, then, is reducible to physiology. But only partly. Human beings are social beings and the main bulk of human action is part of society. What cannot be explained by physiology, therefore, must be explained by sociology. In addition to being a physiological reductionist, then, Comte was a sociological reductionist; the founder, not just of sociology, but of sociologism.

Like many other social theorists in the nineteenth century, Comte conceived of society as an organism and like most of them, he saw the social organism as a whole which must be investigated as such: 'viewing each element in the light of the whole system' (p. 462). Sociology is divided in two branches: statics and dynamics, the former concerned with the mutual interdependency of the parts of the social organism and the latter with its development or growth. Social statics, or the theory of spontaneous order, seeks laws of coexistence, or harmony, while social dynamics seeks the laws of succession of social phenomena. The raison d'être of sociology lies in the historicity of social phenomena. At the beginning of history, social phenomena may be explained in terms of human nature alone. As soon as human beings have been modified by social develop-28ment, however, this is no longer possible. Biological reductionism, therefore, is wrong. 'The consequence of this error is that social modifications proper to certain periods, and passing away with them, are too often supposed to be inherent in human nature, and therefore indestructible' (Comte [1836-42] 1974:488). This argument has lost none of its topicality. It seems to be the main message also of the various versions of contemporary social constructionism. The reason, adduced by Comte, for the variability of human nature is the more dated. Human beings have become social beings and must be understood as part of the social organism. Comte does not reject all use of the laws of human nature in sociology. Since human nature does set limits to the variability of social phenomena, no law arrived at by way of historical induction can be allowed to contradict the 'known laws of human nature'. This argument, in particular, appealed to John Stuart Mill, who made it the basis of his inverse-deductive, or historical, method. Comte's organicism and his argument about the historicity of social phenomena is similar to that of German historicism (see pp. 20-22), but he is less interested in the spiritual, or cultural, side of society. His law of the three stages is about the development of knowledge, but there is no place for concepts like 'folk soul' and 'national spirit' in his sociology. The main difference, between them is that Comte was a positivist, preaching unity of method, whereas the German historicists saw the human sciences as entirely different from the natural sciences. Because of this, Comte was actually a main target of attack from historicist quarters. For the purposes of this book, however, the similarities are more important than the differences. Like the German historicists, Auguste Comte was a methodological holist, and as such both were common targets for the attacks of methodological individualists. It may be added that he was not an economic, or political individualist either and this contributed to his unpopularity among methodological individualists. 17 According to Comte, the market may be spontaneous, but it is not self-regulating. If left to itself, it leads to chaos rather than order. This was one reason why Comte supported a big government, engaged in large-scale social engineering; in technocracy, if not in bureaucracy. 18 A final note on positivism and the science of statistics. 19 Comte, himself, saw no use for statistical, or other mathematical, methods in positivist sociology. He believed that social phenomena are too complex for mathematical treatment, and criticised Condorcet for failing to see the limits of mathematical analysis, including the probability calculus, in social science ([1819-26] 1974:166-74; [1836-42] 1974:492-4). But there were others, such as the Belgian statistician Lambert A.J. Quetelet (1796-1894) and the English historian Henry Thomas Buckle (1821-62), who saw the possibility of using statistics for the purposes of a positivist sociology and history. Quetelet was a pioneer in statistics and especially in its use to register moral phenomena. Following St Simon and Comte, he called his moral statistics, social physics. Quetelet is famous for his idea of the Average Man, which was much criticised, because it was believed that he failed to see that the Average Man is a -29fiction. Actually, Quetelet was aware that the Average Man is a 'fictitious being' ([1835] 1842:8), but he obviously believed that averages tell us something important about 'man in general' and about society. Quetelet was also among the first to observe the astonishing constancy of many

statistical phenomena, such as crime and suicide rates. Above all, he was among the first to collect a large body of statistical data to demonstrate such regularities. Quetelet was not satisfied, merely to register statistical regularities, he wanted to explain them, and his explanation was sociological: Society includes within itself the germs of all the crimes committed, and at the same time the necessary facilities for their development. It is the social state, in some measure, which prepares these crimes, and the criminal is merely the instrument to execute them. Every social state supposes, then, a certain number and a certain order of crimes, these being merely the necessary consequences of its organisation. (Quetelet [1835] 1842:6) According to Quetelet, the crime rate depends upon social institutions, and this is encouraging, since it is possible to change social institutions in a way that reduces the number of crimes. Buckle's views on statistics can be found in his History of Civilization in England (1858). In this work he appears as a follower of Comte and Quetelet, attempting to demonstrate that history, like the natural sciences is subject to necessity and, therefore, law-governed. His main argument for this thesis is the regularities found in moral statistics. These regularities, according to Buckle (pp. 20ff), force us to conclude that the actions of men are determined by the state of society and, therefore, subject to social laws. His main example is the apparently individual act of suicide, which exhibits such an astonishing regularity in the aggregate - a fact which led Buckle to reach the following dubious conclusion: In a given state of society, a certain number of persons must put an end to their own life. This is the general law; and the special question as to who shall commit the crime depends of course upon special laws; which, however, in their total action, must obey the large social law to which they are subordinate. And the power of the larger law is so irresistible, that neither the love of life nor the fear of another world can avail any thing towards even checking its operation. (Buckle, 1858:25f) Buckle was not alone to be fascinated by statistical regularities and the suicide rate, in particular, had a powerful grip on the minds of nineteenth-century social scientists. The most famous study is, of course, Emile Durkheim's Suicide (1897), 'the masterpiece of nineteenth century statistical sociology' (Hacking, 1990:64). 20 Before I turn to Durkheim, however, I will stay in Britain for a while. Early positivist sociology was mainly a French affair, but it is common to -30include also the British sociologist Herbert Spencer among its ranks. Spencer, himself, protested against being associated with Comte and published a list of Reasons for Dissenting From the Philosophy of M. Comte (Spencer [1864] 1984:23). He did not deny, however, being a 'positivist' in a more general sense of that term. Spencer's main quarrel with Comte was political. Being a radical individualist in matters political and economic, Spencer did not at all fancy the political part of Comte's positivist programme (pp. 18f, 23f). In sharp contrast to Comte, Spencer was a supporter of a free market society watched by a minimal state. 21 In this respect, Spencer had much more in common with another critic of Comte, Friedrich von Hayek. Another cause of dissension was Comte's dismissal of subjective psychology as an important science in itself, and as an indispensable basis of sociology (Spencer [1864] 1984:10). 22 According to Spencer, 'psychological truths underlie sociological truths, and must therefore be sought by the sociologist' ([1873] 1961:348). No one indeed, who is led to dwell on the matter, can fail to see how absurd is the supposition that there can be a rational interpretation of men's combined actions, without a previous rational interpretation of those thoughts and feelings by which their individual actions are prompted. Nothing comes out of society but what originates in the motive of an individual, or in the united

similar motives of many individuals, or in the conflict of the united similar motives of some having certain interests, with the diverse motives of others whose interests are different. (Spencer [1873] 1961:348f; see also [1864] 1984:15) This seems to be a fairly clear statement of psychologism cum methodological individualism, but perhaps it is not clear enough. A problem with Spencer is that he also emphatically endorsed the idea of society as an organism (Spencer, 1860). 23 As I have already indicated, this idea is almost unanimously conceived of as holistic and as the very opposite of methodological individualism. 24 In the literature about Spencer, it is a recurrent allegation that there is a conflict between his individualism on the one hand and his organicism on the other. An extensive survey of these allegations can be found in Gray (1985) and Taylor (1992), who both argue that it is possible to save Spencer from contradiction. In a second and much extended work, Gray (1996) accepts that there are a number of apparent tensions both between his methodological individualism and organicism (ch. 2) and between atomism/mechanism and organicism in his theory of society (ch. 5). Even so, he argues (ch. 14) that most of these tensions are, indeed, more apparent than real, since they are due to conceptual ambiguity. A problem with this controversy is that the authors do not always distinguish clearly between ontological, methodological and political issues. For my part, I agree that there is no necessary conflict between political individualism and organicism. Even if most organicists are political collectivists, it is possible to combine organicism with political and economic individualism, and Herbert -31Spencer is, indeed, the primary example of this unusual combination. 25 It is important to observe the difference between those who say that the state is an organism and those who say that society is an organism. The individualists are to be found among the latter and they usually have a leaning towards conservatism. There is an unintentional 'wisdom' in the organically grown traditions and in the working of the spontaneous order of the market, which cannot be achieved, only ruined, by political means. Of special importance for Spencer's pro-market attitude was his view that the social organism lacks a consciousness of its own. Only individuals have consciousness (Spencer [1860] 1982:397). The particular wisdom of the market lies in the spontaneous co-operation of individuals with specialised knowledge. This view foreshadows Hayek's famous argument about the role of knowledge in a market economy (cf. Taylor, 1992:143). 26 Concerning the conflict between methodological individualism and organicism, I see more of a problem, even if I agree that it is always possible to formulate these doctrines in a way that makes the conflict disappear (see Gray, 1985:246-53; 1996: ch. 14). I am not convinced that Spencer can be saved in this way, but my interest is not in the consistency of his position. I am interested in the question of whether or not he was a methodological individualist, and on that point I find myself in agreement with Ellen Frankel Paul (1988): 'That Spencer was a methodological holist is, I think, beyond question' (p. 443). She adds that 'elements of methodological individualism can be discerned in some of Spencer's writings but it must be considered a minor element' (p. 444). After Spencer, positivist sociology returned to France. The most important figure was Emile Durkheim, who praised Spencer for going further than Comte in spelling out the details of the organism analogy. Like Spencer, Durkheim saw society as a spontaneous order, but he credits the economists with being first to suggest this idea. They [the economists] were the first to sense all that is living and spontaneous in societies. They understood that collective life could not brusquely be established by some clever artifice; that it did not result from an external mechanical impulsion but is slowly elaborated in the very heart of society. In this way they were able to ground a theory of liberty on a foundation more solid than a metaphysical hypothesis. In effect, it is obvious that if collective life is spontaneous, it must not be deprived of its spontaneity. Any fetter would be absurd. (Durkheim [1888] 1978:48)

Here agreement ends, however. According to Durkheim, Spencer made the mistake of believing that self-interested individuals could engage in peaceful exchange, without a system of rights and duties to regulate their behaviour. I do not believe, this is an altogether fair critique of Spencer, but it is certainly fair to say that Spencer was much more pro-market than Durkheim, who saw an important role for state in economic life (see Udehn, 1996:354-7). Durkheim's agreement with the economists is also limited to the idea of spon-32taneous order. Economics is the individualist social science, par excellence, and, like most sociologists, Durkheim is the very opposite: a methodological holist, who sees methodological individualism as a serious defect. 27 I will quote a passage at some length, because I believe it gives a clear and concise picture of economics that is fairly typical among sociologists. According to them [the economists], there is nothing real in society but the individual. Everything emanates from him, and it is toward him that everything converges. A nation is only a nominal entity; it is a word which serves to designate a mechanical aggregate of juxtaposed individuals. But it has no specific properties that distinguish it from other things. Its properties are those of the elements that compose it, merely enlarged and amplified. The individual is, therefore, the only tangible reality that the observer can get at, and the only question which science can set for itself is to investigate how the individual should conduct himself in the principal circumstances of economic life, given his nature. Economics and, more broadly, social laws, are not, then, very general facts which the scholar induces from the observation of societies, but logical consequences deduced from the definition of the individual. The economist does not say, 'Things happen in this way because experience has established that fact.' Rather he says, 'Things should happen in this way because it would be absurd if it were otherwise.' The word natural should therefore be replaced by the word rational, which is not the same thing. If only this concept of the individual, which is supposed to contain in itself the entire science, were adequate in reality! But in the attempt to simplify things, the economists have artificially impoverished the concept. Not only have they ignored the circumstances of time, place, and country in order to conceive of man's abstract type in general, but in this ideal type itself they have neglected everything which does not bear upon strictly individual life to such an extent that, passing from abstraction to abstraction, nothing is left but the sad portrait of an isolated egoist. (Durkheim [1888] 1978:49) Durkheim's description of economics is, I believe, representative of the view of a majority of sociologists and (economic) historians in the nineteenth century. To some extent Durkheim's view may be based on that of Comte, but it owes much more to his reading of Adolf Wagner, Gustav Schmoller and other economists belonging to the German Historical School (see Durkheim [1887] 1993:58-77; [1888] 1978:59ff). But is it a fair description, or is it the prejudice of an ignorant sociologist? The answer, I believe, is that Durkheim paints a largely correct picture of economics, at least at the end of the nineteenth century. It should be added, though, that what is a vice to the typical sociologist is a virtue to the typical economist. Durkheim seems to have shared Comte's sociologistic view that economics is best conceived of as a part of 'general sociology' (Durkheim [1909] 1978:83). -33He also shared some of the latter's dismissive attitude towards psychology. 28 He did not, however, deny it a place in the hierarchy of sciences. 'In succession, physics and chemistry, then biology and finally psychology have been established' (Durkheim [1888] 1978:47). He even admitted that sociology depends upon psychology. He emphatically denied, however, that sociology is reducible to, psychology. It was the merit of Comte to have established the fact that society is like a living organism and, as such, 'something more than a collection of individuals. A whole is not identical to the sum of its parts, even though without them it would be nothing' (p. 50). Or in other words: 'for Comte society was a being sui generis' (p. 54).

Durkheim adopted this view of society. For him, social facts are sui generis and, therefore, irreducible to facts about individuals. More specifically, social facts have two characteristics: (1) they are external to individuals and (2) have coercive power over them (p. 51; see also Durkheim, [1895] 1982: Ch. 1 and 1898). This does not mean, however, that social facts exist outside all individuals taken collectively. Durkheim's argument is that they are external to each single individual. Nevertheless, from these characteristics of social facts, Durkheim derives the methodological rule that social facts must be explained in terms of other social facts, not in terms of facts about human nature ([1895] 1982:134). Using the scheme I borrowed from Arthur Danto (see Introduction, p. 5), it is possible to represent Emile Durkheim's methodology in the following way:

Figure 2.3 Emile Durkheim's rules of sociological method Vertical arrows represent Durkheim's methodological rule that social facts are external constraints on individual behaviour, while horizontal arrows represent the rule that social facts must be explained in terms of other social facts. His famous explanation of the differences in suicide rates between countries is described, by himself, as horizontal, but James Coleman (1986a: 347f) has argued that it is better represented by the vertical arrows. I tend to agree with Coleman. Since Durkheim wants to explain an aggregated macro-phenomenon - namely differences in suicide rates, in terms of social facts such as solidarity and social control, it is clear that these social facts really act upon individuals (Durkheim [1897] 1951:297ff), who decide to commit, or not commit suicide. In comparison with Comte and Spencer, Durkheim moved away from -34organicism towards idealism. What makes social facts sui generis is not that society is an organism, but that it has a collective consciousness (Durkheim [1900] 1973:13; [1911] 1974:93). The source of this change is probably Durkheim's visit to Germany in the 1880s, where he was exposed to Völkerpsychologie and to Wilhelm Wundt's empirical approach to ethics (Durkheim, 1887). There is, in fact, strong reason to believe that Durkheim derived most of his view of social facts from Wundt (Gisbert, 1959; Hall, 1993:37-51). One idea, in particular, has been assumed to derive from Wundt; that of 'creative synthesis' (Ginsberg, 1956:45). Just as life emerges out of the association of molecules in the cell and mind from the combination of physiological processes in the brain, social facts emerge as a result of the interaction of individual minds. 29 Before Wundt, the idea of creative synthesis was used by John Stuart Mill, under the name of 'mental chemistry', to argue that new ideas emerge in the mind of individuals, but it was Wundt who used it to explain the emergence of social facts (see p. 61). Another source of Durkheim's holism was the view of the statistician Quetelet, who led him to see in the stability of various statistical measures over time a sign of the existence of social facts. His own study of Suicide (1897) strengthened him in this belief and led him to argue that the suicide rate 'is not simply the sum of independent units, a collective total, but is itself a fact sui generis, with its own unity, individuality and consequently its own nature - a nature, furthermore, dominantly social' ([1897] 1951 46). Before leaving Durkheim, it is important to point out that when he maintains that sociology is irreducible to psychology, he intends individual psychology, of which he has a rather narrow view. It seems to be restricted to a concern with human beings as unaffected by society. As soon as they turn into social beings, they become the subject matter of sociology. Durkheim has no objection at all to calling sociology a form of 'social', or 'collective psychology' and therefore, in a broader sense, a proper part of psychology (see, e.g. Durkheim [1895] 1982:249f; [1897] 1951:312; [1898] 1974:34). Because of this, and some other considerations, Lorenzo Infantino (1998: ch. 5) asks the question: 'Is an "Individualistic" reading of Durkheim possible?' Given the fact that Durkheim is probably the most often cited representative of collectivism and holism (see, e.g. Pratt, 1978:112ff; Rosenberg 1988:118ff; Pettit [1993] 1996:132ff), this question might seem absurd, but I do not think it is. At least not with respect to ontological individualism. Having made this admission, I had

better add that I also believe that an individualistic reading of Durkheim, even if not absurd, is ultimately wrong, and it is not possible with respect to methodology. Durkheim was certainly not a methodological individualist. Not all French sociologists joined the sociologistic camp. Durkheim's fiercest critic, Gabriel Tarde was among the founders of social psychology and a defender of psychologism in sociology. On this issue he sided with Mill against Comte (Tarde [1898] 1969:77ff). He was also critical of Quetelet's social physics (Tarde [1890] 1962:114ff) and the organicism of Spencer. His main target, however, was Durkheim. According to Tarde, Durkheim's argument that social facts are sui generis, implies their existence in some Platonic heaven over and -35above individual human beings ([1894] 1969:114ff). In a debate with Durkheim in 1903, he is reported to have said: Does Mr. Durkheim think that social reality is anything other than individuals and individual acts or facts? 'If you believe that,' said Mr Tarde, 'I understand your method, which is pure ontology. Between us is the debate between nominalism and scholastic realism. I am a nominalist. There can only be individual actions and interactions. The rest is only a metaphysical entity, mysticism'. (Tarde, [1904] 1969:140) In contradistinction to Durkheim, Tarde maintains that 'it is imitation which is the elementary and universal social fact' ([1898] 1969:54). All social phenomena are transmitted not collectively, but individually, 'from one individual - parent, teacher, friend, neighbour, comrade - to another'. This is not to deny, however, that the collective result often is fairly constant. According to Tarde, it is this fact which 'gives rise to Mr Durkheim's ontological illusion. For there is no doubt that it is veritable scholastic ontology that the learned writer is undertaking to inject into sociology in place of the psychology he opposes' ([1894] 1969:115). 'To sum up the question which I began by asking: What is society? I have answered: Society is imitation. We have still to ask: What is imitation? Here the sociologist must yield to the psychologist' ([1890] 1962:76). Tarde, then, reaches the same conclusion as did Mill, and it is possible to see in the laws of imitation an attempt to realise Mill's unfinished project of a science of ethology (see pp. 45f). Tarde, then, is highly critical of Durkheim's idea of social facts sui generis and, it might be added, of his associated idea of a 'collective consciousness', which is distinct from the individual consciousness of human beings. According to Tarde, there is nothing but individual consciousness. This does not imply, however, that there is nothing but individual psychology. Sociology is collective, or social, psychology, even if it depends on individual psychology. Collective psychology, inter-mental psychology, that is sociology, is thus possible only because individual psychology, intra-mental psychology, includes elements which can be transmitted and communicated from one consciousness to others, elements which, despite the irreducible hiatus between individuals, are capable of uniting and joining together in order to form true social forces and quantities, currents of opinion or popular impulses, traditions or national customs. (Tarde [1898] 1969:95) In the debate between Durkheim and Tarde, it eventually turned out that also the former saw sociology as a kind of social psychology. Does this mean that there is no important difference between their respective versions of sociology? I believe there is, but I am not going to argue this point here. It may be added, though, that Tarde was critical of other aspects of positivist sociology, as well, -36and, especially, of its organicism and historicism ([1898] 1969:77ff). While it would be absurd to call Emile Durkheim a 'methodological individualist', it seems fair enough to attach this epithet to Gabriel Tarde.

I have suggested that sociology emerged, at least in part, as a holistic reaction to the individualistic discipline of economics. If so, what was the position of Vilfredo Pareto, who was both a neoclassical economist and a classical sociologist? It is often assumed (see e.g. Boland, 1982:27ff), as more or less self-evident, that Pareto was a methodological individualist - maybe because it is simply taken for granted that a neoclassical economist has to be a methodological individualist - but I wish to cast some doubt upon this seemingly self-evident truth. Some things suggest that Pareto was, indeed, a methodological individualist: (1) his denial of the possibility of interpersonal comparisons of utility is typical of methodological individualists, at least in the Austrian tradition. (2) His famous Pareto optimality has become part and parcel of political individualism. (3) His critique of conceptual realism and leaning toward nominalism (Pareto, [1916] 1963:31f, 1094ff), point in the direction of ontological individualism. But there are other indications pointing in the opposite direction. In his first important book, Cours d'Economie Politique ([1896] 1976), Pareto dresses his theory explicitly in organicist language, usually associated with social holism, and social evolution is an important theme. In his later works, organicism gives way to a theory of the economic system, as part of a larger social system, and evolution becomes a less prominent theme. Still, there is much that points in the direction of social holism. Pareto was a fierce critic of theories dealing with the origins of social institutions (see, e.g., Pareto [1909] 1972:17f), as did the theory of the social contract and some of the Austrian economists. Instead of the causal-genetic approach, he favoured theories of functional interdependence. Pareto's main units of analysis were the economic system and the larger social system. The main elements of these systems are 'residues' (motives) and 'derivations' (beliefs) inhering in individual human beings (pp. 1433ff), but residues and derivations are partly social facts (pp. 33, 71-4). According to Pareto, they are individual, from one point of view, and social from another. Investigating whether moral sentiments have an individual or social origin is useless. The man who does not live in society is a very unusual man, one who is almost, or rather entirely, unknown to us. And a society distinct from individuals is an abstraction which does not correspond to anything real. Consequently, all the sentiments which are observed in a man living in society are individual from one point of view, and social from another. (Pareto [1909] 1972:71) The fact that we deal with individua by no means implies that a number of individua taken together are to be considered a simple sum. They form -37compounds which, like chemical compounds, may have properties that are not the sum of the properties of their components. (Pareto, [1916] 1963:32) This is the doctrine of emergence, typically used by holists, such as Wundt and Durkheim, to defend their position. It recurs in Pareto's discussion of the composition of social forces, where he suggests that some composition effects are analogous to mechanical resultants, while others are analogous to the compounding of chemical elements (pp. 1446ff). Much like Durkheim, Pareto argues that these emergent social facts are objective and external to individual human beings. He also accepts the reality of social groups and makes a distinction between individuals and the positions they occupy in the social structure. There is, thus, quite a lot that goes against an interpretation of Pareto as a programmatic methodological individualist.

Holism and collectivism Methodological individualism has been opposed to a large number of nominally different doctrines, but most commonly to methodological collectivism and holism. In the early stages of its

development, especially in the case of Austrian methodological individualism, it was usually opposed to collectivism. In the later stages of its development, methodological individualism has been increasingly contrasted with methodological holism. This change, which is due mainly to Karl Popper, was not possible until J.C. Smuts introduced the term 'holism' in his book Holism and Evolution (1926). I think it is possible to make a distinction between collectivism and holism, which may be worth keeping in mind throughout the rest of this book. In the doctrine of emergent evolution, which was a source of inspiration for both Smuts and Durkheim, these two root ideas are combined. The suggestion is that new phenomena, such as life, individual consciousness, and 'folk souls' emerge as a result of the organisation of parts into wholes, by way of creative synthesis. Holism is the term here coined (from olos = whole) to designate that wholeward tendency in Nature, this fundamental feature of 'wholes' in the universe … Every organism, every plant or animal is a whole with a certain internal organisation and a measure of self-direction, and an individual specific character of its own … beyond the ordinary domain of biology it applies in a limited sense to human associations like the state, and to the creations of the human spirit in all its greatest and most significant activities. (Smuts [1926] 1936:96) Genuine wholes differ from mere aggregates by being more than the sum of their parts. 'A whole which is more than the sum of its parts, has something internal, some inwardness of structure and function, some specific inner relations, some internality of character or nature which constitutes more' (Smuts -38[1926] 1936:101f). The difference, then, is that the parts of genuine wholes are internally related. This makes them different also from mechanical composites, whose parts are only externally related. 'It is the very essence of a whole that while it is formed of its parts, it in turn influences the parts and affects their relations and functions. This reciprocal influence underlies the internality or interior character of the whole' (p. 103). The picture of the world painted by the doctrine of emergent evolution is that of the universe as a hierarchic order of different levels, where each level has emerged from, but is supervenient upon, and irreducible to, the level immediate below. We have a progressive superposition of level on level. Higher kinds of relatedness - chemical, vital and conscious - are each in turn supervenient on those that stand lower in the scale; but they do not supersede them in the sense that, when some higher kind of relatedness comes, the lower kinds go. (Morgan, 1923:278) According to the idea of social holism, society is the highest level of organisation in this hierarchic order. It is supervenient upon, but irreducible to, human individuals and their actions. This is the meaning of Emile Durkheim's claim that society is sui generis. Actually, however, there are two distinct, though related claims made by Durkheim and by most social holists and both claims can be traced back to German Romanticism. In the section on German historicism, above, I made a distinction between organicism and objective idealism. According to the first doctrine, societies are wholes made up of interdependent and functional parts. If we assume that the parts of societies are individuals, the relation between individuals, according to organicism, is that of part-whole. According to objective idealism, on the other hand, social organisms have minds, or souls, which are expressed in their language, customs, laws, literature, etc. In this case, the relation between individuals and folk souls is not that between part and whole, but rather something they have in common, something they share. The relation here is more akin to that of particular-universal. Emile Durkheim's distinction between mechanic and organic solidarity was an early attempt to catch this difference (Durkheim,

1893:70ff). More recently, Philip Pettit ([1993] 1996: chs 3-4) has suggested that the opposite of individualism is collectivism, but not holism, which is instead the opposite of atomism. I agree with Pettit that there is a difference between collectivism and holism, but I do not agree with his rendering of this difference. 30 The ideas of social organisms and social minds are metaphors, which were soon abandoned by social scientists, although they remain as root ideas about social life, even in contemporary social science. Organicism turned into structural-functionalism, which combines two holistic ideas: structure and function. The ideas about folk souls, national spirits and collective consciousness have turned into the social scientific idea of culture. Now, I suggest that it is possible to make a distinction between holism and collectivism. Holism is the idea that there are wholes made of social parts, which -39are interrelated in a way that makes them different from a mere aggregate and irreducible to the parts taken in isolation. Collectivism is the idea that individuals have something in common which turns them into a collective. The most common form of collectivism is 'idealistic'. Individuals are supposed to share a culture that is common to the group to which they belong. But collectivism may also derive from structuralism. In this case, individuals are supposed to form a collective by virtue of the fact that they occupy the same position in the social structure. This is the Marxist case of class analysis. Holism and collectivism often combine into entities which are both wholes and collectives. All organisations, for instance, tend to be both: the wholes made up of parts (this is the meaning of organisation), but they also tend to develop a common culture and typically they act in common. To this extent, they are also collectives. A simple illustration of the distinction between wholes and collectives, would be this:

Figure 2.4 Social wholes and collectives Having made this distinction between collectivism and holism, I immediately announce that I intend not to use it, unless it is called for by the circumstances or purpose at hand. Throughout this book, I am going to use the term 'holism' to refer both to collectivism and holism. -40-

3

Psychologism in early social science Methodological individualism, as a programme in social research, goes back to the nineteenth century, and the various attempts to lay a foundation for the social sciences. The rise of a specifically methodological version of individualism at this particular time probably had much to do with the divorce of the various social sciences from philosophy, and their establishment as academic disciplines at the universities of Europe and the USA. To turn the individualist theories of society into a methodological rule, principle, or programme for social scientific analysis answered a deeply felt need for philosophical justification. As we have seen in chapter 2, there existed at the beginning of the nineteenth century one social science; economics, and this science was largely individualistic. Other approaches to society, such as German historicism and French positivist sociology developed, partly, as reactions to the individualism of economics. Methodological individualism is, I suggest, a reaction to this reaction. In the nineteenth century, philosophers and social scientists started to reflect on the proper

methodology of the social sciences, and the issue of individualism versus collectivism in social science was one of the most hotly debated. The nineteenth century was also characterised by the emancipation of the various human sciences from philosophy and their further differentiation into a number of academic disciplines fighting for a territory of their own. In particular, the relation of psychology first to philosophy and second to the various human sciences was a matter of much concern, and it was closely intertwined with the issue of individualism versus collectivism. Since psychology is the science of human individuals, it is only natural that methodological individualism should take the form of a requirement or suggestion that the human sciences must be based on psychology. It is the thesis of this chapter that individualism, as a methodological principle or programme for social research, arose in the nineteenth century and made its first appearance in the form of psychologism. The term 'methodological individualism' did not appear until the twentieth century. There is little agreement about the meaning of the term psychologism. 1 For my purposes, it is a form of reductionism. Some other theory or discipline is reducible to, or at least heavily dependent upon, some form of psychology. I leave the term 'reduction' undefined in this chapter (see chapter 11 for a more -41detailed discussion), except to say that I understand it in a broad sense to include both complete and partial reduction. Most often, in the nineteenth and early twentieth century, it was philosophy that was supposed to be reducible to psychology. We may call this version 'philosophical psychologism'. My interest, however, is in psychologism with respect to the human sciences: the thesis that they are reducible to psychology. This thesis might be called 'scientific psychologism'. These two versions of psychologism are analytically distinct, but not independent. Many psychologicists have endorsed both and some anti-psychologicists have defended the autonomy of both philosophy and social science and for a similar reason. The methodological individualist Karl Popper, for instance, would be one example (see pp. 202-10). For him, the existence of a third world, or world 3, of objective ideas makes both philosophy and the social sciences autonomous vis-à-vis psychology. 'Psychology', in its turn, may also mean different things (see pp. 331-36), but for the purposes of this chapter, I suggest that psychology is whatever putative knowledge we have of the minds and behaviour of individual human beings. On the basis of this broad view of psychology, I suggest that there are three forms of psychologism in social science: (1) scientific psychologism, which claims that all social phenomena can be explained by and all social laws deduced from, psychological laws, existing or potential; (2) folk psychologism, which maintains that all social phenomena can be explained by mental phenomena and/or human actions, and (3) ontological psychologism, which maintains that social phenomena are made up of, or constituted by, mental phenomena and/or human actions. Psychologism as an approach to philosophy, including social philosophy, is as old as individualism and, for obvious reasons, closely related to it. Psychology, for all its diversity, is a theory about the mental states and/or behaviour of individual human beings. Virtually all individualist theories of society, therefore, have been based upon some 'psychological' view of human nature. Actually, there is one view of human nature, in particular, which has dominated the history of individualism: the view of man as a rational egoist. This theory is really the conjunction of views of human nature: the Aristotelian idea of 'man' as a rational animal and Epicurean hedonism. This view of human nature was the psychological foundation of the theory of the social contract. It was eventually adopted and baptised as economic man (see Myers, 1983). A second psychological theory of considerable importance in the history of social thought is the suggestion that our beliefs result invariably from the association of ideas. This theory was held by most British empiricists and is an important part of David Hume's theory of knowledge, in particular. The most elaborated version of associationist psychology is to be found in James Mill's Analysis of the Phenomena of the Human Mind (1829). 2 As we shall see in later chapters, these two psychological theories, or views of human nature, are far from dead. On the contrary, they are very much part of the short history of methodological

individualism; the first, as part of economics and eventually of rational choice theory in all social sciences; the second because it is part of John Stuart Mill's psychologism and the forerunner of behaviourist -42psychology, which was the psychological foundation of George Homans's methodological individualism (see pp. 190-96). The doctrine of psychologism made its first appearance in the nineteenth century along with the discipline of psychology, and immediately became a matter of heated controversy. An important reason for this was, no doubt, the competition between representatives of the various academic disciplines for recognition and resources at a time when these disciplines were institutionalised at the universities in Europe and the USA (Kusch, 1995). Important as it is, however, this is not the only reason. There were also a number of genuine questions concerning the proper content and methods of the emerging social scientific and humanistic disciplines at issue. My interest in this chapter is mainly in psychologism as a doctrine which maintains that the foundation of the human sciences is to be found in psychology. As I have already suggested, this version of psychologism may be seen as the first form of the principle of methodological individualism in the social sciences. Following the methodological individualist Karl Popper, we may call it psychologistic methodological individualism. Its origin is in Great Britain and the first social science it conquered was economics. In the latter half of the nineteenth century, the centre of psychologism was in Germany, where its main impact was on the humanities and eventually on sociology.

British psychologism I have mentioned two psychological theories in the history of social thought: hedonism and associationism. Both of them had their strongest hold in Great Britain. I think it is fairly safe to suggest that before the nineteenth century at least Great Britain was the main seat of psychologism. In no other country was the interest in human nature more intense. Psychology was at the centre of discussion, both among the British moralists and of the early social scientists. The conviction of most British social philosophers was that there is a universal human nature, constant over time and all over the world. The only problem was to find out exactly what this universal human nature is.

John Stuart Mill John Stuart Mill is often mentioned as an exponent of psychologism, both in philosophy and in the social sciences. My interest is in the latter, viz., his view that social laws can and should be reduced to psychological laws. This view is generally considered a form of methodological individualism. 3 Indeed, the methodological individualist Karl Popper ([1945] 1966:88-99) has appointed Mill to being the main representative of 'methodological psychologism', which is according to him, an extreme and untenable form of methodological individualism. Popper's follower Joseph Agassi (1960) has suggested the term 'psychologistic individualism', to designate the position Popper ascribed to Mill. Lorenzo Infantino (1998:45-7) makes a distinction between the two, but I -43suppose he would not deny that psychologism is a form of methodological individualism. George Homans, however, is a methodological individualist who equates the two doctrines. Maybe that is because he is the only recent methodological individualist who was clearly indebted to John Stuart Mill? As a philosopher, Mill was deeply rooted in the British empiricist tradition. Like Locke, Berkeley and Hume, he believed that all knowledge, not self-evident, is based on induction from sensory experience. Like all empiricists, he also rejected conceptual realism, but he was not a nominalist, like Hobbes and Berkeley. With Locke, he accepted the existence of abstract ideas, which is to say

that he was a conceptualist. Above all, however, John Stuart Mill was a defender of the associationist psychology, used by David Hume and his own father to explain the acquisition of belief. 4 Mill was not a naive empiricist, though. He defended the deductive method in economics and he was a pioneer of the hypothetical-deductive, or covering-law, model of scientific explanation. Mill was also a utilitarian of sorts, but not in the form given to this doctrine by Jeremy Bentham and his father. At the end of the 1820s, he was exposed to certain alternative ways of looking at human beings in society and he was led in a direction away from simple-minded utilitarianism, both in ethics and social science. In his Autobiography (Mill [1873] 1961:94ff), he mentions three people as particularly important in modifying his utilitarian view of 'man' and society: the historian Thomas B. Macaulay (1800-59), the poet and philosopher Samuel Taylor Coleridge (1772-1834) and the philosopher and sociologist Auguste Comte (see pp. 27-29). I have already mentioned the strong impression that Macaulay's critique of James Mill's 'Essay on Government' made on his son. The younger Mill was shaken in his belief in the excellence of utilitarianism and of the 'geometric', or abstract-deductive, method. His doubts were reinforced by his reading of Coleridge, who introduced him to the ideas of German Romanticism (Mill [1840a] 1969). A first insight gained from reading Coleridge was that there are certain essential requisites of civil society, not noticed by Enlightenment thinkers. Mill mentions three: (1) 'a system of education' incurring a 'restraining discipline'; (2) 'a feeling of allegiance, or loyalty', and (3) 'a principle of cohesion among the members of the same community or state' (Mill [1840a] 1969:133-5). A second insight, gained from acquaintance with the work of Wilhelm von Humboldt, in particular, concerned the existence and value of individuality; of differences between individuals, ignored by utilitarian individualism (Mill [1859] 1975:69-91; Hinchman, 1990). According to Mill, Bentham himself was entirely insensitive to spiritual ends and failed to recognise the fundamental importance of self-formation, or self-culture, in a system of ethics. But formation of self, or character is also important in social science, where it is the subject matter of the all-important science of ethology (see below). Self-formation is, finally, important in Mill's solution to the problem of freedom. While it is the task of ethology to explain individual character as the necessary consequence of circumstances, it is possible for individuals to influence their own circumstances and, thus, their character (Mill [1843-72] 1974:836-43). -44The extent of Mill's debt to Comte is a matter of some controversy. According to Hayek, 'Mill himself, in the sixth book of his Logic, which deals with the methods of the moral sciences, became little more than an expounder of Comtian doctrine' (1955:186). Alan Ryan, points out that Mill himself 'was anxious not to be thought to have learned everything from Comte' and adds that 'there is every reason to believe his declaration on this point' (1974:228). So far, I agree with Ryan, but there is, on the other hand, no reason at all to believe Mill, if the following statement is a correct rendering of his view of the matter: '[t]he only area in which Mill recognised a clear debt to Comte was that of the so-called method of inverse deduction'. Mill's debt went further than this, but he did not share Comte's view of psychology and political economy and, above all, he positively disliked Comte's political thinking, not to speak of his later ideas of positivism as a religion of humanity. Probably, most of the differences between them boils down to the fact that Comte was a holist and collectivist, whereas Mill was an individualist. John Stuart Mill's System of Logic (1843) was probably the most influential work written on scientific method in the nineteenth century and this is especially true of the part devoted to the 'social' or 'moral' sciences. 5 Mill did not use the term 'methodological individualism', but he did address the issue and advanced certain ideas that are clear manifestations of 'methodological individualism', in the sense eventually attached to this term. Like Comte, Mill was a methodological monist, who saw but one remedy of the backwardness of the social sciences: the use of the method that had already proved so successful in the natural sciences. He also agreed with Comte that the complexity of social phenomena makes this an exceedingly difficult task. Mill recognised three types of law in social science: (1) laws of the mind; (2) laws of the formation of character, and (3) laws of society. Laws of the mind are, of course, psychological law belonging to the science of psychology ([184372] 1974:849-60). The main example of such laws are those of the laws of association, identified by Mill's father James Mill (p. 852). Since there are no innate ideas, all our beliefs are a result of

the association of ideas. Of our desires, on the other hand, some may be natural, even though most of them are acquired (p. 856). It is interesting that Mill sees a place for 'mental chemistry', as distinguished from mechanics. Just as two substances like hydrogen and oxygen, when mixed, give rise to a new substance, water, which has properties of its own, so association of ideas may give rise to new ideas. 6 This is the idea of emergence, which was eventually to play such an important role in the doctrine of holism. It is significant, though, that Mill recognised emergence only within the individual mind, but not in the collective consciousness, as did the holist Emile Durkheim (see p. 35). Laws of the formation of character belong to the science of ethology, which was intended to be Mill's own contribution to social science. Ryan has suggested that it corresponds to social psychology and I believe that this is largely correct. The subject matter of ethology is the way human beings are socialised and educated to become new members of society. Because the circumstances in -45which individuals are brought up are never exactly the same, each individual will become to some extent unique. Also, since circumstances differ between nations, there will be different national, or collective, characters. This phenomenon used to be the main object of investigation by German Völkerpsychologie, but it is not within the scope of mainstream social psychology today. The laws of ethology are either empirical or causal. As examples of the former, Mill mentions the maxims of common wisdom that exist in all countries. 7 Invaluable as they are in everyday life, these approximate generalisations are not scientific. To the extent that they are true, they need to be explained by causal laws about the formation of character. The science of ethology does not exist, but it is an absolutely necessary precondition for the development of social science. The causal laws of ethology are the axiomata media which connects the laws of society with the laws of mind. 8 The laws of the formation of character are derivative laws, depending upon the laws of mind and the specific circumstances. They tell us what will be the influence of circumstances on the formation of character. 'In other words, Ethology, the deductive science is a system of corollaries from Psychology, the experimental science' (p. 872). Mill went on to make clear that the science of '[e]thology is still to be created' (p. 872) and he saw it as his own task to do so. His efforts in this direction failed, however, and he turned to other projects (Feuer, 1976; Collini, et al., 1983:156ff). Among other things he wrote a book on political economy and an autobiography. Laws of society, finally, may be divided into laws of coexistence and laws of succession. The possibility of laws of coexistence are based upon the fact that there is a consensus among the different parts of society; that only certain combinations of social phenomena can coexist. Mill even uses the holistic metaphor of an organism to express this fact ([1843-72] 1974: pp. 899, 912). 'The fundamental problem' of social science, however, 'is to find the laws according to which any state of society produces the state which succeeds it and takes its place' (p. 912). The discussion, in which this passage occurs, has led Popper to accuse Mill of both holism and historicism (Popper, 1957:72). I believe this accusation is a bit unfair. First of all, I think it is pretty obvious that Mill makes no serious use of the organism metaphor. He talks about 'states of society' succeeding one another, but this is 'holism' only in an extensive sense, to be carefully distinguished from true holism, which asserts that there are social wholes, which cannot be explained in terms of individuals. According to Mill, however, all laws about social states must be explained in terms of psychological laws. The same goes for Mill's alleged historicism. He does suggest that there are historical laws of development, even if they are hard to come by, but they have the status of empirical laws, or trends, only. Like the laws of coexistence, they are only derivative law, which must be deduced from the ultimate laws of human nature ([1843-72] 1974: p. 916). A problem with finding the laws of society is that experiments are not feasible. The inductive or 'chemical' method suggested by Bacon is, therefore, -46-

inapplicable. Nor is the abstract or 'geometric' method used by Hobbes and the Benthamist school appropriate, except, perhaps, in the case of economics. One problem with the geometric method is that it relies entirely on the assumption of self-interest, but does not admit of conflicting forces in the form of mixed motives (pp. 887ff). The method of the social sciences is the 'physical' or concrete deductive. The following statement from Mill's Autobiography is interesting, because it reveals the connection, first, between the method of concrete deduction and a mechanistic view of society and, second, between the latter and individualism. It is a characteristic feature of mechanical forces that they can be added, or aggregated, in a way that makes the whole equal to, instead of more than, the sum of its parts. My practice (learnt from Hobbes and my father) being to study abstract principles by means of the best concrete instances I could find, the Composition of Forces, in dynamics, occurred to me as the most complete example of the logical process I was investigating. On examining, accordingly, what the mind does when it applies the principle of the Composition of Forces, I found that it performs a simple act of addition. It adds the separate effects as the joint effect. But is this a legitimate process? In dynamics, and in all the mathematical branches of physics, it is; but in some other cases, as in chemistry, it is not … I now saw that a science is either deductive or experimental, according as, in the province it deals with, the effects when conjoined, are or are not the sums of the effects which the same causes produce when separate. It followed that politics must be a deductive science. It thus appeared that both Macaulay and my father were wrong; the one in assimilating the method of philosophizing in politics to the purely experimental method of chemistry; while the other, though right in adopting a deductive method, had made a wrong selection of one, having taken as the type of deduction, not the appropriate process, that of the deductive branches of natural philosophy, but the inappropriate one of pure geometry, which, not being a science of causation at all, does not require or admit of any summing up of effects. (Mill [1873] 1961:98) In the case of the general science of society, or sociology, however, the only possible method is that of inverse deduction, suggested by Comte (see p. 29). Since only such social states can exist that are compatible with human nature, laws of society must be subjected to 'constant verification by psychological and ethological laws' (p. 917). An important vehicle for tracing and verifying empirical laws of society is the emerging field of statistics. In an addition to the 1862 edition of a System of Logic, Mill (pp. 931-42) comments upon the recently published History of Civilization in England (1857) by Henry Thomas Buckle. In this book, as we have seen (p. 30) Buckle argued, like Quetelet before him, that the constancy of certain statistical phenomena, such as suicide and crime rates, is proof that there are statistical -47laws. It is significant that Mill rejects this argument in favour of a more individualist interpretation (p. 934). He also gives qualified support to the 'aristocratic' individualism of Carlyle, which assigns a special importance to great men in history. While agreeing that 'the varieties of character among ordinary individuals neutralize one another on any large scale, exceptional individuals in important positions do not in any given age neutralize one another' (p. 937). According to Mill, laws of society are empirical laws, or generalisations, only. As such they must be explained by the causal laws of the mind and of the formation of character on which they ultimately depend (pp. 896, 908, 914, 924f). 9 The laws of the phenomena of society are, and can be, nothing but the laws of the actions and passions of human beings united together in the social state. Men, however, in a state of society are still men; their actions and passions are obedient to the laws of individual human nature. Men are not, when brought together, converted into another kind of substance, with different properties, as hydrogen and oxygen are different from water, or as hydrogen, oxygen, carbon, and azote, are different from nerves, muscles, and tendons. Human beings in society have no properties but those which are derived from, and may be resolved into, the laws of the nature of individual man. In social phenomena the Composition of Causes is the universal law. (Mill [1843-72] 1974:879)

This passage is usually quoted as proof that Mill was a methodological individualist and, as such, it seems conclusive. It seems equally clear that his methodological individualism was psychologistic. According to Mill, all causal laws in social science are psychological laws about human nature. Social science is turned into large-scale psychology. More precisely, however, it is a metaphysical, or ontological, justification for methodological individualism. Mill explicitly denies that social phenomena have emergent properties and make up a reality of its own, or sui generis. Instead, he affirms the mechanist view of social phenomena as resultants, or composite effect, of the actions of individuals as governed by the laws of human nature. It seems clear that Mill was a psychologistic methodological individualist, as Karl Popper maintained. But Popper went further and maintained that Mill's psychologism 'forces him to adopt a historicist method' (Popper [1945] 1966:92) and 'to operate with the idea of a beginning of society' (p. 93). Alan Ryan rejects Popper's argument and maintains that Mill's psychologism is not different from Popper's methodological individualism (Ryan, 1970:156ff). Since it is not my aim to criticise psychologism here, I will not consider Popper's argument, even though I believe that he is basically right (Udehn, 1987:192-201). I also believe, however, that Ryan is right to maintain that Mill's psychologism is not different from Popper's methodological individualism. It takes Popper's institutionalism to get rid of psychologistic historicism and Mill assigns no explicit role to social institutions in his methodology of the social sciences. There are only the laws of -48individual and social psychology (ethology). It may be argued that the science of ethology makes room for social institutions, but being a science of the formation of character, it is bound to give a psychologistic interpretation of them, and this is not enough to escape historicism in the sense of a quest for origins. It is quite another matter that Mill often treats institutions as real factors given to analysis and treated as causal factors in his empirical investigations. 10 According to Mill, then, the social sciences are based on psychology. This view was in contradistinction to that of Comte, who saw no role at all for this science. But Mill took exception also to Comte's view of economics. Whereas the latter argued that the economy must be analysed as part of society and inductively, rather than deductively, Mill defended the abstract-deductive approach of his father and his friend David Ricardo. Mill's philosophy of the social sciences made a tremendous impact on the early human sciences. Even those who did not share his views, like Wilhelm Dilthey, advanced their own views in opposition to the positivism of Mill and Comte. The Austrians read Mill and were probably to some extent influenced by his psychologism, even if other influences may have been stronger. Karl Popper developed his institutionalism in contrast to Mill's psychologism. The most clear example of Mill's influence is the sociologist George Homans, who suggests a version of methodological individualism, which looks almost exactly like that of Mill (see pp. 190-96). But it is possible to see similarities also between Mill's psychologism and the quest for microfoundations, advanced recently by many sociologists (see pp. 187-89). Like the latter, Mill maintained that empirical generalisations; both those of common sense and those of official statistics, must be provided by microfoundations in the form of causal laws of psychology.

Figure 3.1 John Stuart Mill's psychologistic methodological individualism

Utilitarian economics In chapter 2, we saw that classical economics was largely if not wholly individualistic. There was also an important element of institutionalism in several of the classical economists. In my opinion, economics became definitely individualistic in 1871, when Stanley Jevons and Carl Menger made the marginalist revolution, together with Leon Walras (1874). The idea that revolutionised economics was that economic decisions about what to buy depend, not upon the total utility, but -49-

on their marginal utility to the consumer. What matters is not the utility of the total quantity I possess of a certain good, but the utility of an additional unit of that good. An important part of this revolution was also the switch from an objectivist to a subjectivist theory of value. A consequence of this switch was a shift in economic theory, from a concern with the problems of production and distribution to an almost exclusive preoccupation with consumption. All market phenomena were explained, in the last instance, as the result of the consumer's subjective valuation and choice of goods. In this section, I am going to concentrate on the British branch of neoclassical economics, which is the clearest example of psychologism, at least in the early phase of its development. The psychological theory, used by the early British marginalists was, of course, the utilitarianism of Jeremey Bentham and James Mill. Stanley Jevons (1835-82) was first to introduce marginalism in British economics. He did not use the term 'marginal utility', however, but called it 'final utility'. Jevons was also first to build economics on the foundation of utilitarianism, and described his theory as 'the mechanics of utility and self-interest' ( Jevons [1871] 1970:90). He took utilitarianism from Bentham, but turned it from an ethical theory into an explanatory theory of human behaviour. 'In this work I have attempted to treat economy as a calculus of pleasure and pain, and have sketched out, almost irrespective of previous opinions, the form which the science, as it seems to me, must ultimately take' ( Jevons [1871] 1970:44). Pleasure and pain are undoubtedly the ultimate objects of the calculus of economics. To satisfy our wants to the utmost with the least effort - to procure the greatest amount of what is desirable - in other words, to maximise pleasure is the problem of economics. ( Jevons [1871] 1970:101) It may be noticed that, for Jevons, utility was not a psychic phenomenon, but a quality of objects with the capacity of producing a feeling of pleasure in its utilisers. However, in order to maximise pleasure or happiness we have to maximise utility. Jevons did not state any principle of methodological individualism, although there are some indications of individualism in his major work. He rejected the possibility of comparing the feelings of pleasure in different minds and, hence, of arriving at a utility function for a collectivity of individuals. According to Jevons, 'the weighing of motives must always be confined to the bosom of the individual' (p. 85). I must here point out that, though the theory presumes to investigate the condition of a mind, and bases upon this investigation the whole of economics, practically it is an aggregate of individuals which will be treated. The general form of the laws of economics are the same in the case of individuals and nations; and, in reality, it is a law operating in the case of -50multitudes of individuals which gives rise to the aggregate represented in the transactions of a nation. ( Jevons [1871] 1970:86) Jevons here points to a practical problem which always did beset methodological individualism and which has led some social scientists to adopt a more collectivistic methodology. He continues: Practically, however, it is quite impossible to detect the operation of general laws of this kind in the actions of one or more individuals. The motives and conditions are so numerous and complicated that the resulting actions have the appearance of caprice, and are beyond the analytic powers of science. ( Jevons [1871] 1970:86)

The solution to this problem is to use averages, or aggregates, assuming that, in the long run, accidental and disturbing causes will neutralise each other and produce a more predictable aggregate outcome. 'Accordingly, questions which appear, and perhaps are, quite indeterminate as regards individuals, may be capable of exact investigation and solution in regard to great masses and wide averages' (p. 86). Jevons's solution is not, however, to follow Quetelet and give up individualism, but to insist that laws of the aggregate depend upon laws of individual behaviour: The laws which we are about to trace out are to be conceived as theoretically true of the individual; they can only be practically verified as regards the aggregate transactions, productions, and consumptions of a large body of people. But the laws of the aggregate depend of course upon the laws applying to individual cases. ( Jevons [1871] 1970:108f. See also p. 135) Jevons is no more explicit about the assumption of rationality. Of course it may be objected that the assumption of rationality is implicit in that of utility-maximisation or, even, that they are identical. This is a common view today, but it is a view that I reject for at least two reasons. First of all, rationality presupposes conscious intention, whereas utility-maximisation does not, and second, individuals may try to maximise utility, but fail because they are irrational. It may be argued that Jevons talks about the calculus of pleasure and pain and that calculation certainly is part of rational choice. He also mentions that we derive pleasure from anticipation of future pleasure (p. 99). This is a further indication of conscious intention. On the other hand, he immediately adds that, in our ordinary affairs, we make these calculations almost unconsciously (p. 100). Francis Y. Edgeworth followed Jevons in leaning on Bentham's principle of greatest happiness, but considered two different versions of this principle: the ethical and the economic. He called the former 'utilitarian' and the latter 'egoistic'. According to Edgeworth the scope of economics is limited to self-interested -51utility-maximisation. In his well-known statement, 'the first principle of Economics is that every agent is actuated only by self-interest' ([1881] 1967:16). As things turned out, however, also the utilitarian version would become a concern of economists. Edgeworth's utilitarian calculus may be conceived of as an early contribution to welfare economics. More important, from a narrowly scientific point of view, Edgeworth was first to introduce the idea of indifference curves (pp. 21ff), thereby creating the possibility for an alternative mathematical representation of economic theory. Edgeworth's distinction between an economical and a utilitarian calculus was based on a distinction between 'egoistic' and 'universalistic' hedonism made by Henry Sidgwick in his monumental and influential The Methods of Ethics (1874). There is no exact correspondence, however, since Sidgwick conceived of both as ethical doctrines to be distinguished from 'psychological hedonism'. The latter corresponds to Edgeworth's egoistic principle, which is also the first principle of the science of economics. Sidgwick was of another opinion, however. He defended universal hedonism, or utilitarianism, as an ethical theory, but rejected egoistic hedonism. Benevolence, not self-interest is the centrepiece of common sense morality and, therefore, of ethics. But there would be little point in defending universal hedonism if human nature were entirely dominated by psychological hedonism. Because of this, Sidgwick went to great length in order to rebut the latter assumption (Sidgwick [1874] 1981:42ff, 199ff, 497ff). It would still be possible, of course, to use self-interest as a simplifying assumption for the purposes of economics, but Sidgwick rejected even this use of psychological hedonism. While admitting that economics has to use simplifying assumptions (Sidgwick, 1885:37), he denied that it has to use the assumption of strict self-interest. All that the deductive reasonings of English economists supply is a method of analysing the phenomena and a statement of the general causes that govern them, and of the manner of their operation. In this analysis, no doubt, the assumption is fundamental that the individuals concerned in the actual determination of the economic quantities resulting from free exchange will aim,

ceteris paribus, at getting the most they can for what they sell and giving the least they can for what they buy. (Sidgwick, 1885:34) The reason this assumption does not imply self-interest is that individuals trying to get the most they can when selling and giving the least they can when buying, may do so for the benefit of their family, their friends, or some other people, rather than for their own benefit (p. 29). Sidgwick, then, appears as a precursor of Wicksteed's principle of non-tuism. Instead of self-interest, economics relies on the assumption of wealth-maximisation: Other things being equal, they always prefer more to less (Sidgwick [1883] 1901:46). -52The first and most fundamental [assumption] is that in a state of economic freedom, all persons engaged in industry will, in selling or lending goods or contracting to render services, endeavour, other things being equal, to get as much wealth as they can in return for the commodity they offer. This is more briefly expressed by saying the Political Economy assumes the universality and unlimitedness of the desire for wealth. (Sidgwick [1883] 1901:41) Sidgwick does not express any manifest belief in methodological individualism. He does talk about 'individualism or economic egoism' to designate the nature of economic man ([1883] 1901:34) and he often refers to a free market economy as the 'individualistic organization' of industry, or society (pp. 44, 591); still this does not imply methodological individualism. This principle seems to be implicit, however, in the first quotation from Sidgwick, above, and it may underlie his critique of organicist sociology (Sidgwick, 1885:41-57). Philip Wicksteed was less committed to utilitarianism, and closer, in some respects, to Austrian than to British marginalism. In his first contribution to economics, The Alphabet of Economic Science (1888), he was still exploring the field opened up by Jevons, Walras and Marshall and, consequently, much concerned with 'marginal utility', yet he was much more interested in the rational choices made by individuals comparing the marginal utility of various goods (Wicksteed [1888] 1970:51ff). 11 His paradigm of a rational economic agent is the house-holder, which, as it happens, is usually a housewife: The clever housekeeper has a delicate sense for marginal utilities, and can balance them with great nicety. She is always on the alert and free from the slavery of tradition. She follows changes of condition closely and quickly, and keeps her system of expenditure fluid, so to speak, always ready to rise or fall on any one of innumerable and ever shifting, expanding and contracting channels through which it is distributed, and so always keeping or recovering the same level everywhere. She keeps her marginal utilities balanced, and never spends a penny on A when it would be more effective if spent on B; and combines the maximum of comfort and economy with the minimum of 'pinching'. (Wicksteed [1888] 1970:126) Wicksteed is also more individualistic than the other British marginalists. Like the Austrians, he insists that 'we must make the relative intensity of the desires and wants of the individual our starting-point' (p. 77). Consequently, he starts his analysis with the case of Robinson Crusoe. From this individualistic point of view, it is not legitimate to compare the desires and wants of different individuals and, hence, to arrive at a utility function for the whole community, conceived as a unity. Economics is a science of a 'catallactic community … in which the individuals freely exchange commodities one with another, each with a view to -53making the enjoyment he derives from his possessions a maximum' (p. 79, note).

12

In Wicksteed's major work, The Common Sense of Political Economy (1910), utility-maximisation is pushed a bit further into the background. Economics is now based on a 'psychology of choice between alternatives' ([1910] 1933:2f). For the purposes of economic theory, each individual is endowed with a single scale of preferences encompassing all objects of desire (pp. 32-6). The economic problem confronting each individual is how to administer limited resources in the choice between alternatives according to his/her scale of preferences. Wicksteed is aware that choice is not always deliberate and not always rational, but maintains that the principle of price is always active (p. 28). Wicksteed's real point of departure is the household, not the individual, but he assumes that it is administered by an individual in the form of a housewife. The end of economic analysis, however, is to explain the organization of industry and commerce. As in his first work, he calls it a 'catallactic community', but he also describes it as a 'spontaneous organisation', made up of 'spontaneous relations' (pp. 15f). The 'aggregate', or combined, result of the actions of all individuals in this catallactic community is called, with a term borrowed from mechanics, a resultant. (see, e.g. pp. 5, 162, 167). Wicksteed is critical of the idea of economic man acting from a specific economic motive. Economics is not based on the assumption of a specific motive at all, but on a specific, impersonal, economic relation called 'non-tuism'. For the purposes of economic science there is no need to assume that individuals are self-interested. They may very well act from altruism or benevolence. The only assumption needed is that individuals are not altruistic or benevolent towards parties to exchange, but that they try to strike the best bargain they can in their economic transactions. 'The economic relation does not exclude from my mind everyone but me, it potentially includes every one but you' ([1910] 1933:174). Wicksteed knows, of course, that economic relations are usually 'embedded' in social relations of various sorts, but defends the simplifying assumption of isolated economic relations for the purposes of economic science (pp. 194ff). 13 Economics, then, is not based on assuming a particular motive such as self-interest, or utilitymaximisation, still this does not mean that it is free from psychology (Wicksteed [1914] 1933:780): 'If political economy is the science of wealth, then it deals with efforts made by man to supply wants and satisfy desires. "Want," "effort," "desire," "satisfaction," are each and all psychic phenomena' (Wicksteed [1914] 1933:766). It is equally obvious, however, that the economist is not engaged in doing psychology. Following John Neville Keynes, Wicksteed argues that economics takes psychological principles as its point of departure, rather than subjecting them to investigation. But the ultimate laws of economics are psychological and 'it may be argued that political economy is largely, or even prevailingly, applied psychology, so that the economist must from first to last realise that he is dealing with psychological phenomena, and must be guided throughout by psychological considerations' (p. 767). Alfred Marshall (1842-1924) was probably the most influential of the British -54neoclassical economists, at least in the long run, but he was not altogether orthodox in his outlook. Marshall was less prone than other neoclassical economists to engage in abstraction and insisted that economics is about real men and women as members of society and not about an abstract economic man acting in splendid isolation (Marshall [1890] 1920:12-23). More than other neoclassical economists, Marshall took an interest in the German Historical School of Economics and in sociology, and tried to make use of some of its ideas (Coase [1975] 1982:412). One obvious sign of this influence is that Marshall rejected the orthodox view of human nature as a constant ([1890] 1920:3ff, 622, 630f). Another sign is that Marshall conceived of his own theory as holistic, or organicist, rather than as individualistic (pp. 20f, 637). 14 Unlike the other British marginalists, he also advocated a development of economic theory in a more evolutionary direction (Foster, 1993). Marshall wished to play down the break with classical economics and accused Jevons for exaggerating discontinuity between classical and marginalist economics. He denied that value is altogether determined by utility and not at all by cost of production. 'We might as reasonably dispute whether it is the upper or the under blade of a pair of scissors that cuts a piece of paper, as whether value is governed by utility or cost of production' (Marshall [1890] 1920:290). He also rejected Jevons's claim that the theory of consumption is the scientific basis of economics. Economics is a science of human action and of choice, not of wants, or of utility. Wants are of interest, only to the extent that they manifest themselves in the use of money for their satisfaction.

The existence of the measuring rod of money is the basis of economics as a science and the reason for its superiority to the other social sciences. Marshall, then, might be seen as a progenitor of the idea of starting from revealed preferences, rather than from the psychological basis of choice. Economics, then, is a science of action and of choice as manifested in the use of money on the market. But this does not mean that Marshall conceives of all action as the result of deliberate choice. When we speak of the measurement of desire by the action to which it forms the incentive, it is not to be supposed that we assume every action to be deliberate, and the outcome of calculation. For in this, as in every other respect, economics takes man just as he is in ordinary life: and in ordinary life people do not weigh beforehand the results of every action, whether the impulses to it come from their higher nature or their lower. (Marshall [1890] 1920:17) According to Marshall, much of ordinary life is governed by habit and custom, but he also suggests that most customs have been adopted and survive because they are rational, or functional, especially in the modern world ([1890] 1920:18f; 1885:48ff). It is a thesis of Marshall, that there has been a historical development from a society dominated by custom, to a society increasingly dominated by deliberate choice (Marshall [1890] 1920:1-11, 602-23). A -55consequence of this thesis is that the theory of rational choice is of wider scope in modern than in traditional society. With all these provisos, it should finally be admitted that the main legacy of Alfred Marshall is as a founder of individualist neoclassical economics. It may be argued that Marshall's methodology rested upon two pillars: the principles of substitution and continuity (cf. Boland, 1992: chs 2-3). According to the first, every economic agent will try 'to obtain better results with a given expenditure, or equal results with a lesser expenditure' (Marshall [1890] 1920:295). In other words: individuals are constrained maximisers. The principle of continuity says that everything is relative and a matter of degree (314f). Most importantly, the principle of continuity applies to time. Thus there is only a difference of degree between the long run and the short. In the short run, both technology and social institutions are exogenously given as constraints on maximisation. In the long run, however, they themselves may be treated as endogenous variables subject to constrained maximisation. Which variables are conceived of as exogenous and endogenous is entirely relative to the time-perspective and to their stability over time. Those 'variables' that are stable over long periods of time, are treated as exogenously fixed conditions. Although the proximate causes of the chief events in history are to be found in the actions of individuals, yet most of the conditions which have made these events possible are traceable to the influence of inherited institutions and race qualities and of physical nature. (Marshall [1890] 1920:602) It seems to me that Marshall represents what has been later called institutional individualism (see chapter 6). His way of tackling the problem reminds one of the new institutionalism in economics (see chapter 8), which is not surprising, since he has been a major influence on at least one of its branches, namely the Chicago School. I believe there is a difference, however. Whereas Marshall suggested that we should try to maximise the number of exogenously fixed conditions (see Boland, 1992:27ff), the Chicago School tries to endogenise as much as possible. The strategy of the former may be described as institutionalistic and that of the latter as individualistic. In the beginning of the nineteenth century, economics was gradually to free itself from its dependence upon utilitarianism, and turn into a theory of rational choice, more or less drained of psychological content (see Stigler, 1950). Part of the responsibility for this development lies with the other branches of marginalism: the Austrian and Lausanne schools of economics. I believe it was mainly the Austrians, who turned economics from utilitarianism to rational choice (see chapter

4), while the Lausanne school paid virtually no attention at all to the individual, except as a cog in the lifeless machine of the market (see pp. 241-50). Of great importance in this development was also the mathematical-technical side of the matter. The first important steps were apparently taken by Irving Fischer and Vilfredo Pareto in the beginning of the 1890s. -56Other figures who contributed to this development were Gustav Cassel and Eugen Slutsky. The final step was taken by John R. Hicks and Roy G.D. Allen in their article 'A Reconsideration of the Theory of Value' (1934). According to them (p. 52), the most important figure in the replacement of the concept of utility by that of a scale of preferences was Vilfredo Pareto, the successor of Leon Walras in Lausanne (see also Stigler, 1950:386ff, and Marchionatti and Gambino, 1997). It is a bit surprising, therefore, that Lawrence Boland (1982:27ff) should single out Pareto's position, among all economists, as an example of psychologism. However, this is not to suggest, that he is entirely wrong to do so. In Pareto's main sociological treatise, The Mind and Society ([1916] 1963:1442), we read: 'All human conduct is psychological and, from that standpoint, not only the study of economics but the study of every other branch of human activity is a psychological study and the facts of all such branches are psychological facts'. This passage is quoted by Lawrence Boland (1982:27) at the beginning of a chapter on methodological individualism, where he suggests that Pareto was a proponent of psychologism. But was he? It depends, of course, upon what you understand by 'psychologism', but I do not think that Pareto is a very good example of psychologism in economics. The passage quoted by Boland is from a note, where Pareto is really more concerned to play down the importance of psychology for the science of economics (see also pp. 20f, 324), but he might also have quoted the following passage from his main work on economics, Manual of Political Economy: Clearly psychology is fundamental to political economy and all the social sciences in general. Perhaps a day will come when the laws of social science can be deduced from principles of psychology, just as some day perhaps the principles of the composition of matter will give us all the laws of physics and chemistry by deduction; but we are still very far from that state of affairs, and we must take a different approach. (Pareto [1909] 1972:29) This is the programme of reductionism, in general, and of psychologism, in particular, but it is not a programme that Pareto recommends, as can be seen from the last sentence. And it is not his own procedure. Being a follower of Walras, Pareto's psychologism is minimalistic indeed. According to Pareto, the economist is not interested in the tastes of individuals (Pareto [1909] 1972:95). Individuals may be represented by their indifference curves. 'The individual can disappear, provided he leaves us this photograph of his tastes' (p. 120). 15 The relation of economics to psychology has been a constant bone of contention. While most economists deny that economics has anything to learn from psychology, there have always been dissenters who maintain the opposite. Some of the former go as far as to deny that economics in any way depends upon psychological knowledge. I believe that this view is mistaken (see pp. 33136). It is rather a matter of the extent to which economics depends on psychological -57knowledge and what kind of psychological knowledge it is. Whether it should be based on detailed knowledge about human behaviour derived from the science of psychology, or upon some simple assumptions derived from common sense. I suggest that we make a distinction between thin and thick versions of psychologism. Thin psychologism is minimalistic, and makes use of very simple psychological assumptions, like those about economic man. It does not rely on any acquaintance with the science of psychology. Thick psychologism, on the other hand, makes use of more detailed knowledge about the motives and reasoning of human beings. An important source of this more sophisticated knowledge is, of course, the science of psychology. The psychologism of Pareto was a thin version of this doctrine.

Pareto's main contribution to individualism, was not his psychologism, but his denial of the possibility of interpersonal comparisons of utility and his famous idea of optimality, commonly called Pareto optimality, or Pareto efficiency. The latter idea is one of the central pillars of the individualist tradition in normative economics and political philosophy. Its basis, the denial of the possibility of comparing the utilities of different individuals is also a characteristic mark of individualism, but not of utilitarianism (despite the fact that Jevons also denied this possibility). Among economists, it is typically the most outspoken methodological individualists, the Austrians, who deny the possibility of comparing the utility of different individuals. The reason, of course, is that it blocks the possibility of constructing a collective utility-function and, more importantly, of a collectivistic politics, based on such a utility-function. The intellectual roots of this view are, I believe, in German qualitative individualism, which is a source, not only for Austrian individualists, but also for Pareto (cf. Carroll, 1973).

German psychologism In chapter 1, we saw that thinking about the individual and society in nineteenth-century Germany was dominated by historicism. It is perhaps paradoxical that the science of psychology should first emerge in this intellectual context, and that it should take the form of a natural, rather than a human, science. Nevertheless, it did, but not without a fight. The natural and experimental science of psychology met with strong resistance from the start and, in the end, there was a split between an experimental and explanatory psychology, on the one hand, and a phenomenological and descriptive psychology, on the other. The latter was conceived of as the foundation upon which all human sciences rest. The implication was a kind of psychologism, that was the most common version of methodological individualism in sociology (see chapter 5) before the rise of rational choice sociology (see chapter 10).

The rise of psychology It is commonly agreed that psychology as a science, or at least as an academic discipline, originated in Germany in the middle of the nineteenth century. It had -58two roots; one in philosophy, the other in natural science. Of these, the latter was the more important in turning psychology into a science, but institutionally speaking, psychology emerged as a sub-discipline of philosophy. There were, for quite some time no separate chairs in psychology. Psychologists competed with philosophers for chairs in their discipline. Like a young cuckoo, the science of psychology threatened to crowd out the philosophers from their nest. Or, so it seemed to philosophers proper, who mounted a counterattack in the form of anti-psychologism. Armed with the mighty weapon of logic, the philosophers eventually succeeded in throwing the psychologists out of their discipline. This story is told in much detail, and in a persuasive manner, by Martin Kusch (1995). In a larger perspective, it is just another chapter in the play of group interests which drives the process of the specialisation and differentiation of scientific knowledge. In Great Britain, as we have seen, philosophy was largely psychologistic. This was not the case in Germany: not even at the start. German philosophy in the nineteenth century was largely antipsychologistic, and this explains some of the animosity, but even so, it did contribute to the emergence and development of the new discipline. It is virtually impossible to say anything at all about German philosophy without going back to Immanuel Kant. Unlike John Stuart Mill in England, Kant denied that philosophy depends upon psychology. Pure logic, for instance, 'has nothing to do with empirical principles, and does not … borrow anything from psychology … Pure logic is a body of demonstrated doctrine, and everything in it must be certain a prior' ([1781/7] 1965:95). He also denied that psychology is possible as a science in its own right. In Kant's terminology, only an 'empirical' psychology, but not a 'rational' psychology is possible (328ff). 'This is because mathematics is inapplicable to the phenomena of the internal sense and their laws, unless one might want to take into consideration merely the laws of continuity in the flow of this sense's internal changes' (Kant [1786] 1970:8). It might be added that, for Kant, science means natural science and quantification is its distinguishing mark. The

reason why psychic phenomena are not quantifiable, in its turn, is that psychic experience exists only in time, but not in space. Perhaps, this says more about Kant's concept of science, than about the prospects of psychology. According to Kant, chemistry also fails to qualify as a science. I suspect that Kant's view of mental phenomena continued to play some role in the discussions about the possibility of measuring and comparing the utility of different individuals, which has been so important in welfare economics. Despite Kant's own doubts, some of his disciples tried to establish psychology as a science (see Leary, 1978), and, ironically, two of them, Jacob Friedrich Fries (1773-1843) and Friedrich Eduard Beneke (1798-1854), may have been first to advance and defend psychologism in philosophy (Notturno, 1985:12). More well known is Friedrich Herbart (1776-1881), who argued, against Kant, that psychological experiences are, indeed, quantifiable. His most famous thesis was that the -59intensity of various sensations tend towards equilibrium. A change in the intensity of one sensation is offset by changes in other sensations. At the beginning of the nineteenth century, Kant was replaced by the German idealists, Johann Gottlieb Fichte (1762-1814), Friedrich Wilhelm von Schelling (1775-1854) and Georg Wilhelm Friedrich Hegel (1770-1831), as the dominant philosophers of the epoch. The tenor of their philosophy was even more anti-psychologistic than that of Kant. While psychology is a science of the subjective experience of individual human beings, German idealism was holistic and objectivistic. From the latter point of view, the approach of psychology appeared as limited, at best. According to the German idealists, the mind of the individual is but a moment in the development of the absolute spirit. Even so, it made some contributions to the burgeoning science of psychology. First of all, it gave philosophical legitimacy to social psychology as a special branch of the new science. In Germany, social psychology took the special form of folk psychology (Völkerpsychologie). 16 Second, Fichte, in particular, emphasised the active side of human beings, as a manifestation of will. This theme was developed by other philosophers, such as Arthur Schopenhauer and by Friedrich Nietzsche, in a more individualistic direction, but it also made an impact on psychology (Leary, 1980). The main root of scientific psychology, however, was natural science. Two important figures were Ernst Heinrich Weber (1795-1878) and Gustav Fechner (1801-87), who both - but especially the latter - contributed to the famous Weber-Fechner law of psychophysics. According to this law, the smallest notice-able difference in the intensity of sensations increases in proportion to this intensity. The explanation for this fact is that the intensity of our sensations increases at a slower rate than the increase in the stimuli which causes the sensation. The most important natural scientist behind the development of scientific psychology, however, was Hermann von Helmholtz (1821-94), who specialised in the investigation of the functioning and activity of our senses and muscles. Part of Helmholz's importance lies in the fact that he was the teacher of Wilhelm Wundt, who is considered by many the real founder of psychology as a science. Mention should, finally, be made of Hermann Lotze (1817-81), who was a philosopher and successor of Herbart, but who was trained in medicine and tried to accomplish a marriage between psychology and physiology. Among Lotze's pupils was Franz Brentano, who might be considered a co-founder of scientific psychology. The emergence of psychology was gradual, but there is reason to assign a special importance to the year 1874. In this year two books of particular importance for the establishment of psychology as a science were published (see Titchener, 1921), namely Wilhelm Wundt's Grundzüge der physiologischen Psychologie (Lectures on Human and Animal Psychology) and Franz Brentano's Psychologie vom empirischen Standpunkte (Psychology from an Empirical Standpoint). Wilhelm Wundt (1832-1920) was an incredibly productive writer and, in -6

addition, a good organiser, who created the first laboratory for experimental psychology in Leipzig in 1879. He did more than anyone to establish psychology as an academic discipline and therefore is often mentioned as the founder of psychology. As I have already mentioned, his background was in physiology and he always considered psychophysics an important part of psychology. The central part, however, was the study of mental phenomena themselves, and for the grounding of this part, he relied heavily on the associationist psychology of James and John Stuart Mill. It might be noted that he borrows the idea of mental chemistry from the later Mill, but calls it 'psychic synthesis' (Wundt, 1874:484). Also this part, however, was to become part of experimental psychology. Eventually, Wundt would become much interested in Völkerpsychologie. 17 In the first stage of his career, Wundt appears as a follower of Mill also in matters concerning the logic of the human sciences (Geisteswissenschaften). In the first edition of his own Logik (1883), Wundt consistently maintains that (individual) psychology is the foundation of the human sciences (pp. 478ff, 572). The latter establishes facts of a singular, or generic, nature, but it takes psychological laws to explain them and the reason is that only psychological laws are causal (pp. 500, 514-18, 541). Statistical regularities, for instance, are not causal, but only empirical, and, therefore, in need of a causal explanation in terms of psychological laws (pp. 77-9). A significant difference between Wundt and Mill is that the former makes an important distinction between history and social science. In the case of sociology, he follows Mill closely, except in his opinion of Comte, which is much more negative. Wundt sees no justification for a science of sociology, à la Comte, which he dismisses as philosophy of history (p. 568f). Like most Germans, he is also somewhat less impressed by the achievements of abstract-deductive economics (pp. 586ff). As a German, finally, he assigns an important place to hermeneutics, or the art of interpretation, in the humanities (pp. 518ff). In his Ethics, however, written only three years later (1886), Wundt has turned into a critic of 'the one-sided individualism of the Enlightenment' (p. 394) and of utilitarianism (p. iv). He still maintains that psychology is an important aid to the social sciences and history, but now it is Völkerpsychologie, not individual psychology, which provides the foundation. As we have seen (p. 35), Wundt's Ethics had a profound effect upon the sociologist Emile Durkheim and its place is in the history of holism, rather than in that of methodological individualism. Although Durkheim tried to deny it, Wundt is most probably the source of his idea of 'creative synthesis'. As I have already suggested, Wundt took the idea of psychic synthesis from Mill and used it to explain novelty in the minds of individuals. This idea is also hinted at in the first edition of his Logik (1883:523f), where he talks about 'the creation of psychic energy' in individuals. It is only in the second edition of this work (1895:267-97), however, that creative synthesis (schöpferische Synthese) becomes an important topic and Wundt now applies this idea to cultural phenomena that originate in a community of individuals, rather than in an individual mind. -61From the 1880s to the end of his life, Wundt moved progressively away from individual psychology and individualism to Völkerpsychologie and social holism. In the preface to the posthumously published fourth edition of Logik (1921), his son Max Wundt writes that, his father's last concern was to overcome individualism (Wundt, 1921: viii). Franz Brentano was a scholar of a somewhat different bent from Wundt. His training was in classical philosophy rather than natural science. As a Catholic he had a strong leaning towards Aristotle and the scholastics, but he was also well versed in modern philosophy, including Comte and Mill. Of these two, he preferred Mill, if for no other reason than that he defended psychology against the critique of Comte (Brentano [1874] 1973:33-5). For Brentano, himself, psychology is the science of mental phenomena (pp. 19, 100) and it occupies an important place of its own in the hierarchy of the sciences. Brentano goes to some length in rebutting Comte's reduction of psychology to physiology (pp. 48ff, 128f), but follows Mill in attempting to reduce philosophy and social science to psychology. 'Along with aesthetics and logic, ethics and politics also stem from the field of psychology. And so psychology appears to be the fundamental condition of human progress in precisely those things which, above all, constitute human dignity' (p. 21). With direct address to Comte, he also writes: The observation of mental phenomena in human society undoubtedly sheds light upon the mental phenomena of the individual; the opposite, however, is even more true. Indeed, in general it is a more natural procedure to try to understand society and its development on the basis of what has

been discovered about individuals than to proceed the other way around and try to shed light on the problems of individual psychology by means of the observation of society. (Brentano [1874] 1973:43) Brentano, then, seems to have been a psychologicist and, consequently, a methodological individualist, but this is not a central part of his argument. His most well-known contribution to philosophy and psychology is his argument that mental phenomena are characterised by intentionality; by 'reference to a content, direction toward an object (which is not to be understood here as a thing), or immanent objectivity'. Every mental phenomenon includes something as object within itself, although they do not all do so in the same way. In presentation something is presented, in judgement something is affirmed or denied, in love loved, in hate hated, in desire desired and so on. (Brentano [1874] 1973:88) Brentano's conception of psychology was somewhat modified towards the end of the century. In his later writings he made a sharp distinction between 'genetic', or explanatory, and 'descriptive' psychology, akin to, but not identical -62with, that made by Wilhelm Dilthey (see pp. 68, 70f). The former is an inductive science seeking laws of 'mental' phenomena. It is a 'natural science' connecting mental with physiological phenomena, in the manner of psychophysics. The descriptive psychologist, on the other hand, 'investigates the constituents of human consciousness; he seeks out its elements and attempts to determine as exhaustively as possible their modes of combination' (Brentano, 1890-1, quoted in Chisholm, 1976:92). Descriptive psychology is also an 'empirical' though not an inductive science, since it aims at discovering apodictic, or certain, truths about psychic phenomena. It is a posteriori, to the extent that it is based on experience, but a priori, to the extent that its truths are independent of experience. In this respect, Brentano's descriptive psychology complies with Kant's synthetic a priori. Most of its statements, however, are analytic. Brentano's descriptive psychology, therefore cuts across Kant's distinction between analytic and synthetic judgements (see Chisholm, 1976; de Boer, 1976). To conclude: unlike Dilthey's descriptive psychology, that of Brentano is an exact science. Brentano's ideas of a descriptive psychology and of the intentionality of mental phenomena would become important elements in the burgeoning phenomenology of Edmund Husserl, who had attended Brentano's lectures as a student (Husserl 1981:342-8). More important, for my purposes, is the suggestion that Brentano influenced members of the Austrian School of Economics. It is likely that Carl Menger got some of his Aristotelianism from Brentano, and more than likely that he got his idea of economics as an exact science from him (see Gordon, 1993:17ff and Smith, 1986:8ff). It has also been argued that Ludwig von Mises praxeological version of Austrian Economics pointed out that it owes a lot to Brentano (Chisholm, 1986:191f). If so, it is a bit odd that Mises did not recognise the similarities between his own view and that of Menger, but believed that the latter was a follower of Mill (Mises, 1969:27f). Wundt in particular, but also Brentano had a large number of students, who eventually became famous psychologists. I am not, however, aware of anyone who made an important contribution to psychologism in the human sciences. Wundt's experimental psychology also made a great impact outside Germany and, especially, in the USA. An important link between Germany and the USA was the British psychologist E.B. Titchener (1867-1927), who had been a student of Wundt and organised his own laboratory at Cornell University. This is not to suggest, however, that psychology in the USA was imported from Germany. The Unites States had a tradition of its own closely associated with pragmatist philosophy, which exerted an important formative influence on the further development of psychology and philosophy, not only in the USA, but also in Europe. The pioneer was William James, who wrote one of the classics of the discipline, The Principles of Psychology (1890), which includes the famous chapter IX on 'The Stream of Thought'. In this chapter, James rejects the analysis of the mind suggested by

associationist psychology. The mind, or consciousness, is not a passive receptor of senseimpressions, as in Locke's tabula rasa, but a function of human activity: hence, the label 'functionalist -63psychology'. 18 Equally wrong is the atomism of associationist psychology. The mind does not consist of bits and pieces put together into complex ideas. Whatever goes on in the mind is a process, or a stream. Consciousness, then, does not appear to itself chopped up in bits. Such words as 'chain' or 'train' do not describe it fitly as it presents itself in the first instance. It is nothing jointed; it flows. A 'river' or a 'stream' are the metaphors by which it is most naturally described. In talking of it hereafter, let us call it the stream of thought, of consciousness, or of subjective life. ( James, [1890] 1950:239) Also important is James's theory of the self, and on this point he is more in agreement with associationist psychology, especially that of Hume. Like the latter, he rejects the idea of the self as some kind of substance. James's analysis of the self is in terms of an 'I' and, especially, of a 'me', or empirical self. This empirical self is inclusive, indeed: In its widest possible sense … a man's Self is the sum total of all that he can call his, not only his body and his psychic powers, but his clothes and his house, his wife and children, his ancestors and friends, his reputation and works, his lands and horses, and yacht and bank-account. ( James, [1890] 1950:291) It is evident from this list that the self is, to a large extent, a social self. According to James, '[a] man's social Self is the recognition which he gets from his mates' ([1890] 1950:293). Or, properly speaking, 'a man has as many social selves as there are individuals who recognize him and carry an image of him in their mind' (p. 294). James goes on to suggest that these individuals fall into different classes, which means that an individual 'has as many different social selves as there are distinct groups of persons about whose opinion he cares' (p. 294). For each of these groups, an individual shows a different side of his/her self. What James is hinting at here is the idea of a social role, which would later become an important part of social psychology and sociology. William James influenced the symbolic interactionists, and also Henri Bergson and Alfred Schutz, to mention only some of the more important. He also influenced John Dewey, who adopted his functionalism with respect both to mind and society. Around the turn of the century, a sub-discipline called social psychology was established as a field of its own. Of particular importance in the history of social psychology is the year 1908. In that year two books with that title were published - one written by the American sociologist E.A. Ross (1908), the other by the British psychologist William McDougall (1908). Of these works, the former was largely based upon the ideas of Tarde, while the latter exhibits important influences from him in the parts that deal with social psychology rather than general psychology. Both authors claim that social psychology provides a much-needed -64and necessary basis for the social sciences, and sociology in particular (Ross, 1908:2; McDougall [1908] 1924:1-3, 16), but neither in Ross, nor in McDougall, is it possible to find an explicit avowal of psychologism. 19 The roots of social psychology are to be found both in Europe and the USA. In Europe, Völkerpsychologie was one source, even if it was closer to ethnology and social anthropology than to social psychology, as conceived of today. Two other sources were the sociologists Gabriel Tarde and Georg Simmel, who both wrote treatises on social psychology (Tarde, 1898; Simmel, 1908c). In the USA, James and Dewey had already been moving in the direction of a social psychology and

Dewey's follower Charles Ellwood wrote a 'Prolegomena to Social Psychology' (1899), which suggested an extremely holistic version of social psychology, derived from German Romanticism and from Hegel. In his later writings, however, Ellwood retreats from social holism into a more individualistic version of psychology and even into psychologism. In The Psychology of Human Society (1925), he has reached the conclusion that sociology differs from psychology in subject matter, but its explanations are 'psychological' (pp. 14ff). Unlike psychology, sociology is about groups, but since groups consist of individuals interacting with one another, and individuals consist of body and mind, or psyche, explanations of group life must be psychological. Ellwood claims that 'psychological sociology' is only a part of sociology, but his broad view of psychology makes it hard to see what would not be 'psychological'. According to Ellwood (pp. 11, 461-6), the category of the 'psychic' includes culture. Ellwood's later sociology, or social psychology is launched as a third way between the two untenable theories of society which had dominated earlier social thought: the theory of the social contract and the theory of society as an organism (pp. 453ff). Ellwood's psychology of society is a synthetic work based upon the contributions made to social psychology in the first quarter of the nineteenth century and upon contributions to sociology, which are psychologistic, or, at least individualistic. Among social psychologists, Ellwood was influenced by William James, John Dewey, James Baldwin, William McDougall, E.A. Ross and Floyd H. Allport. Among sociologists, he mentions Georg Simmel and Gabriel Tarde, but seems to be most influenced by Franklin H. Giddings, Charles Horton Cooley, W.I. Thomas, L.T. Hobhouse and Robert M. MacIver. Of these, the sociologists L.T. Hobhouse and Robert M. MacIver, in particular, may be mentioned, since they were important critics of collectivism in social science. Hobhouse wrote a well-known critique of The Metaphysical Theory of the State (Hobhouse, 1918), directed at the political philosophy of Hegel and, especially, at a book by his British follower Bernard Bosanquet: The Philosophical Theory of the State (1899). MacIver wrote a number of articles (MacIver, 1911; 1913; 1914; 1915), where he criticised both organicism and the idea of society as some kind of super-person with a social mind or collective consciousness. From Tarde, Baldwin and Ross, Ellwood took the idea of imitation as a form of learning, 20 from McDougall, the notion of instincts, and from Giddings the theory of socialisation. From Simmel and Ross he borrowed the idea that -65sociology is about groups and from the interactionists Cooley and Thomas his concept of culture, as something subjective, or psychic. From Hobhouse, MacIver and Allport, finally, he derived his critical stance towards organicism and the concept of social mind. Among the most influential works in the early history of the discipline is Floyd H. Allport's Social Psychology from 1924. In this work, Allport appears as a psychological reductionist, and as a passionate critic of all forms of the 'group fallacy' in social science. Social psychology, according to Allport is a science of the individual and, as such, a part of the psychology of the individual. There is no such thing as a psychology of the group, as distinguished from the psychology of individuals. Theories about a social mind, group mind, collective consciousness, class consciousness, general will and the like, are but various forms of the group fallacy, as is also the idea of a social organism (Allport, 1924b: 4-10). 'Behavior, consciousness, and organic life, belong strictly to individuals', which is also the reason why, according to Allport, social psychology is the foundation science of sociology (pp. 10f). 'Since all behavior phenomena of groups are reducible to mechanisms of individual behavior in the social environment, the relation of social psychology to the disciplines which treat of these higher aggregates is a fundamental one' (p. 382). Allport's psychologism is even more explicit, and its identity with methodological individualism more evident, in the article 'The Group Fallacy in Relation to Social Science'. As in Social Psychology, Allport argues that social phenomena must be explained by social psychology. The reason, once again, is that the cause of social phenomena is invariably to be found in the behaviour of individuals. Social institutions exist in the attitudes and consciousness of individuals (Allport, 1924a: 690ff). But psychologism is also justified as part of a more general reduction

programme for scientific explanation. In the hierarchy of the sciences, each science describes phenomena at their own level, but they are only explained by a description of phenomena at the level immediately below. Turning now to the sociologist, we find that the data which he describes reach the highest point of breadth and complexity. They embrace collections of individuals in organised societies, the products of such organisations, and the changes which they undergo. This is indeed a vast field for descriptive analysis. Yet for explanation sociology is in its turn dependent upon the descriptive formulas of the science just below it, namely psychology. Just as psychology has to seek its causation within the units (reflex arcs) of which its material, individual behavior is composed; so sociology must find its explanatory principles in the units (individuals) of which society is composed. (Allport, 1924a: 700) When we turn to the individual for causation, we only follow the rule of the other sciences in explaining the complex in terms of the simple, the whole in -66terms of its parts (p. 703). In the case of sociology, this means behaviour that is stimulated by the behaviour of others, that is social behaviour, as investigated by social psychology. More specifically, then, when we want to explain social phenomena, as described by sociology, it is to social psychology that we should turn. 'The work of sociology, therefore, would be to describe social aggregates and social change in terms of the group, but to explain these phenomena in terms of the social psychology of the individual' (p. 703). 21 Allport's psychologism bears a striking resemblance to that of John Stuart Mill and Gabriel Tarde. Like the latter two, he argues that theories about social wholes and their development only describes, whereas a causal explanation must be sought at the level below, that is in the laws of psychology and social psychology. As we shall see later on, this is a view shared by many methodological individualists, who argue that any theory about social wholes, or aggregates, must be provided with individualistic microfoundations. The similarity goes further than a mere quest for microfoundations. Like some recent methodological individualists (see pp. 187-89), Allport identifies the causal mechanism of social phenomena in the behaviour of individuals. 22 All theories which partake of the group fallacy have the unfortunate consequence of diverting attention from the true locus of cause and effect, namely, the behavior mechanism of the individual. They place the group prior to this mechanism in order of study, and substitute description of social effects in place of true explanation. (Allport, 1924b: 9)

Wilhelm Dilthey The new science of psychology met with much resistance, from historians and social scientists, but, above all, from the philosophers. As I have already hinted at, the reason for this was that the philosophers had most to loose by the emergence of psychology. While historians and social scientists risked only the autonomy of their disciplines, philosophers also risked loosing their jobs. Psychologists were appointed as philosophers. In addition, philosophy was threatened, not only by psychology, but by positivism and historicism, as well. There was no place for philosophy in Comte's hierarchy of the sciences and a seeming implication of his law of the three stages is that it belongs to the metaphysical stage and, thus, to history. The future belongs to the positive sciences. The effect of historicism was to turn philosophy into a kind of history of mind, or spirit, best exemplified by the philosophy of Hegel. It was in this situation that some philosophers turned to Kant as their saviour. Under the battle cry: 'Back to Kant', they fought back against all enemies trying to obliterate philosophy completely, or annex it to their own province (Willey, 1978). According to Kant, philosophy is a theory of knowledge, assuming the form of a critique of knowledge. This is an activity which cannot be reduced to any one of the scientific disciplines, not even to all of them together. Neo-Kantians showed the strongest

-67resistance against positivism, historicism and psychologism, but they were not alone. They were joined by logicians, such as Gottlob Frege, and by Edmund Husserl, the founder of phenomenology. The most common reaction, from philosophers, then, was to deny that philosophy is, in any way, dependent upon psychology, or any other discipline. Some philosophers, however, admitted that philosophy does depend on psychology, but not upon experimental psychology. The main example of this reaction was Wilhelm Dilthey, who was a pupil of one of the founders of Völkerpsychologie, Moritz Lazarus. Dilthey wanted to build a new foundation for the human sciences in the form of descriptive psychology, to be distinguished from the explanative psychology of the professional psychologists. Dilthey's first important attempt to lay a new foundation for the human sciences was in his Introduction to the Human Sciences (Einleitung in die Geisteswissenschaften, 1883), a work that was not far behind Comte's Cours de Philosophie Positive and Mill's System of Logic in terms of influence upon the human sciences. To some extent, it was also written as a response to the works of Comte and Mill. The main thesis of Dilthey is that there is a fundamental difference between the natural and the human sciences ([1883a] 1989:60ff, 80f). While the former deal with external reality, which can only be inferred from experience, the latter deal with inner experience itself. Because we have direct access to our inner experience, the human sciences are epistemologically privileged, relative to the natural sciences. One consequence of this is that also their methods differ. In the human sciences, the method of understanding (vertstehen) plays an important role (pp. 88, 158), even if this is not at all an important theme in Introduction to the Human Sciences. 23

But Dilthey was critical also of many aspects of historicism. He explicitly rejected the notions of Volksseele and Volksgeist ([1883a] 1989:83, 92), which were used by his teacher Moritz Lazarus, and also the idea of a social organism (pp. 83, 87, 121). There is no unity of consciousness in a people and the analogy between a society and an organism is taken much too far by historicists and sociologists alike. Dilthey, finally, denied unity also to history. There is no meaning or goal of history and there are no laws of historical development. The attempts to detect such unilinear patterns by sociology and the philosophy of history are misconceived (pp. 142ff). The rejection of the most holistic aspects of historicism and sociology, does not lead Dilthey to run to the other extreme and jump right into the camp of radical individualism. 'The fundamental error of the ancient natural-law school was to isolate individuals and then to connect them mechanistically as the method of constructing society' ([1883a] 1989:82). Dilthey wants to steer a middle course between the extremes of individualism and holism, but it is my belief, that he stays on the individualistic side of the divide, at least in his early writings. It is possible to understand his project as that of providing historicism with a new individualistic foundation (see pp. 48-52). The main idea of Dilthey was that the human sciences must be provided with a new foundation in the form of psychology. 'Analysis designates the life-unit, -68i.e., the psycho-physical individual, as the element from which society and history are formed; and the study of these life-units constitutes the most fundamental group of the human sciences' ([1883a] 1989:80). As we have already seen, however, Dilthey rejected the extreme individualism of natural law, which takes its point of departure in the isolated, or abstract, individual. It is part of his foundation of the human sciences that individuals interact: The units that act on one another in the marvellously complex totality of history and society are individuals, psychophysical wholes, each of which differs from every other, each of which constitutes a world, for the world exists nowhere else but in the representations of such an individual. (Dilthey [1883a] 1989:80f)

There is, I believe, an obvious reference to Leibniz's 'monadology' in this quotation, and there is no doubt about the influence of Leibniz on Dilthey, but if Leibniz's monad has no windows, Dilthey's individual has. 'Thus the individual is found within it [society] in interaction with other elements' ([1883a] 1989:87). This interaction, moreover, is not 'mechanical' as in the case of neoclassical economics, but social, and for Dilthey this means symbolic or at least meaningful. It would probably not be too wide off the mark to conceive of Dilthey as the first symbolic interactionist, but as we shall see later, he was also a progenitor of phenomenology. A consequence of seeing society as meaningful interaction between individuals is that each individual can only be understood in the context of systems of interaction. 'The individual is … an element in the interactions of society, a point of intersection of the various systems of these interactions, reacting to the influences of that society with conscious intentions and actions' (p. 89). According to Dilthey, then, the human sciences are concerned with the intentional actions of human beings. He goes on to point out that intentions, or motives, are different from other causes, but he does not deny that they are causes. 'The interaction which occurs here, namely, the motive which arises in consciousness, differs from every other cause' ([1883a] 1989:89). On this point he takes a position similar to that of Max Weber. The interaction of individuals in history gives rise to three classes of objects, which the human sciences need to study: 'the external organization of society; the cultural systems within it, and individual peoples. Of all these enduring entities that of a people as a whole is the most complex and difficult' (Dilthey [1883a] 1989:92f). The sciences devoted to the study of these objects have to introduce, what Dilthey calls, 'second-order concepts' and the theories arrived at are, consequently, 'second-order theories', relative to individual psychology (pp. 92, 96). By secondorder concepts, Dilthey understands all concepts developed within the human sciences, such as 'work', 'value', 'price', 'status', 'role', etc. There is no question, however, but that the second-order concepts and theories, used by second-order human sciences, such as philology, economics and ethnology, make sense only to the extent that they refer to psychic facts about the lived experience -69of individuals (pp. 114ff). All human studies become scientific 'by establishing the reference of their concepts and propositions to psychological and psychophysical facts' (p. 129). When this is achieved, 'the sciences of the external organization of humanity would be based upon concepts of psychic and psychophysical facts and upon propositions about them which correspond to the concepts and propositions on which the sciences of the cultural systems are based' (p. 118). I hope it is clear by now that Dilthey saw the basis of the human sciences in psychology. At the beginning of my presentation of Dilthey, I also mentioned that this psychology is called descriptive, as distinguished from the explanative psychology of Mill and Wundt. What the former amounts to is not made clear, except by what is indicated by the label 'descriptive'. The latter, however, is characterised by its attempt to explain the whole of human reality by means of a few simple assumptions, or hypotheses, about human nature ([1883a] 1989:84). Dilthey's idea of a 'descriptive' psychology was a bit more developed in Ideas Concerning a Descriptive and Analytic Psychology (1894). Once again, it is contrasted with the explanatory psychology of associationism and various types of materialism, that seeks to explain the constitution of the psychic life [Seelenleben] with the help of its components, energies and law, just as physics and chemistry explain those of the corporeal world … By explanatory science is to be understood every subordination of a domain of experience to a system of causality [Kausalzusammenhang] by means of a limited number of well-determined elements (i.e., the components of the system). (Dilthey [1894] 1977:23) A first characteristic of explanatory psychology, then, is that, like the natural sciences, it seeks to give a causal explanation of psychic life with the help of a combination of hypothetical laws. 'In the human studies, to the contrary, the nexus of psychic life constitutes originally a primitive and fundamental datum. We explain nature, we understand psychic life' ([1894] 1977:27). A second

characteristic of explanatory psychology is that it is 'constructive', or 'synthetic'. With another term, equally apt, and often used to describe British associationist psychology, we might call it 'atomistic'. In sharp contrast to explanatory psychology, descriptive psychology is holistic. It is holistic because experience, immediately given, lived experience is holistic. '[L]ife exists everywhere only as a nexus or coherent whole' (p. 28). Psychic life-process is originally and above all, from its most elementary forms to the highest, a unity. Psychic life does not grow together from parts; it is not composed of elements; it is not a composite nor is it a result of the collaboration of sensory or affective atoms: it is originally and always a comprehensive unity. (Dilthey [1894] 1977:92) -70That psychic life is a whole does not imply, however, that social life or cultural life is also a whole, and it is not at all unusual that methodological individualists are psychological holists in the manner of Dilthey (cf. Rickman, 1979:9-11). The reason for this is, of course, that psychic life - even if a whole - is contained in individual human beings. There are purposive systems of social life, such as economic life, law, art and religion, which may be studied apart. 'But the ensemble of such a system is nothing other than the psychic nexus, of the people who cooperate in it. It is therefore, in the end, psychological' (Dilthey [1894] 1977:40). For Dilthey, the human sciences start and end in the psychic life of individuals. This is, in the first instance, an epistemological thesis. But it is also an ontological thesis. While the natural sciences point towards an external reality, existing independently of the lived experience of individuals, the human sciences do not. Society and culture exist nowhere, except in the immediately given, lived experience of individual human beings. This is subjective idealism, at least with regard to society and culture, and to that extent congruent with phenomenology. I mentioned above that Dilthey saw explanatory psychology as synthetic. Consequently, descriptive psychology is analytic. If psychic life is given to experience as a whole, it is the task of descriptive psychology to analyse this whole in its various parts ([1894] 1977:51ff). 'In the service of this descriptive activity stand the logical operations of comparing, distinguishing, establishing degrees, separating degrees, separating and associating, abstracting, connecting parts into a whole, deducing similar relationships from particular cases, analyzing individual events and classifying' (p. 56). It is possible to see, in these tasks of descriptive psychology, a point of contact with phenomenology. 24 It is a common observation among students of Dilthey that his view of psychology and its relation to the human sciences changed towards the end of his life. The direction of this change was away from subjectivism and individualism towards a more objectivistic and holistic view; from psychological experience to cultural hermeneutics. 25 A clear sign of change can be found in the article on 'The Development of Hermeneutics' (1900). The source of knowledge about culture is no longer the lived experience of individuals, but the expressions of others and, especially of written records. Hermeneutics is defined as 'the methodology of the interpretation of written records' ([1900] 1976:249). Such interpretation invariably takes the form of a circle: The whole of a work must be understood from individual words and their combination, but full understanding of an individual part presupposes understanding of the whole. This circle is repeated in the relation of an individual work to the mentality and development of its author, and it recurs again in the relation of such an individual work to its literary genre. (Dilthey, [1900] 1976:259) What is only hinted at in the article on hermeneutics, however, is more fully developed in 'The Understanding of Other Persons and Their Life-Expressions' -71-

c. 1910). Dilthey here makes a distinction between two classes of life-expressions: (1) concepts, judgements and thought structures and (2) actions ([1927] 1986:153). He also makes a distinction between elementary and higher forms of understanding of life-expressions. By elementary understanding, Dilthey means understanding of 'single life-expressions', for instance an assertion or a facial expression. A third example would be 'elementary acts of which continuous activities are composed, such as picking up an object, letting the hammer drop, cutting wood with a saw' (p. 154). 26 The higher form of understanding also goes in two directions: either it seeks the relation between product and producer, or it is oriented to the relation between expression and what is expressed, which is not at all reducible to what the producer intended to express. When understanding is oriented to the producer of a life-expression, understanding takes the form or 'recreation', or 're-living' (Nacherlebnis). This is not, however, a psychological form of understanding. According to the later Dilthey, all understanding rests on the objective mind. 'It is the medium in which the understanding of other persons and their life-expressions takes place' (p. 155). A sentence is intelligible because a language, the meaning of words and of inflections, as well as the significance of syntactical arrangements is common to a community. The fixed order of behaviour within a culture makes it possible for greetings or bows to signify, by their nuances, a certain mental attitude to other people and to be understood as doing so. In different countries the crafts developed particular procedures and particular instruments for special purposes; when, therefore, the craftsman uses a hammer or saw, his purpose is intelligible to us. In this sphere the relation between life-expression and mental content is always fixed by a common order. This explains why this relation is present in the apprehension of an individual expression and why without conscious inference based on the relation between expression and what is expressed - both parts of the process are welded into a unity in the understanding. (Dilthey [1927] 1986: p. 156) Dilthey's commitment to the idea of an objective mind is clearly a move away from psychologism, at least in epistemology and methodology, but is it also a break with ontological and methodological individualism? H.P. Rickman, one of the authorities on Dilthey, argues that he made no metaphysical claims about the entities of the objective mind (1962:42; 1979:116f). They are human creations and have an existence independent of individuals. I am not at all convinced that this is a correct interpretation of Dilthey, but I will not argue that point here. I will call attention, instead, to a decisive difference between Dilthey and the methodological individualist Max Weber. The latter made a distinction, similar to that of Dilthey between elementary and higher understanding, but he called them direct and explanatory understanding. Weber, even used exactly the same example of a woodcutter, as did Dilthey, before him. For Weber, however, explanatory understanding, does not include -72reference to culture and social structure, which it certainly did to Dilthey. For Weber, explanatory understanding is exclusively understanding in terms of the motive of the producer of the product or, more generally, of the acting individual (see pp. 100f). If the later Dilthey was a methodological individualist, therefore, he was not a methodological individualist in the sense of Weber and probably not at all.

Georg Simmel It should be clear by now that in Germany it was history that dominated the human sciences. Psychology was also established as an academic discipline, first as an explanatory natural science, but in the second half of the nineteenth century also as a descriptive science of mind and as a science of culture (Völkerpsychologie). It might be added that philosophy was still strong and encyclopaedic. In this situation, there is little wonder that sociology met with much resistance - if less than psychology - before it was accepted as an academic discipline, and that the first German sociologists had somehow to adapt to this situation. Of the two most famous German sociologists, Max Weber was also a historian, and Georg Simmel a philosopher, making important contributions to the philosophy of history. Both of them rejected French and British positivism and created their own versions of sociology, better suited to German conditions. In the case of Weber, it was an

interpretative (verstehende) sociology, in the case of Simmel a formal sociology. The impression created is that Weber owed most to Dilthey, whereas Simmel owed more to neo-Kantianism. The truth, I believe, is that it was the other way around, but certainly both Weber and Simmel were influenced by both Dilthey and neo-Kantianism. 27 In the case of Weber, however, there was a third important influence, from the Austrian School of Economics. It was this influence, in particular, which turned Weber into a programmatic methodological individualist. I have found it convenient, therefore, to present Weber in the next chapter, which is devoted to Austrian methodological individualism. Here I will concentrate on Simmel, who was a kind of psychologicist, at least for a start. Like Dilthey, Simmel was a pupil of Moritz Lazarus and, therefore, certainly familiar with his Völkerpsychologie. It is also pretty certain that Simmel owed some important ideas to the latter, especially in his early writings, which include quite a lot on the theme of psychology (Frisby, 1992: ch. 2). 28 Simmel's debt to Dilthey was even larger and it is possible to detect many interesting similarities between them. The idea that the individual is situated at the point of intersection between many social circles, or groups, is, perhaps, the most obvious one. Both Dilthey and Simmel made important contributions to the philosophy of history and made much to clarify the problem of interpretation (verstehen). 29 It has even been suggested that there is a parallel in the development of the thinkers: from psychologism to the idea of an objective mind, or culture (Oakes, 1980:57-60). One difference between them is that Simmel tried to lay the foundation of sociology, a discipline that Dilthey rejected. But, then, it should be mentioned that -73Simmel's sociology was not at all like that of Comte and much more in line with Dilthey's view of the human sciences. Simmel is sometimes classified as a methodological individualist (Infantino, 1998:95-9, 106-13, 131-34) and even as a psychologicist (Moscovici [1988] 1993:236). I do not deny that there are some good reasons for doing so, but nevertheless I believe that it is wrong. Already in an early version of his article 'The Problem of Sociology' (1895) he wrote: 'the overthrow of the individualist point of view may be considered the most important and fruitful step which historical science and the moral sciences (Geisteswissenschaften) generally have made in our time' (p. 52). Of course this is not proof enough, since Simmel may have had some extreme version of individualism in mind, but it is an indication. In my view, Simmel attempted to steer a middle course in between the extremes of atomistic individualism and romanticist collectivism, but he ended up as more of a holistic structuralist, than as a methodological individualist. Simmel's sociology is called 'formal sociology' because he was interested in the forms of social life, as distinguished from its content. The distinction between form and content he borrowed from Kant. With forms of social life, Simmel intended things like superiority, subordination, hierarchy, competition, opposition, division of labour, representation, etc. ([1908] 1909:299). There are, I believe, two possible reasons for conceiving of Simmel as a psychologistic methodological individualist. The first obvious reason is that he maintained that the content, or stuff, of society is mental, or psychic (Simmel, 1895:54; [1908] 1950:24). The other, equally obvious reason is that he maintained that the form of society takes the shape of forms of interaction, or of social relationships (Simmel, 1895:54; [1908] 1950:10, 21, 40). Society, according to Simmel, is the sum-total of 'intersubjective relations which bring it to pass that individuals become societies' (1895:61). Simmel's concept of 'society', then, is a synthesis of two views of society: 1 The intersubjectivist theory of society as being made up solely of ideas in the minds of individuals. 2 The interactionist theory of society, which says that society is made up of the sum total of interactions between individuals. If this were the end of it, Simmel would clearly be a psychologistic methodological individualist, but it is not. First of all, it does not follow from the fact that the content of social phenomena is psychic, if that is a fact, that the explanation of social phenomena must be psychological. In The Problems of the Philosophy of History ([1892] 1977:113-17) Simmel discusses the role of psychological laws in history. He takes his point of departure in the thesis that the ultimate constituents of society are human beings. Only human beings are real entities, with causal efficacy, whereas groups exist only in a secondary sense. Does it follow from this that the laws of history must be laws of individual psychology? Simmel does not want to draw this conclusion: first of -74-

all because the minds of individuals are extremely complex entities, which might be resolved into simpler elements. 'Simplicity and complexity are relative concepts'. Simmel, himself seems to take an agnostic attitude to ontology. 'Suppose there are no absolutely basic units or entities. Suppose that the definition of the unit of investigation is simply a consequence of the special criteria of each science'. If this is so, it is 'certainly not prima facie self-evident' that the 'composite phenomena of historical life are nomologically comprehensible only if they can be deduced from the established laws of individual psychology … the theoretical interests of history could permit the societal group to function as its basic "unit" of inquiry' (p. 114). Simmel agrees with the individualists that 'at least in one sense' the ultimate source of knowledge about history is 'the individual mind or personal psyche'. It is therefore, also the basic unit of historical inquiry. 'The mind is a basic unit or entity for this reason: what we call unity or uniformity is possible only as a consequence of the inner, first-person experience of the self' ([1892] 1977:115). But he adds something potentially important: 'It is not psychic unity or the mental entity as such that constitutes the historical event; on the contrary, it is the contents of mind' (p. 117). This conclusion points in the direction of Simmel's Hegelian idea of objective spirit, or in modern terminology, of culture. The development of the social freedom of the individual is correlated with the formation of an objective spirit, a wealth of superpersonal cultural products, scientific, aesthetic, and technological. These propositions and others like them may be regarded as precursors of proto-forms of structures that will eventually be the objects of exact nomological knowledge. (Simmel [1892] 1977:145f) Simmel returned the theory of objective spirit and objective culture in his Philosophy of Money ([1900] 1978:446ff), where his break with psychologistic individualism is fairly evident. Products of the objective mind (cultural products, such as buildings, machines, books, works of art, etc.) have an objective existence independent of each particular individual and exert a profound influence on individual human beings. Interaction taking place in this created cultural environment crystallises into more or less permanent social structures (pp. 170ff). These facts cast serious doubts on Infantino's attempt to find convergences between Simmel and Carl Menger. Not that it is difficult to find such convergences, but the divergences seem, to me, more significant. Take their respective theories of money. For Carl Menger, as we shall see in the next chapter, the all-important task is to explain the origin of money. For, Simmel, on the contrary, the main concern is to analyse the effects of money (pp. 228ff). In 'The Problem of Sociology' ([1908] 1909), Simmel admits that his discussion of this science 'appear[s] to be nothing but chapters of psychology, or at most of social psychology' (p. 313), but adds 'that the scientific treatment of psychical facts still by no means needs to be psychology' (p. 314). I interpret these passages as indicating that Simmel was an ontological individualist, but not a -75methodological individualist. At least not a psychologistic methodological individualist. But there are some clear indications that, in the end, Simmel gave up even his ontological individualism. Forms of interaction between individuals 'crystallise' into social structures, which take on a life of their own. More specifically, the interactions we have in mind when we talk about 'society' are crystallized as definable consistent structures such as the state and the family, the guild and the church, social classes and organizations based on common interests … The large systems and super-individual organizations that customarily come to mind when we think of society, are nothing but immediate interactions that occur among men constantly, every minute, but that have become crystallized as permanent fields, as autonomous phenomena. As they crystallize, they attain their own existence and their own laws, and may even confront or oppose spontaneous interaction itself. (Simmel [1908] 1950:9f)

In addition to individual human beings, then, there also exist social structures, which are autonomous relative to individuals. Thus, according to Simmel, society takes on a life of its own: '"Society" develops its own vehicles and organs by whose claims and commands the individual is confronted as by an alien party' ([1917] 1950:58). The result is a kind of split between individual and society, which is inconceivable to an ontological individualist. A society … is a structure which consists of beings who stand inside and outside of it at the same time. This fact forms the basis for one of the most important sociological phenomena, namely, that between a society and its component individuals a relation may exist as between two parties. (Simmel [1908] 1971:14f) The conclusion of Simmel's investigation is that '[s]ociety is a structure composed of unequal elements' ([1908] 1971:18). He offers the phenomenon of bureaucracy as a small-scale analogue of society. Typical for a bureaucracy is that it consists of a structure of positions with a predetermined function assigned to each position, irrespective of the particular person occupying that position. Society 'is a system of elements each of which occupies an individual place, a coordination of functions and function-centers which have objective existence' (p. 20). There is much in Simmel that reminds us of Marx and Durkheim, but which has no place in an individualist theory, as represented by symbolic interactionism, phenomenology, existentialism and ethnomethodology (see chapter 5). There are certain similarities between Simmel's notion of sociation (Vergesellschaftung) and Anthony Gidden's theory of structuration, but Simmel's dualistic conception of individual and society, make him clearly less individual-76istic than Giddens. Because of this dualism, Simmel is closer to the later Sartre, Berger and Luckmann and Pierre Bourdieu (see pp. 147f, 161ff, 186f), perhaps also to Roy Bhaskar. To conclude: Georg Simmel was not a psychologistic methodological individualist and probably not even an ontological individualist. It is still possible to classify him as a less radical methodological individualist. Perhaps, it is possible to conceive of him as a structural individualist (see chapter 10).

Psychologism on trial Dilthey's move away from psychologism was, at least in part, a reaction to objections raised against this doctrine by the neo-Kantian philosophers Wilhelm Windelband and Heinrich Rickert, and by the phenomenological philosopher Edmund Husserl. The most destructive critique, however, was directed at Dilthey's particular form of descriptive psychology, by the experimental psychologist Hermann Ebbinghaus. Georg Simmel was influenced both by Dilthey and neoKantianism, but was not, himself, an object of much critique. Most critique was directed at experimental psychology, but this is not my business here. In the last section of this chapter, I will focus on some reactions to Dilthey, and also on some positive contributions to psychologism in social science. At the University of Strasbourg in 1894 in his famous Rectorial Address on 'History and Natural Science', the leader of the Southwest School of neo-Kantian philosophy, Wilhelm Windelband, took issue with Dilthey's way of making a distinction between the natural and the human sciences ([1894] 1980:173). 30 The main problem with Dilthey's dichotomy seems to be that psychology belongs to both types of science (p. 174). Instead of making this distinction on the basis of a substantive dichotomy of nature and mind, we should use an epistemological distinction, in terms of cognitive interest. From this point of view, the empirical sciences can be divided into those that seek general laws and those which are interested in specific historical facts. In the well-known terminology suggested by Windelband, 'scientific thought is nomothetic in the former case and ideographic in the latter case'. In terms of this dichotomy, 'psychology falls unambiguously within the domain of the natural sciences' (p. 174).

With Windelband's distinction between history and natural science, it becomes necessary to reject also the positivist attempt to turn history into a natural science, seeking laws of historical development. Against this view, 'it is necessary to insist upon the following: every interest and judgement, every ascription of human value is based upon the singular and unique' (p. 182). The role of values was to become even more prominent in the constitution of the 'cultural sciences' by Windelband's pupil Heinrich Rickert. Rickert's much more ambitious attempt to establish a distinction between history and natural science can be found in his most important work, The Limits of Concept Formation in the Natural Science (Die Grenzen der naturwissenschaftlichen Begriffsbildung, 1902) and in the shorter Science and History (also 1902). 31 Like Windelband, Rickert was much concerned to combat various reductionisms and, -77in the first instance, those that threaten philosophy. Thus, he rejected historicism and positivism in philosophy. Psychologism was also rejected, because it is a natural science and psychologism, therefore, a form of positivism. 'In all of its essential aspects, however, ours is a logical, or a methodological and epistemological, investigation' ([1902] 1986:19). Rickert's main task, however, was to save history from being reduced to natural science, in the manner of Comte's positivism (pp. 23ff). Hence, the project of identifying the limits to natural science, once again including psychology. Rickert's distinction between history and natural science is similar to that of Windelband, but much more elaborated and refined. History and natural science are based on different cognitive interests: 'Empirical reality becomes nature when we conceive of it with reference to the general. It becomes history when we conceive it with reference to the distinctive and the individual' (Rickert [1902] 1986:54). For Windelband this distinction was absolute. Rickert, however, saw the difference as relative and preferred to talk about the method of history as individualising and that of natural science as generalising ([1902] 1986: xii). Rickert's point of departure was Kantian: there is an unbridgeable gap between concept and reality and the latter is inaccessible to our knowledge. Every form of epistemological realism, and especially the picture theory of meaning is therefore excluded from the outset. Reality is reality as perceived, or experienced, and as constructed by means of concepts. 'Reality itself, the infinite manifold of which scorns every conception, can best be called "irrational," and even this designation could be applied to it only on the grounds that it resists every conception' ([1902] 1986:52). According to Rickert, then, empirical reality is indefinite and, therefore, practically infinite. It is extensively infinite, in the sense that there are an infinite number of possible objects of knowledge and it is intensively infinite, in the sense that there are infinitely many aspects of every single object of knowledge. In order to cognitively master this infinite manifold, we use abstraction. The procedure of the natural sciences is to go searching for similarities, while abstracting from the differences of objects, including their position in space and time. Positivism assumes that this is the only scientific procedure. But, according to Rickert, there are limits to natural scientific concept formation, since it prevents us from seeing what is unique and individual about objects of knowledge. But this is exactly the cognitive interest of the historical sciences. They are interested in individual events, languages, works of art, cultures, etc, in space and time. The real problem that Rickert set out to solve was that of concept formation in history. If empirical reality is an infinite manifold and the method individualising, what kind of abstraction is used in history? Obviously, history is only interested in some of the (extensively infinite) manifold of individuals there are in empirical reality, and only in some aspects of these (intensively infinite) individuals. Rickert calls them 'historical individuals' and they comprise, not only human individuals, or personalities, but all sorts of historical particulars, such as the Renaissance, the French revolution and World War I (Rickert [1902] 1986:78-98). Rickert's solution to this problem is the so-78-

called value relevance, or value relation (Wertbeziehung). History concentrates on those individuals and those aspects of individuals to which a value, or meaning is attached by people in general, that is individuals who are considered interesting and/or important in terms of cultural values. The thesis that the knowledge interest of history is directed at 'historical individuals', then, does not imply a focus on human beings and Rickert denies that history is 'individualistic' in this sense. First of all, he rejects the 'rationalistic-teleological' historiography in which 'historical events are shown to be intended consequences produced by rational and purposive beings' ([1902] 1986:103). Those who see the setting of a conscious purpose and the conduct that follows from it as the motive force of all historical movements, and in consequence regard purpose as the explanatory principle of history, must not only see individual personalities as the chief objects of history because the setting of conscious purpose can be confirmed in them alone; as the result of this, they must also take the view that single individuals make history, so that everything becomes a product of individual intention. But we are far from advocating an individualistic conception of history in this sense. (Rickert [1902] 1986:104) Second, Rickert denies that history is 'individualistic', even if by individuals we understand historical individuals. The reason is that no historical individual, whether a person or some larger individual, can be understood in isolation from the historical nexus, or whole, of which it is a part (pp. 107ff). Like Dilthey, then, Rickert argued that historical understanding is, in a sense, 'holistic'. He also agreed with Dilthey (and Hegel) that understanding is of objective mind, or spirit ([1902] 1986:138ff). Unlike Dilthey, however, Rickert took great care to point out that objective mind is ideal and nonreal. Culture consists both of that part of reality to which meaning is attached, and this nonreal meaning, or spirit, itself. According to Rickert 'Dilthey confuses the nonreal meaningful content of culture that is situated in the realities of history with the real psychic existence that actually occurs in the mental life of single individuals' (p. 146). This accusation would have been entirely justified, had Rickert intended Dilthey's early writings, but his target is actually the theory of the human sciences that Dilthey developed in his last writings. This does not make sense to me, but the whole issue is too complex to be treated here. It seems extremely important for Rickert to distinguish culture from the psychic, or mental. A first reason for this is, no doubt, that his distinction between the natural and the cultural sciences must not be reducible to Dilthey's distinction between natural and human sciences. A second, and related, reason, I presume, is that his logical/epistemological distinction must not be reducible to a material distinction between nature and mind, or spirit. Even so, there is a sense in which Rickert falls back upon an ontology of individuals and their minds. First, his view of objective mind as nonreal, makes it possible to avoid conceptual realism and maintain that only human individuals exist ([1902] 1986: -79150f). The fact that '[m]eaningful wholes can be understood only as unities or totalities' (p. 159), does not imply that there are real wholes, irreducible to their parts. The object of understanding as nonreal meaning configuration always remains a whole or a unity. Realities, on the other hand, are decomposed into their parts for the purpose of explanation. Or, in explanation, the path leads from the parts to the whole; in understanding, it proceeds in the opposite direction, from the whole to the parts. (Rickert [1902] 1986:159) Since, for Rickert, the parts of real 'wholes' are individuals, this view is in agreement with the methodological individualism of Weber's interpretive sociology (see pp. 101f), which admits that holistic understanding is necessary as a preparation before the real sociological investigation of motives begins. Unlike Weber, however, Rickert never allowed subjective meaning to play an

important role in historical methodology. While agreeing in substance, their emphasis is entirely different. Rickert admits that historical reality is meaningful because individuals attach meaning to it and values are valid because accepted as valid by individuals, but he never attaches much importance to the subjective meaning and causal explanation. For Weber, on the other hand, the subjective meaning of human action and causal explanation in terms of motives are the core of interpretive sociology. To conclude: Rickert was a metaphysical individualist, since he conceived of objective mind as nonreal. He was not a methodological individualist, if this is understood as a principle of understanding - which, according to him, is the main task of the cultural sciences - but to the extent that the cultural sciences engage in explanation, they are individualistic. The reason for this difference may be that Rickert's methodology was intended for history, whereas Weber was engaged in the attempt to create an interpretive sociology. The most famous, and most influential, critique of psychologism came from Edmund Husserl (1859-1938), the founder of phenomenology. It can be found in the first volume - the so-called 'Prolegomena' - of his Logical Investigations (1900). Space does not admit of any detailed presentation of Husserl's argument and it is not necessary for my purposes, since his argument was directed at psychologism in philosophy. 32 Simply put, Husserl maintained that psychology has no bearing on normative disciplines such as mathematics and ethics, but leads to subjectivism, scepticism and relativism. In the second volume of (the German edition of) Logical Investigations, Husserl set out his first version of phenomenology, which, paradoxically, owed much to the descriptive psychology of his teacher Franz Brentano. 'The Logical Investigations … are a full development of Brentano's suggestions, as is a matter of course, since I was an immediate student of Brentano' (Husserl, 1977:24). The most important borrowing is the idea that mental phenomena are intentional. It also had some-80thing in common with Dilthey's epistemology and descriptive psychology, at least that is what Dilthey, himself, thought. 33 The mature version of phenomenology, however, took shape in the first decade of the twentieth century. A first groping attempt to lay a new foundation for this philosophy was made by Husserl in a series of lectures given in 1907, later published as The Idea of Phenomenology (1950). It is not easy to understand from these lectures what phenomenology really is, but it is clear that it has little to do with psychology, including descriptive psychology ([1950] 1973:5, 33ff). Phenomenology is a priori (p. 41), but not in the sense of mathematics. 'Phenomenology proceeds by "seeing," clarifying, and determining meaning, and by distinguishing meanings' (p. 46). Husserl's method is that of Descartes. Like the latter, he seeks absolute certainty and finds it in cognition. A few years later, Husserl made a new attack on psychologism in 'Philosophy as a Rigorous Science' (1911), but it is clear that he conceives of psychology as a natural science. The main fault of this naturalistic psychology is 'to set aside any direct and pure analysis of consciousness' (1981:174). This time Husserl's critique is extended to include also historicism (pp. 185ff), which 'if consistently carried through, carries over into extreme sceptical subjectivism' (p. 186). The target is Wilhelm Dilthey's 'Weltanschauung philosophy', which, according to Husserl, is bound to lead to relativism. It is doubtful whether this is really the case, but what is more interesting is that Husserl makes no recognition of Dilthey's version of a descriptive and analytic psychology, despite his knowledge about it. 34 The first comprehensive expression of Husserl's mature version of phenomenology is to be found in Ideas Pertaining to a Pure Phenomenology and to a Phenomenological Philosophy (First Book 1913). This is not the place to assume the demanding task of doing justice to Husserl's pure phenomenology. I will do no more than indicate some of the ideas, which may help us better to understand phenomenological sociology (see pp. 137-44). In our everyday life, we take the existence of an external world of physical things and other human individuals for granted. I suppose this is roughly what is understood by 'common sense' or 'naive realism'. Husserl calls it the 'natural attitude', but, according to him, it characterises not only common sense, but also the empirical, or 'experiential' sciences. The distinguishing mark of the natural attitude is that it posits a world of external, or 'transcendent', objects in space and time. In addition to cognition of matters

of fact, however, there is something Husserl calls 'eidetic seeing', or intuition of essences (Wesensschau), which is about a new sort of ideal universal objects (Eidos). The idea of a straight line in geometrics would be one example. The sciences about these objects are called the eidetic sciences and they include logic and mathematics, but also the 'pure theories of time, space, motion, and so forth' (p. 16). Pure phenomenology, as created by Husserl, is an eidetic science about essences - if different from mathematics and logic - and, like all such sciences, it is also a science about phenomena, or objects of intention, but not about a world of things beyond them, or things-in-themselves. In order to be able to attend -81only to phenomena, Husserl maintains that we must free ourselves from the natural attitude of presupposing things-in-themselves; we must put the objective world 'within brackets'. This is the method of phenomenological reduction, which is similar to Descartes's methodical doubt, except that it excludes also doubt. We simply disregard everything objective. Husserl calls it the phenomenological epoché, and it is a first preparatory step in order to reach the world of pure phenomena. The next step towards pure, transcendental, phenomenology is the intuition of essences, which I have already mentioned. This is called the eidetic reduction, because it leads from particular phenomena, such as this house, to universal phenomena and the necessary relations between them, but it is not yet the transcendental reduction which leads to the transcendental ego of pure phenomenology. In Ideas Husserl juxtaposed phenomenology to psychology and denied any common ground between them. Of course, they have something in common: both are theories of phenomena of consciousness; he even admitted that there is an eidetic psychology, but pure phenomenology is distinct from psychology and there is no phenomenological psychology. In his 'Inaugural Lecture at Freiburg in Breslau' in 1917, he told his audience that 'pure phenomenology is too separated sharply from psychology at large and, specifically, from the descriptive psychology of the phenomena of consciousness' (Husserl 1981:14). 35 In the middle of the 1920s, however, there is a new revision of phenomenology. An interesting document from this period is Husserl's lectures on phenomenological psychology, given in Paris in 1925 (Husserl, 1977). In these lectures Husserl begins by paying tribute to Dilthey and Brentano. After hailing Dilthey as a genius, he goes on to state his main critique, which is that Dilthey was more of an intuitive than analytical thinker and therefore failed to lay the foundation of a new psychology. His main complaint, however, is that Dilthey was too much of a historicist, seeking the unique and culturally relative. A phenomenological psychology, on the contrary, seeks essences and universal laws. As firmly as Mill, he believes in a universal human nature, which it is the task of phenomenology to lay bare, and which is at the bottom of all social life. All concepts of the human sciences, therefore, rest on the foundation of phenomenological psychology. Having originated in the living nexus of the human psyche, they can be understood only on this same basis. Only because there is uniformity and regularity in psychic life can they arise as forces overreaching the individual and making the same order possible for all individuals. Another significant point is their combination with the theory of knowledge. (Husserl, 1977:10) In the famous 1927 article on 'Phenomenology' in Encyclopaedia Britannica (repr. in Husserl, 1981), Husserl divides phenomenology into 'phenomenological psychology' and 'transcendental phenomenology'. What is somewhat confusing, -82however, is that phenomenological psychology seems to have almost everything in common with pure phenomenology, as construed in Ideas, except that it operates within the natural attitude (p.

29). Like pure phenomenology, in Ideas, it is the result of both a phenomenological and an eidetic reduction (pp. 24ff). Pure phenomenology is now pushed back into the realm of the transcendental ego and is consequently called 'transcendental phenomenology'. I will not even try to account for the ontology of possibilities that can be dimly perceived. Husserl himself is perfectly aware that to grasp the distinction between transcendental and phenomenological psychology is difficult, indeed. In his preface to the English edition of Ideas, he admits that it 'is a problem that as a rule brings great difficulties with it … It has led to misunderstandings, to which even thinkers who subscribe to the phenomenological line of thought are subject' (1981:44). Despite these acknowledged problems, however, Husserl is confident that transcendental phenomenology is the universal science and the foundation of all other sciences and of all knowledge. 36 It should be obvious by now that phenomenology is a form of radical subjectivism. What is perhaps less obvious, as yet, is that it is a form of intersubjectivism. 'The reductive method is transferred from self-experience to the experience of others'. The application of the method of phenomenological reduction to 'community experience', or 'community mental life' is called 'intersubjective reduction' (Husserl, 1981:25). '[T]the reduced intersubjectivity, in pure form and concretely grasped is a community of pure "persons" acting in the intersubjective realm of the pure life of consciousness' (p. 25). Although these quotations referred to phenomenological psychology, transcendental phenomenology also is intersubjective. The psychic subjectivity, the concretely grasped 'I' and 'we' of ordinary conversation is experienced in its pure psychic ownness through the method of phenomenological-psychological reduction. Modified into eidetic form it provides the ground for pure phenomenological psychology. Transcendental subjectivity, which is inquired into in the transcendental problem, and which subjectivity is presupposed in it as an existing basis is none other than again 'I' myself and 'we' ourselves; not, however, as found in the natural attitude of everyday or of positive science; i.e., apperceived as components of the objectively present world before us, but rather as subjects of conscious life, in which this world and all that is present - for 'us' - 'makes' itself through certain apperceptions'. (Husserl, 1981:30) Husserl's claim that phenomenology implies intersubjectivity has always appeared as a problem to his critics. The subjectivist point of departure would rather seem to imply solipsism. In the fifth of the Cartesian Meditations (1929), Husserl set out to solve the problem of transcendental intersubjectivity. His proposed solution is in terms of Leibnizian monadology. According to Leibniz, monads have no windows; which means that they do not influence one another, -83at least not in a substantial way. The order of the world is a pre-established harmony. Now, according to Husserl, the transcendental ego is similarly unaffected by any interaction between ego and others. Transcendental intersubjectivity is egological and derived by analogy. 'It is clear from the very beginning that only a similarity connecting, within my primordial sphere, that body over there with my body can serve as the motivational basis for the "analogizing" apprehension of that body as another animate organism' ([1929] 1973:111). Husserl's term for this form of analogy is 'pairing association'. It may be objected that this solution does not explain intersubjectivity, but this would be unfair, since phenomenology is not intended to be explanatory. In the terminology of Husserl, phenomenology 'constitutes' the world. Whether Husserl's suggested solution to the problem of transcendental intersubjectivity is a successful constitution, or not, is beyond my power to judge. I will end this short presentation by mentioning the last development of Husserl's thinking. Towards the end of his life, Husserl was working fervently with a new foundation for phenomenology and knowledge. The result was The Crisis of European Sciences and Transcendental Phenomenology (written between 1935-7 and publihsed in 1954), which remained unfinished at his death in 1937. In this work, Husserl proceeds in the unusual way of a history of knowledge. Transcendental phenomenology now appears as the end-product and consummation of this history. 37 The most interesting novelty, for my purposes, however, is the introduction of the concept of 'life-world' [Lebenswelt] as a new point of departure for phenomenological reduction.

In their everyday life, human beings live together in a pregiven intersubjective world, which they take for granted ([1954] 1970:103ff). 'The life-world is a realm of original self-evidences' (p. 127) or 'common-sense'. The life-world is pre-scientific, both historically and epistemologically. Science emerges from the life-world, as the result of the rise of the 'theoretical attitude' in Greek Antiquity, but it is forever anchored in the life-world, to the extent that science is a human creation and a social activity (pp. 269ff). 38 The dominant form of the theoretical attitude in the history of Western rationalism has been the objectivism of natural science. Also psychology has been snared in this unfortunate conception. According to Husserl, not even Brentano and Dilthey were successful in their attempts to escape this trap (pp. 222f, 245f). Closest to a breakthrough was Brentano, with his important insight that mental phenomena are intentional (pp. 233f). 39 The only way to establish psychology as a rigorous science is subjectivism and phenomenological reduction ([1954] 1970:212). The point of departure is the life-world, but stripped of any trace of objectivism. Why does not the whole flowing life-world not figure at the very beginning of a psychology as something 'psychic,' indeed as the psychic realm which is primarily accessible, the first field in which immediately given psychic phenomena can be explicated according to types? … Naturally there are differences in the manner of life-world experience, depending on whether one experiences stones, rivers, mountains or, on the other hand, reflectively -84experiences one's experience of them or other ego-activity, one's own or that of others … But does this change the fact that everything about the lifeworld is obviously 'subjective'? Can psychology as a universal science, have any other theme than the totality of the subjective? (Husserl [1954] 1970:220) As I have already pointed out, The Crisis is an unfinished work. It is risky, therefore, to use it as a basis for drawing conclusions about Husserl's final position. It does seem to me, however, as if Husserl had been moving in the direction of psychologism. It is pretty obvious, I believe, that descriptive psychology now occupies an important place in the phenomenological reduction ([1954] 1970:191ff, 235-41). Husserl even concludes that 'pure psychology in itself is identical with transcendental philosophy as the science of transcendental subjectivity' (p. 258). This conclusion looks like philosophical psychologism. But Husserl seems to be a psychologicist also with respect to the human sciences. what is required for the regional sciences of man, then, is obviously first of all what is sometimes called (by contrast to social psychology) individual psychology … This individual psychology must … be the foundation for a sociology and likewise for a science of objectified spirit (of cultural things), which after all refers, in its own way, to the human being as person, i.e., to the life of the soul. (Husserl [1954] 1970:228) Husserl's phenomenology, especially his phenomenological psychology and his idea of a life-world, made a tremendous impact on continental philosophy and on the social sciences, especially sociology. Among others, it influenced, directly and indirectly, Dilthey, Scheler, Jaspers, Heidegger, Schutz, MerleauPonty, Sartre, Ethnomethodolgy, the Frankfurt School, especially Habermas, Bourdieu and Giddens. Indirectly, through Schutz, it may even have influenced the Austrian School of Economics. I will return to some of these figures in later chapters. Here I will make a brief remark on the immediate reception of Husserl's phenomenology. It has been maintained, by Kusch (1995:224ff), that Husserl's phenomenology emerged victorious in the battle between philosophical schools in Germany, at the beginning of the nineteenth century. The most important reason for this was the success of Husserl's critique of psychologism. Another reason was that phenomenology, unlike neo-Kantianism, could be assimilated by the emerging philosophy of life (Lebensphilosophie). Kusch mentions three philosophers and three texts as especially important for the development of philosophy in the Weimar Republic. One of them, Oswald Spengler, was a historicist and holist, who is of no interest for my purposes.

More interesting is Max Scheler, who was an influential philosopher - eventually sociologist of knowledge - who started as a phenomenologist, but later oriented himself towards the new philosophy of life. In an influential article -85from 1915, he hailed Friedrich Nietzsche, Wilhelm Dilthey and Henri Bergson as the most important representatives of this new philosophy (Scheler, 1915). All three have a place in the history of individualism. I have already discussed Dilthey and I am going to discuss Nietzsche in another work on the history of individualism. This leaves the French philosopher Henri Bergson (18591941), who suggested a view of consciousness similar to that of German idealism and of William James. In his Time and Free Will (1889), Bergson rejected any attempt to quantify and measure psychic states, including the utilitarian states of pleasure and pain and the sensations of the WeberFechner law of psychophysics. So far, he agreed with Kant. He did not, however, accept Kant's theory of the forms of understanding. In particular, he disagreed with Kant's view of time and free will. Much like his friend and ally, William James, Bergson saw consciousness as a flow. Consciousness takes the form of duration (durée) of heterogeneous states, but not of a succession of measurable, homogeneous, time-units. The latter concept of time is really a misleading derivation from our concept of space. As indicated by the title of the English translation, Bergson's book is about free will, which he accepted as a matter fact. We experience free will, and the reason, though philosophers and scientists often deny it, is the idea of time, modelled on that of space and fostered by science, or, at least, by mechanicism. Bergson was not an individualist and his main legacy was holistic. In his most famous work, Creative Evolution (1907), he advanced the idea of emergence of novel phenomena, which played an important part in the development of the doctrine of holism (see Udehn, 1987:85ff). In his last book, The Two Sources of Morality and Religion (1932), Bergson adheres to an organicist view of society, which is clearly holistic. But he also introduces the distinction between closed and open societies ([1932] 1977:30ff), which Karl Popper used in his famous book The Open Society and Its Enemies (1945), and which includes one of most cited statements of the principle of methodological individualism (see pp. 200ff). But even if Bergson was not a methodological individualist, himself, he did play a role in the development of an individualist theory of society. Bergson exerted a considerable influence on the phenomenology, not only of Max Scheler, but also of Alfred Schutz, and he also influenced the existentialism of Jean Paul Sartre and Maurice MerleauPonty (see chapter 5). The third philosopher, mentioned by Kusch (1995:228, 236ff) is Karl Jaspers, and the text is Psychologie der Weltanschauungslehre (1919), where Jaspers makes a 'psychological' analysis of worldviews. Jaspers mentions some precursors of this type of analysis, such as Hegel and Dilthey, but rejects the approach of the former. His own approach is based mainly on two of Hegel's individualistic critics: Nietzsche and Kierkegaard. Among other things Jaspers discusses individualism and collectivism/holism, but only as Weltanschauungen, as psychological facts that is. Jaspers is often conceived of as the founder of existentialism and, the germ of this doctrine can be clearly detected in his Psychologie, with its frequent references to the Existenz of human beings. 40 -86-

4

Austrian methodological individualism The new Austrian methodology, which traced market prices to the actions of individuals was known as methodological individualism. It pointed out that market prices, as well as all other economic phenomena, rested unequivocally on the decisions, preferences, and subjective values of individuals. (Greaves, 1996:2)

Methodological individualism, as an explicitly stated principle for social scientific research, originates with the Austrian School of Economics. It is also the members and sympathisers of this school, who have made most to propagate this principle in the social sciences, at least in the early stages of its development. The Austrian School has little in common with the British and Lausanne schools of economics besides the principle of marginal utility. Its roots are not in utilitarianism and it does not make much use of mathematics and the idea of equilibrium. Its hallmark is subjectivism and it uses a genetic approach to social institutions, prices included. The Austrian School of Economics is, I believe, best understood against the background of German and Austrian thinking about methodology, economy and society. 1

Carl Menger The founding father of the Austrian School in Economics was Carl Menger (1840-1917), one of those three economists who made the marginalist revolution. The other two were W. Stanley Jevons and Leon Walras. Menger's contribution to the rise of neoclassical economics was Principles of Economics (Grundsätze der Volkswirtschaftslehre, 1871). The main message of this work was that the value and the price of an economic good is determined, neither by the labour it takes to produce it, nor by the total costs of production, but by the subjective evaluations of economising individuals. The ultimate determinant of economic value and of price is the needs of individual human beings. 2 Already in the Preface to Principles of Economics, Menger makes the following proclamation: -87In what follows I have endeavoured to reduce the complex phenomena of human economic activity to the simplest elements that can still be subjected to accurate observation, to apply to these elements the measure corresponding to their nature, and constantly adhering to this measure, to investigate the manner in which the more complex economic phenomena evolve from their elements to definite principles. (Menger [1871] 1976:46f) This, according to Menger, is the method proposed by Francis Bacon and commonly accepted in the natural sciences. 3 Applied to economics, it amounts to demonstrating 'that man with his needs and his command of the means to satisfy them, is himself the point at which human economic life both begins and ends' (p. 108). The ultimate explanation of all economic phenomena, therefore, is in terms of the behaviour of economising individuals. The starting-point of Menger's analysis is the isolated individual, represented by Robinson Crusoe alone on his island (pp. 133ff), but the same principles of economising govern the behaviour of individuals exchanging goods on a market. This is Menger's 'atomistic' method, which would later become known as 'methodological individualism' (see Hayek, 1973:8; 1978:276f). Principles of Economics was a work on substantive economic theory, containing only a few scattered remarks on methodology. The latter subject was treated more fully some ten years later in Menger's second major work, Problems of Economics and Sociology (Untersuchungen über die Methode der Socialwissenschaften und der Politischen Oekonomie insbesondere, 1883). The reason Menger turned to methodology was the relative neglect of his work on economic theory in an academic atmosphere dominated by the German Historical School in economics. His methodological treatise would become all but neglected. It became the igniting spark of the famous Battle of Methods (Methodenstreit), which divided German and Austrian economists of different scientific and political persuasions for several decades. 4 The main combatants in this battle were Carl Menger and Gustav von Schmoller, the undisputed leader of the Younger Historical School in German economics. One, largely latent, source of animosity between the two combatants was no doubt politicalideological (cf. Cubeddo, 1993:21ff). Menger was a liberal, with a certain conservative leaning, defending a free market economy against state intervention. Schmoller was a conservative state

socialist, a so-called 'Academic Socialist', or 'Socialist of the Chair' (Kathedersozialist), who saw the economy as an affair of the state and advocated social reform. Simply put, Menger was relatively more pro-market, Schmoller more pro-state. More manifestly, however, the battle raged over the nature of economic science and the methods proper to it. Menger defended a theoretical economics proceeding, like classical economics, by abstraction and deduction. First, rational and selfinterested economic man is abstracted from concrete human beings. Second, the market of pure exchange relations is abstracted from the society in which it is embedded. The laws governing the universe of theoretical economics have the status of exact natural -88laws. Schmoller conceived of economics as a historical science proceeding by induction from concrete historical reality, in order, eventually, to arrive at laws of economic phenomena. From this point of view, the postulates of theoretical economics are simply false - figments of the imagination. An important part of the argument concerned the relation between theory and practice, but this is not my business here. The most important difference, for my purposes, is that Menger defended an atomistic method focusing on individuals, while Schmoller suggested a holistic approach focusing on social institutions. For Schmoller, the economy is but one aspect of the life of nations and must be analysed as part of society as a whole. 5 In his Problems of Economics and Sociology (1883), Menger made a division of the field of economics into three groups: the historical, the theoretical and the practical sciences. His main concern was to defend theoretical economics against the attempts to turn economics into a historical science. Theoretical economics, in its turn, was divided into a realistic-empirical and an exact orientation. Without denying the utility of the former, Menger saw, as the crowning achievement of theoretical economics, its development into an exact science. 6 One of the historical school's main criticisms of theoretical economics was that it is atomistic. This charge of atomism 'is supposedly based on the fact that economic phenomena theoretically are reduced ultimately to individual economic efforts or to their simplest constituent elements, and are thus explained' (Menger [1883] 1963:90f). According to Menger, however, this criticism is based upon a misunderstanding, since all exact sciences are necessarily atomistic. Arguing for an exact economics, therefore, is tantamount to arguing for an atomist method (pp. 93f). Menger's defence of atomism in economics is combined with a critique of the alternative interpretation of 'national economy' as concerned with the nation as 'a large subject that has needs, that works, practices economy, and consumes' ([1883] 1963:92f). Thus the phenomena of 'national economy' are by no means direct expressions of the life of the nation as such or direct results of an 'economic nation.' They are, rather the results of all the innumerable individual economic efforts in the nation, and they therefore are not to be brought within the scope of our theoretical understanding from the point of view of the above fiction … Whoever wants to understand theoretically the phenomena of 'national economy,' those complicated human phenomena which we are accustomed to designate with this expression, must for this reason attempt to go back to their true elements, to the singular economies in the nation, and to investigate the laws by which the former are built up from the latter. But whoever takes the opposite road fails to recognize the nature of 'national economy.' He moves on the foundation of a fiction, but at the same time he fails to recognize the most important problem of the -89exact orientation of theoretical research, the problem of reducing complicated phenomena to their elements. (Menger [1883] 1963:93) Menger does not, however, deny the existence of unitary social wholes. While critical of the excesses of organicism in nineteenth-century social theory, he does admit that there are social 'organisms', in the sense of unitary wholes. He also admits that they may be subjected to functional analysis of social institutions as parts of such wholes. But the existence of organic wholes is not something to be assumed a priori, it is something to find out by research, and even

unitary wholes are amenable to an exact atomistic analysis. 'The acknowledgement of a number of social phenomena as "organisms" is in no way in contradiction to the aspiration for exact (atomistic!) understanding of them' ([1883] 1963:141). The defining characteristic of an 'organism' is that it has grown, without being anyone's deliberate creation. Menger, thus, sides with the critics of the theory of the social contract, such as Hegel and Savigny. While many social institutions and structures are mechanisms of pragmatic origin, others are organisms which have 'grown', in the sense of being the unintended result of the actions of many men. This is the immediate source of Hayek's celebrated distinction between two types of order: organisations and spontaneous orders (see p. 120). The most well known example of an organism or spontaneous order, in the sense of Menger and Hayek, is the market. At least, as analysed by Adam Smith, where the it appears as if guided by an invisible hand. Prices and other economic phenomena are the unintended results of the economic action of many individuals and, as such, amenable to atomistic analysis. More original and interesting, however, is Menger's suggestion that other social institutions also, such as the family, the state, and law can be explained in similar manner. Simply stated, the procedure is to show how social institutions emerge as the unintended end-result of a sequence of actions, many of which are intended and rational, others mere custom. Menger himself uses this type of atomistic analysis in his well-known explanation of the origin of money (Menger [1871] 1976: ch. 8; [1883] 1963:152-5; 1892). In the beginning, human beings exchanged goods in the form of barter. But some goods are more useful for this purpose than others, since they fulfil needs that are common to many people. These goods, therefore, are more saleable. Cattle, for instance, is a good which virtually all individuals find useful and therefore tend to accept as payment. This praxis turns into custom and this custom seems to have been the embryo of money in many cultures. Though useful, cattle have some disadvantages. They are big and heavy and not perfectly divisible, at least not when alive. Other goods such as shells and pieces of metal have obvious advantages in this respect. How it comes about that money takes exactly the form it has today may be hard to tell, but the principle of explanation is clear: It is clear … that the origin of money can truly be brought to our full under-90standing only by our learning to understand the social institution discussed here as the unintended result, as the unplanned outcome of specifically individual efforts of members of society. (Menger [1883] 1963:155) I suggested earlier (p. 9) that Hobbes's theory of the social contract was a first paradigm of methodological individualism-in-use. I also suggested that Adam Smith's idea of the market, as governed by an invisible hand, was a second paradigm of theoretical individualism (p. 12). I now wish to suggest that Carl Menger's explanation of the origin of money is a third paradigm of methodological individualism-in-use. 7 It is an explanation which has precedents in the conservative thinking of German historicism, especially that of Savigny and in Hume's analysis of convention. It is similar to Smith's theory of the market, to the extent that it is an invisible-hand explanation of a spontaneous order, but it is different in being an evolutionary, or genetic, explanation. Menger's explanation, forebodes, not only the game-theoretic analysis of conventions as solutions to games of co-ordination (Wärneryd, 1990: ch. 4), but also explanations in terms of path-dependence.

Figure 4.1 Carl Menger's theory of social institutions The German economist Gustav von Schmoller reviewed Menger's book on methodology in the year of its appearance, but in a tone that Menger did not like at all. From his pedestal in German

academic life, Schmoller looked down upon Menger as an 'acute dialectician, with a logical mind', but lacking 'the universal philosophical and historical training' necessary for a reformation of economics (Schmoller, 1883:251). It must have been the tone that Menger reacted to, since Schmoller was very predictable in his review and actually agreed with some of Menger's views. Anyway, Menger became absolutely furious and wrote a piece called Irrthümer des Historismus (Delusions of Historism, 1884), which consists of little more than invectives and ironies directed at Schmoller. The final act was melodramatic: Schmoller (1884:677) returned his copy of Menger's Irrthümer to its author with an open letter explaining that the alternative would have been to throw it in the waste-paper basket. 8 The Battle of Methods raged for decades and included several contributions by Menger himself and by his pupils. Nothing of great importance was added, -91however, to the topic of methodological individualism, or atomism. Menger made an addition to his earlier tri-partition of economics to comprise also a morphological orientation (1889) which may be seen as a departure from methodological individualism. 9 Emil Sax (1884: ch. 5) made a distinction between individualism and collectivism as tendencies in the motives and actions of human beings and went on to argue that corresponding to these tendencies are different economic theories (ch. 6). Nothing follows from Sax's suggestion, however, for the issue of methodological individualism versus collectivism. Eugen von Philippovich (1886:50, n 3) rejected Sax's distinction and restated Menger's original position, which he clarified in some respects. He maintained (pp. 38f), for instance, that economics accepts individuals' wants (preferences) as given, without asking the further question why they happen to have these particular wants. Friedrich von Wieser (1851-1926) agreed with Menger that there is no such thing as a social interest (1884:25). Society is not a person and has no interest other than the interests of its members. He also defended the atomistic method of marginalist economics. The fundamental law of 'marginal utility' - a term that Wieser introduced (p. 128) - is true of the isolated individual, no less than of individuals in exchange (pp. 210-14). This is in contrast to the theory of price, which is a theory of economic exchange (Wieser [1893] 1971:50-3). While critical of the 'naive formulation' of the 'individualistic theory of society', typical of political individualism, he defended methodological individualism: one cannot get away from its fundamental concept, that the individual is the subject of social intercourse. The individuals who comprise society are the sole possessors of all consciousness and of all will. The 'organic' explanation, which seeks to make society as such, without reference to individuals, the subject of social activity, has patently proved a failure. One must hold himself aloof from the excesses of the individualistic exposition, but the explanation must still run in terms of the individual. It is in the individual that one must look for those tendencies that make the social structure, that dove-tail (if we may use that expression) in such a manner as to give the firm cohesion of social unity and at the same time provide the foundation for the erection of social power. (Wieser [1914] 1967:154) Eugen Böhm-Bawerk (1851-1914) similarly distinguished between two economic processes: one involving only the isolated Robinson Crusoe and the goods he uses, the other involving exchange of goods with other individuals (1891:379). In the individualist imagery of Böhm-Bawerk, atomism is replaced by the idea of the individual as a microcosm, reflecting the macrocosm of the economy as a whole (pp. 380f). In his famous critique of Marxian economics, Böhm-Bawerk (1896:258ff, 278f, 287) maintains that the root of the trouble is Marx's use of Hegelian dialectics instead of adequate psychological microfoundations. -92Like early British neoclassical economics, the early Austrian School was clearly and explicitly psychologistic (Endres, 1997:33-7). 10 As we have already seen, the psychological foundation of Menger's economics was a theory of needs. Von Wieser and Böhm-Bawer dropped the psychology of needs, but retained psychologism in the form of satisfaction of wants. According to von Wieser

(1884:39), 'the theory of value, rightly conceived, is applied psychology' and Böhm-Bawerk agreed, as we have seen. Increasingly, however, psychologism was replaced by new microfoundations in the form of rational choice (Endres, 1997:213-15), conceived of as free from psychology. Menger was much less explicit about rationality than he was about methodological individualism. The individualist basis of his theory is individuals engaged in the satisfaction of their needs. No doubt, however, Menger's reasoning is based on the assumption that individuals do so in a rational way. This becomes evident when he makes the qualification that individuals do not always act rationally in the satisfaction of their needs: Even individuals whose economic activity is conducted rationally, and who therefore certainly endeavour to recognize the true importance of satisfactions in order to gain an accurate foundation for their economic activity, are subject to error. Error is inseparable from all human knowledge. (Menger [1871] 1976:148) It seems to me that the element of rational choice in early marginalist economics was pointed out most clearly by economists outside the Austrian camp. One of them was Heinrich Dietzel who argued, in effect, that economics is a theory of rational action. The economic principle (Das wirtschaftliche Prinzip) does not depend upon any particular motive, such as self-interest, but states only that individuals are instrumentally rational in the choice of means to satisfy their needs (Dietzel, 1883:26ff; 1884:17-44). 11 The Austrian economist Emile Sax responded to Dietzel's suggestion by pointing out that his formulation of the economic principle fails to exclude technology from the scope of economic theory. Following the German sociologist Albert Schäffle, Sax suggested that the economic principle is what the Austrians called economising (wirtschaften): the use of scarce resources to achieve a maximum of satisfaction (Sax, 1884:9ff). This is, I believe, the main contribution of Austrian Economics to a theory of rational choice: they all conceived of economic theory as essentially concerned with individuals rationally engaged in economising on scarce resources, with alternative uses. This view of economics was eventually made famous by Lionel Robbins in his The Nature and Significance of Economic Science (1932). The Austrians of the first generation were aware and admitted that marginalist economics relies on an assumption of purposeful and rational behaviour on the part of economic agents, but this assumption was never the focus of their attention. It is my conjecture that the work of Max Weber contributed significantly to make rationality a central assumption of Austrian -93Economics - it was certainly an important theme of Max Weber's own work in history and sociology. To conclude: Carl Menger may be considered the founder of 'methodological individualism', but, like Mill, he did not use this term himself. Borrowing a label used by the critics of classical economics, he called it 'atomism', which means that complex phenomena should be explained in terms of their simplest elements, or parts. It is not absolutely clear to me whether Menger's atomism necessarily implies strict methodological individualism, or if there may be atoms larger than individual human beings. From the point of view of economic theory any economising unit - a household, a firm, even a state - may be treated as an atom of analysis (see Menger [1871] 1963:193-6). On the other hand, it is perfectly clear that, according to Menger, the ultimate explanation of all economic phenomena is in terms of needs, something attributable only to individuals. Menger's plea for atomist analysis is not dogmatic and it is strictly limited to the exact orientation of theoretical economics. History and the empirical-realistic orientation in social science make legitimate and necessary use of a collectivist method. 12 Menger's immediate followers accepted his atomistic method, as well as its limits, but did not contribute to its development, or clarification. Among Austrian economists, it is above all Friedrich von Hayek who has followed Menger in matters methodological. But there were others. Two German economists, Heinrich Dietzel and Max Weber, were swimming against the tide and professed a heretical belief in abstraction and atomism against the orthodoxy of the Historical School. Of these two, Weber is by far the most important, and will be treated in a separate section

below, but the now forgotten Heinrich Dietzel was not without influence in his own lifetime and deserves a few comments. Dietzel was read by the Austrian economists and may have had some influence on their methodological views. Like them, he made a distinction between the theory of man's relation to economic goods, which he called economics (Wirtschaftslehre), and the theory of economic exchange, which he called social economics (Socialwirtschaftslehre, later Socialökonomik). Like Menger, Dietzel was critical of the idea of a 'national economy' (Volkswirtschaft or Nationalökonomie) because of the misleading connotations of this term (Dietzel, 1895:51ff). His own preferred term 'social economics' was suggested as a way to avoid the Romantic ideas of a people (Volk) and a nation (Nation), which only obscured the true nature of the economy as marketplace. Dietzel was a defender of classical economics and later also of marginal economics against the critique of the Historical School. He defended the abstract or, as he preferred to call it, the isolating method and also atomism, or individualism, at least for the purposes of social economics. Dietzel (1882:55) referred to individualism as a 'premiss' of social economics and, indirectly, as a 'methodological assumption' (p. 62) which comes close to suggesting the term 'methodological individualism', although he did not actually do so. Methodological individualism is also implicit in Dietzel's conception of economics as a theory of instrumental action, more specifically -94economic action, aimed at the satisfaction of needs by means of economic goods (Dietzel, 1883:59ff; 1884:17ff). Social phenomena are caused and constituted by the actions of individuals, which are caused by the motives of action, which are caused by the needs of individuals (Dietzel, 1895:18). Dropping needs as the ultimate causes of social phenomena, we get something close to Max Weber's view in a nutshell.

Max Weber The Austrians of the first generation were aware and admitted that marginalist economics relies on an assumption of purposeful and rational behaviour on the part of economic agents, but this assumption was never the focus of their attention. It is my conjecture that the work of Max Weber contributed significantly to make rationality a central assumption of Austrian Economics - it was arguably the central concern of Max Weber's own work in history and sociology. As is well known, Max Weber saw history, or at least the history of the West, as subject to a tendency of increasing rationalisation. Not only economic life, but also politics, social life and culture, are subject to the irresistible force of human reason. In economic life, we see a culmination of instrumental rationality with the development of modern capitalism and the market. For this reason, economics, in particular, must be based on the assumption of instrumental rationality on the part of agents. (Udehn, 1991:134-6). The first source of Weber's view of the role of rationality in economics is in some notes he made to a course on theoretical economics in 1898 (Weber [1898] 1990:29ff). Weber here conceives of economising as means-ends rationality, but does not yet make the distinction between economic and technical rationality. He is careful to point out that economics is not about real human beings, but about a constructed economic subject with certain ideal characteristics. Among the most important features of this ideal figure are those that define her/his rationality: perfect knowledge of the situation (the alternatives) and perfect understanding of the most adequate means to realise the various alternatives. Weber returns to the ideal typical assumption of rationality in his early methodological essays on "'Objectivity" in Social Science and Social Policy' (1904) and on the German economist of the Historical School Karl Knies (Weber, 1903-6). In the first essay, Weber arrives at the common interpretation of economics as bound up with the fundamental fact of scarcity (1949:64f). This article also contains Weber's first extensive discussion of ideal types, illustrated by abstract economic theory: 'It offers us an ideal picture of events on the commodity-market under conditions of a society organized on the principles of an exchange economy, free competition and rigorously rational conduct' (pp. 89f). In the second article, Weber's starting-point is Knies's argument that freedom of will is somehow irrational and, therefore, escapes social scientific treatment ([1903-6]

1975:95-101). Against this argument, Weber correctly maintains that freedom is related to rationality rather than to irrationality, and also that free and rational actions are most eminently suited to social scientific -95treatment (pp. 120-9). Weber presents rational interpretation as the most important form of interpretive understanding. Rational action, which consists in choosing the most adequate means to reach an end, exhibits a unique degree of self-evidence, which makes it methodologically privileged. If we know that an action X is related to Y as cause to effect, then we can explain X as a means to reach the end Y. Such rational interpretation can be used either as a hypothesis to be verified by the facts, or as an ideal type, with which to compare actual actions. Actions, which are not rational, may then be understood as non-rational actions, as deviations from the ideal type of rational action. In both cases, according to Weber, rational interpretation is of 'extraordinary heuristic value' (pp. 186-191). With this argument, Weber appears as an early advocate of the 'principle of charity', later defended by Donald Davidson and Jon Elster, among others. A fourth source of Weber's views of rationality in economics is his article on 'Marginal Utility and "The Fundamental Law of Psychophysics"' (Weber, 1908a). His main business in this article is to deny that the idea of marginal utility is in any way dependent on the Weber-Fechner law of psychophysics or any other psychological laws for that matter. Economics is based on certain common-sense observations of economic behaviour and on the equally common-sense assumption that individuals are rational in their economic activity. Economic theory rests on the assumption of perfect rationality and its heuristic value rests on the socio-cultural fact that economic life in the West increasingly approximates this assumption. Weber's last treatment of the methodology of economics, is in his article on 'The Meaning of "Ethical Neutrality" in Sociology and Economics' and in chapter II of Economy and Society (1922). In the first, you will find Weber's second extensive treatment of ideal types, once again exemplified by economics: Economic theory makes certain assumptions which scarcely ever correspond completely with reality but which approximate it in various degrees and asks: how would men act under these assumed conditions, if their actions were entirely rational? It assumes the dominance of pure economic interests and precludes the operation of political or other non-economic considerations. (Weber 1949:44) In Economy and Society, Weber returns to the nature of economics. Economic action is now defined as 'any peaceful exercise of an actor's control over resources which is in its main impulse oriented towards economic ends'. Economic action is not necessarily rational. Rational economic action 'requires instrumental rationality in this orientation, that is deliberate planning' ([1922] 1978:63). But resources are necessarily scarce, 'the most essential aspect of economic action for practical purposes is the prudent choice between ends' (p. 65). Weber has finally arrived at the distinction between economics and technology. The difference between them is this: 'Economic action is primarily oriented to -96the problem of choosing the end to which a thing shall be applied; technology, to the problem, given the end, of choosing the appropriate means' (pp. 66f). 13 Max Weber was not from Austria and he was not only an economist. He was a jurist, historian, economist and sociologist, with a special interest in methodology. To posterity Max Weber is known as a sociologist, but it has been argued that he was first of all an economist, albeit of a kind that is extinct today; a member of the German Historical School in economics (Hennis, 1988: ch. 3). More common is the view that Weber was primarily a historian, using sociology as an auxiliary science, providing history with a system of basic concepts (Burger, 1976:138; 1994; Roth, 1976). This view is often coupled with the suggestion that he developed from being a historian, to becoming more of a sociologist. 14 I think that Max Weber defies classification in terms of disciplinary belonging, but

that is probably the least important thing about him. Whatever he was, Max Weber was a great scholar and a great thinker. Weber's attention to methodological issues was, at least partly, occasioned by the Methodenstreit and resulted in his intervention in that battle. It is generally agreed that Weber tried to steer a middle course between the positions of the main combatants Menger and Schmoller. The famous ideal type is often interpreted as Weber's way to avoid both horns of a dilemma. 15 Weber agreed with Menger that theoretical economics is, and should be, an abstract and atomistic science, but agreed with Schmoller and the Historical School that economics is a cultural science and a Wirklichkeitswissenschaft; a science of reality (von Schelting, 1922:701-26; Tenbruck, 1986). The simplifying assumptions of economics; homo economicus, perfect competition, etc., are ideal types used for heuristic purposes, but should not be mistaken for natural laws. As Schumpeter (1954:819) suggests, Weber 'saw no objection of principle to what economic theorists actually did, though he disagreed with them on what they thought they were doing, that is on the epistemological interpretation of their procedure'. Even so, Joseph Schumpeter classified Weber as a member of the 'Youngest Historical School' in economics. His reason for doing so is Weber's adherence to the doctrine of Verstehen (cf. also Lachmann, 1970:17-48). I suggest that Weber shared the substantive concerns of the Historical School, but was closer to the Austrian School in methodology. 16 There are many sources of Weber's methodology, but three, in particular, are generally recognised: Heinrich Rickert's neo-Kantianism, Austrian Economics and Dilthey's doctrine of Verstehen (Eliaesson, 1990). 17 For my present purposes, the influence of Austrian Economics is most important, because this is the most immediate source of his methodological individualism. By way of extreme simplification, I suggest that Weber took methodological individualism from the Austrian School of Economics, supported it by a neo-Kantian view of concept formation and turned it into subjectivist methodological individualism with the help of Dilthey and Simmel. 18 The suggestion that Weber took his methodological individualism from economics gains support from a letter he wrote to the economist Robert Liefmann in 1920: -97I do understand your battle against sociology. But let me tell you: If I now happen to be a sociologist according to my appointment papers, then I became one in order to put an end to the mischievous enterprise which still operates with collective notions (Kollektivbegriffe). In other words, sociology, too, can only be practised by proceeding from the action of one or more, few or many, individuals, that means, by employing a strictly 'individualist' method. (Quoted in Roth, 1976:306) This is the first time Weber makes explicit mention of an 'individualist method'. His critique of the use of collective concepts, however, goes back to his early methodological essays. Already in his articles on Roscher and Knies (1903-6) - economists of the German historical school - Weber criticises, as metaphysical, the use of concepts such as 'Volk' and 'general will'. He is also critical of the view of societies as organic wholes, and the attempt by Roscher to arrive at the laws of development of such wholes (Weber [1903-6] 1975:60-91, 202-7). Weber sees in the use of such concepts and doctrines the influence of German Romanticism and especially of Hegelian 'panlogism'. What he objects to, is the view that particular cultural phenomena are explained as 'emanations' of a volksgeist and as parts of an organic whole. Weber obviously prefers the opposite route. To the extent that there are such things as Volksgeists and social wholes at all, they have to be explained as the results of particular cultural values and beliefs entertained by individual human beings (cf. Burger, 1994:88ff). Weber, then, sides with Austrian atomism against the collectivism and organicism of the German Historical School. 19 In his article "'Objectivity" in Social Science and Social Policy' (1904), Weber criticises the conflation of concept with reality. The failure to realise that concepts are theoretical constructs of the mind, has particularly unwholesome effects in the case of collective concepts taken from the language of everyday life. Weber mentions as particularly problematic the ascription of interests to collective entities such as 'agriculture', 'classes' and the 'state'. 'The use of the undifferentiated collective concepts of everyday speech is always a cloak for confusion of thought and action'

(Weber, 1949:107-10). With respect to the scientific conception of the 'state', Weber makes clear that it is 'always a synthesis which we construct for certain heuristic purposes … abstracted from the unclear syntheses which are found in the minds of human beings' (p. 99). When we inquire as to what corresponds to the idea of the 'state' in empirical reality, we find an infinity of diffuse and discrete human actions, both active and passive, factually and legally regulated relationships, partly unique and partly recurrent in character, all bound together by an idea, namely, the belief in the actual or normative validity of rules and of the authorityrelationships of some human beings towards others. (Weber, 1949:99) -98 Weber's distrust of collective concepts was also voiced in his contribution to the meeting of the German Sociological Association in 1910. He attacked a certain Dr Ploetz for making unscientific use of the concepts 'race' and 'society'. Biological traits do not explain social phenomena. The social use of the concept of 'race' is invariably ideological; invented and used to serve the interest of some group in the oppression of another group (race). The concept of 'society', according to Weber ([1910] 1971:36), is purely conventional and may be replaced by 'social relationships and social institutions'. What Weber objected to was Ploetz's suggestion that society is a living creature; his organicism. From a sociological point of view 'nothing useful ever emerges from the joining together of several precise concepts with indefinite notions. And so it is here. We have the possibility of understanding the rational behavior of single human individuals through intellectual empathy' (p. 39). In these short remarks are contained two important seeds of Weber's emerging sociology: (1) the belief that all complex social phenomena can be defined in terms of social relationships and (2) the conviction that all social phenomena can be ultimately understood and explained in terms of individuals' motives for their own actions. Weber's first positive statement of methodological individualism, or 'atomism', can be found in his article 'Some Categories of Interpretive Sociology' (1913). This article, written in preparation of his magnum opus Economy and Society (Wirtschaft und Gesellschaft, 1922), also for the first time contains an outline of his interpretive (verstehende) sociology. Methodological individualism, in fact, is presented as the logical outcome of verstehen. The object of the discussion, 'Verstehen,' is ultimately also the reason why interpretive (verstehende) sociology (as we have defined it) treats the single individual and his action as its basic unit, as its 'atom,' if a questionable analogy is allowed here. (Weber [1913] 1981:158) Weber contrasts his sociology with other approaches, which treat the individual either as a complex of smaller (chemical or psychic) parts, or as parts of social wholes. Interpretive sociology, then, is atomistic not only in the sense of treating the human individual as its elementary unit, but also in the sense of treating the individual as itself indivisible. Most relevant for my purposes is the standpoint of interpretive sociology with respect to collective concepts. It is peculiar not only to language but also to our thinking that the concepts that comprehend action let it appear in the guise of a persistent structure, either of a material entity, or of a personified force leading a life of its own. This is true particularly in sociology. Concepts such as the 'state,' 'association,' 'feudalism,' and the like generally indicate for sociology categories of certain kinds of joint human action; it is therefore the task of sociology to reduce these concepts to 'understandable' action, meaning, without -99exception, the action of the participating individuals. This is not necessarily true for other disciplines. (Weber [1913] 1981:158)

Weber mentions jurisprudence, which is justified in treating some collectives as wholes, without bothering much about the component individuals. Thus, for the purposes of legal science, the state might be treated as a 'legal person', but '[f]or sociological analysis, the word "state" - if it is used at all - signifies only a course of human action of a particular kind' (Weber [1913] 1981:159). In his essay on 'The Meaning of "Ethical Neutrality" in Sociology and Economics' (1917), Weber writes about the 'individualistic orientation' of economic theory and maintains that this individualistic orientation is 'apolitical' and for 'analytical purposes only' (Weber, 1949:44) The term 'individualistic method' does not appear in Weber's writings until the posthumous publication of Economy and Society (1922). This work also contains Weber's most mature and most extensive treatment of methodological individualism and is, therefore, the main source for an understanding of his ideas on this subject. What he has explicitly to say about methodological individualism appears in the negative form of contrasts and oppositions to other doctrines, from which a positive statement has to be extracted. But one thing emerges clearly: Weber's 'individualistic method' is inseparable from his definition of sociology as concerned only with subjectively meaningful behaviour, that is, action. Sociology (in the sense in which this highly ambiguous word is used here) is a science concerning itself with the interpretive understanding of social action and thereby with a causal explanation of its course and consequences. We shall speak of 'action' insofar as the acting individual attaches a subjective meaning to his behavior - be it overt or covert, omission or acquiescence. Action is 'social' insofar as its subjective meaning takes account of the behavior of others and is thereby oriented in its course. (Weber [1922] 1978:4) It is to be observed that interpretive understanding is not an end in itself, but a means for arriving at a causal explanation of action. To this effect, Weber makes the distinction between 'direct observational understanding' and 'explanatory understanding', which was part and parcel of the hermeneutic tradition before Weber. Direct observational understanding is achieved when an action is identified as being of a certain type, explanatory understanding when the motive of the action is known. 'A correct causal interpretation of a concrete course of action is arrived at when the overt action and the motives have both been correctly apprehended and at the same time their relation has become meaningfully comprehensible' ([1922] 1978:12). It may also be pointed out that Weber's social action makes sociology different from economics, which starts with the isolated individual and sees the -100market as a play against nature (see Swedberg, 1998: ch. 2). For Weber, then, rationality is not parametric. Individuals do take the actions of others into account, but Weber did not have the means (game theory) at his disposal to arrive at the idea of strategic rationality (Elster, 1979a; 68f; 2000:38f). Unlike both mainstream economics and game theory, however, Weber focuses his attention on meaning and this meaning is cultural. For Weber, therefore, both economics and sociology are 'cultural sciences' dealing with cultural phenomena (Weber, 1949:66ff). 20 The reason why, according to Weber, his interpretive sociology implies an individualist method, is that only individuals act. 'Action in the sense of subjectively understandable orientation of behavior exists only as the behavior of one or more individual human beings' ([1922] 1978:13). This is also the reason why Weber contrasts the sociological use of collective concepts with that of jurisprudence. In juridical contexts social collectives, such as the state, business corporations, associations and foundations are treated like individual persons - legal persons - and according to Weber, this is perfectly legitimate. But for the subjective interpretation of action in sociological work these collectivities must be treated as solely the resultants of and modes of organization of the particular acts of individual persons, since these alone can be treated as agents in the course of subjectively understandable action.

(Weber [1922] 1978:13) Weber's conclusion is not, however, that concepts denoting social collectives should - or could? (Weber is not absolutely clear on this point) - be entirely eliminated from sociological analysis. Such elimination is unrealistic for several reasons, including their use in other disciplines and in everyday speech. The important thing, according to Weber, is to keep in mind that 'for sociological purposes there is no such thing as a collective personality which "acts"', and in sociological contexts collective concepts refer only to 'a certain kind of development of actual or possible social actions of individual persons' ([1922] 1978:14). Weber also opposes methodological individualism to the functionalist or 'organic' school of sociology, most typically represented by Albert Schäffle and his 'brilliant work' Bau und Leben des sozialen Körpers (1878). Weber does not, however, dismiss the functional approach as of no value at all to sociology. He assigns to it the role of something like a heuristic device, and this is yet another reason why, according to Weber, collective concepts cannot be altogether eliminated from sociological analysis. The functional frame of reference is useful, first of all, for illustration and for a provisional orientation. Second, the functional approach is sometimes the only means of identifying the processes at work in a given social phenomenon. Weber warns us, however, against overestimating the cognitive value and, thereby, illegitimately 'reifying' the collective concepts used. Functional analysis is only the beginning of sociological analysis, as understood by Weber. In sociological analysis it is possible to 'go beyond merely -101demonstrating functional relationships'. It is possible to attain a 'subjective understanding of the action of the component individuals' ([1922] 1978:15). Additional light is thrown upon Weber's view of sociology, its individualist method and relation to functionalism, by looking at his encounter with the functionalist or 'universalist' method of Othmar Spann. Weber grants to Spann the insight that we must know what kind of action is necessary for the 'survival' or maintenance of a cultural type before we can even pose the question of what motives determine the action. 21 It is necessary to know what a 'king', an 'official', an 'entrepreneur', a 'procurer', or a 'magician' does, that is, what kind of typical action, which justifies classifying an individual in one of these categories, is important and relevant for an analysis, before it is possible to undertake the analysis itself … But it is only this analysis itself which can achieve the sociological understanding of the actions of typically differentiated human (and only human) individuals, and which hence constitutes the specific function of sociology. (Weber [1922] 1978:18) Weber concludes his discussion of methodological individualism by criticising, as mistaken, the belief that an individualist method somehow presupposes individualist values, or is applicable only to a free market economy. According to Weber, even a socialist economy has to be understood sociologically in the same 'individualistic' terms. Once again: The real empirical sociological investigation begins with the question: What motives determine and lead the individual members and participants in this socialist community to behave in such a way that the community came into being in the first place and that it continues to exist? Any form of functional analysis which proceeds from the whole to the parts can accomplish only a preliminary preparation for this investigation - a preparation, the utility and indispensability of which, if properly carried out, is naturally beyond question. (Weber [1922] 1978:18) This exhausts what Weber has to say about the 'individualistic method'. Any presentation of Weber's version of methodological individualism would be incomplete, however, without a mention of his definition of the basic concepts of his sociology in terms of the social actions of individuals ([1922] 1978:22ff). Weber's verstehende sociology starts from the concept of 'social action', which,

as we have seen above, is action oriented to the behaviour of others. On this concept is based the concept of 'social relationship' which is social action involving a plurality of actors, each taking account of the actions of the others. Of special importance is Weber's utilisation of the concept of 'probability' in his definition of 'social relationship'. A social relationship, according to Weber 'consists entirely and exclusively in the existence of a probability that there will -102be a meaningful course of social action - irrespective, for the time being, of the basis for this probability' (pp. 26f). It has been argued (see, e.g., Wrong, 1970:24f; Weiss, 1975:88-90), correctly I believe, that Weber's use of the concept of 'probability', in this and in other definitions, should be understood as an attempt to avoid reification and, thereby, to secure methodological individualism (cf. also Ringer, 1997:158f). Social orders or structures, being complexes of social relationships, do not exist as entities sui generis, but only as the probability that certain individuals will act in certain ways. Weber, then, recognises the 'existence' of organisations - such as firms and states - and of social structures - such as markets, religions, systems of law, cities, classes, status groups, nations, races, etc. - but not of society. There is no such thing as society. Society exists neither as an entity, nor as a 'level of reality' in addition to individuals and their actions. Weber's sociology, therefore, has no use for the concept of 'society' (cf. Tyrell, 1994). Sociology is a science of individuals and their actions, not of society. 22 To conclude this presentation of Weber's methodological individualism: Weber advanced his 'individualistic method' in opposition to the use of collective concepts in sociology. Collective concepts are used in everyday life and influence the actions of individuals. As such, they are relevant for the sociologist. But sociologists should not turn collective concepts used in everyday life into their own tools of analysis. Collective concepts, such as class, race, etc., are also used by social scientists, but should then be treated with utmost suspicion, because they are often used for dubious ideological purposes. Weber did not, however, want to abolish collective concepts from sociological analysis altogether, provided one remembers that they denote nothing but complexes of actions of individual persons. To this end, collective concepts must be defined in terms of individuals. Weber's definitions at the beginning of Economy and Society of the basic concepts of sociology in terms of social action is his attempt to achieve this end. But Weber's methodological individualism is not only about concepts. It is also inseparable from his definition of sociology as exclusively concerned with the interpretation of the subjective meaning individuals attach to their actions and the causal explanation of these actions in terms of motives. From this definition follows that Weber did not allow the use of collective concepts in sociological explanation. A highly plausible interpretation of Weber's methodological individualism, therefore, is that it forbids the use of collective concepts, if not in sociological analysis, then at least in sociological explanation (cf. Runciman, 1972:24f). It is not altogether clear to me if Weber intended to suggest that all social phenomena should be explained in terms of motive alone and, if so, if he conceived of this as a peculiarity of his own interpretive sociology, or as imperative for all sociology. My guess is that the answer to the first question is yes, but that he saw interpretive sociology as one of several possible types of sociology. -103-

Joseph Schumpeter In 1909, when Max Weber was planning a handbook in economics called Grundriss in Sozialökonomik (Outline of Social Economics), he asked Friedrich von Wieser to write about economic theory and his pupil Joseph Schumpeter to write a piece on the history of economic theory. Wieser's part was published in 1914 as Theorie der Gesellschaftlichen Wirtschaft (Social Economics, 1927). Schumpeter's contribution was published the same year (1914) as Epochen der Dogmen- und Methodengeschichte (Economic Doctrine and Method, 1954). Eventually, Weber was to make a contribution of his own to this project; Wirtschaft und Gesellschaft, published posthumously in 1922 (Economy and Society, 1978). When Weber, in 1918 was offered a chair in economics in Vienna, he was asked to give his opinion on the candidates to another chair in

theoretical economics. Weber unhesitatingly recommended Joseph Schumpeter to the post - the 'greatest theoretical talent', who is also 'an excellent teacher' (quoted in Hennis, 1991:49). Weber and Schumpeter knew and respected each other, but little is known about their personal relationship. 23 Intellectually, influence was probably asymmetric, running mainly from the older man to the younger. It has been argued by Richard Swedberg (1991:2) that Schumpeter was heavily influenced by Weber's idea of a transdisciplinary economics, called Sozialökonomik (social economics), and eventually made it his own. There is a presumption of a connection between Schumpeter's theory of economic development and Weber's theory of capitalism. Schumpeter's innovative entrepreneur seems to have something in common with Weber's charismatic leader (Macdonald, 1965). Schumpeter defended and adopted Weber's doctrine of value neutrality (Osterhammel, 1987:109). Schumpeter's theory of democracy, finally, bears a clear imprint of Weber's ditto (Udehn, 1996:138). Weber, on the other hand, got at least one thing from Schumpeter: the term 'methodological individualism'. Schumpeter was probably first to use the term 'methodological individualism' (see Machlup [1951] 1978:471f). He introduced it in Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie (The Nature and Essence of Theoretical Economics, 1908) in order to make the distinction between methodological and political individualism and, above all, to argue that they are altogether independent. The ultimate purpose of the distinction was to defend the theory of marginal utility against the recurrent accusations that, like classical economics, it propagates political individualism (Schumpeter, 1908:88-98). The argument is repeated in Economic Doctrine and Method, which also includes a rather odd characterisation of political individualism: This method of starting from a fact of individual psychology led to two groups of objections. Firstly, the general objections to individualism and atomism were levelled especially against this school. In this respect an adequate distinction between political individualism, the view that individuals are independent causes of social phenomena which represent merely a -104resultant of these causes, and the mere method of starting from the individual for purposes of pure economics was not made. (Schumpeter [1914] 1954:190) In the History of Economic Analysis (1954), Schumpeter distinguishes three forms of individualism: political, sociological and methodological. By the first, Schumpeter now means Manchester liberalism. What in the above quotation was called 'political individualism', is now called 'sociological individualism': the view widely held in the seventeenth and eighteenth centuries, that the self-governing individual constitutes the ultimate unit of the social sciences; and that all social phenomena resolve themselves into decisions and actions that need not or cannot be further analyzed in terms of superindividual factors. This view is, of course, untenable so far as it implies a theory of the social process. From this, however, it does not follow that, for the special purposes of a particular set of investigations, it is never admissible to start from the given behavior of individuals without going into the factors that formed this behavior … In this case we speak of Methodological Individualism. (Schumpeter, 1954:888f) With 'methodological individualism', then, Schumpeter understood the method-in-use of theoretical economics: 'the point of departure when describing economic phenomena is the actions of individuals' (dass man bei der Beschreibung gewisser wirtschaftlicher Vorgänge von dem Handeln der Individuen ausgehe [Schumpeter, 1908:90f] my translation). Unlike Weber, however, Schumpeter himself was not committed to 'methodological individualism', and he did not believe that this method was of much use in other theories and disciplines. In the theory of organisations, for instance, and in sociology more generally, Schumpeter did not believe that you would get very far with an individualist method (pp. 94f; 539-41). 24

In a speech Schumpeter gave in Japan in 1931, but published only recently (1991), Schumpeter's instrumental attitude to methodology in general, and to methodological individualism in particular, is most clearly expressed. It is no use before approaching a problem to form a preconceived idea of how to proceed with it. As you know, at the beginning of the eighteenth century all economists used to start in their analysis with the individual. The nineteenth-century economists also took the individualistic standpoint. It is [the creed of methodological universalism] that it is quite wrong to start from the individual. The individual is only a product of the social environment and therefore it is wrong to start from him. We know that every individual is fashioned by the social influences in which he grows up. In this sense he is the product of the social entity or class and therefore not a free agent. That is certainly so, but it is quite uninteresting as long as it is stated -105in this general form, where it is nothing but a phrase. It is interesting only when we can build a concrete knowledge on the basis of that view, and my great objection to it is that we do not make anything out of preaching universalism as a creed. In some problems of sociology or political life and so on we have no choice but to start from the social whole. In other cases, such as market phenomenon and most problems of modern industry, there is no choice but to start from the individual. In one class universalism and in the other class individualism is the indicated method. Therefore we ought to be neither individualistic nor universalistic. It is a matter of convenience; neither individualism nor universalism is an eternal truth. (Schumpeter, 1991:286f) This passage shows clearly that Schumpeter, like the early Austrians, was a methodological pluralist. It also indicates that 'methodological individualism' meant something different for Schumpeter, than it does for many contemporary methodological individualists (see pp. 112, 210). Finally, it shows that Schumpeter did not follow Weber in his attempt to build an individualistic sociology. With respect to sociology, Schumpeter sided with Weber's methodological opposite Emile Durkheim. In his own sociological works, Schumpeter did not practise methodological individualism. 25 The main sources of inspiration for his theory of social classes was Gustav Schmoller, Emile Durkheim and Othmar Spann (Schumpeter [1927] 1951:135). As Schroeter has pointed out (1985:163), this makes for 'a very holistic and deterministic approach', far from the individualistic method of Max Weber. And, indeed, according to Schumpeter 'every social class is a special social organism, living, acting, and suffering as such and in need of being understood as such' (Schumpeter, 1927:137). Weber would have disapproved strongly of this definition, had he been alive. Another deviation from methodological individualism (cf. Swedberg, 1991:104) is that Schumpeter saw the family, not the individual, as the unit of class analysis (Schumpeter [1927] 1951:148). 26 The term 'methodological individualism, then, was coined by Joseph Schumpeter. However he himself did not adhere to any doctrine with this name. Schumpeter was a methodological pluralist with an exceptional tolerance for alternative approaches. Schumpeter used the term 'methodological individualism' descriptively, to designate the method of theoretical economics, but without normative implications for other theories. He also used it to distinguish between political, sociological and methodological individualism. I believe that another distinction would help to clarify his own position. I suggest that a fruitful distinction can be made between substantive and procedural methodological individualism. Substantive methodological individualism says something about the content of concepts and/or explanations. This is how Weber understood methodological individualism and, as we shall see, it is the most common version. Procedural methodological individualism, on the other hand, says something about the order of analysis and/or presentation. For Schumpeter, methodological individualism did not say anything about social reality, about the -106causes of social phenomena, or about how to explain them. It was merely an acknowledgement of the fact that marginal economics actually starts with the wants of individual human beings -

something he calls its modus procedendi (Schumpeter, 1909:214). Methodological individualism, according to Schumpeter, is procedural methodological individualism.

Ludwig von Mises Methodological individualism was also proposed by the Austrian economist Ludwig von Mises. Although never his pupil, Mises was, as an economist, much influenced by Menger, 27 and eventually became a leading representative of the Austrian, or the New Austrian, School in economics. He did not, however, share all of Menger's ideas on methodology. According to Mises, 'Menger was too much under the sway of John Stuart Mill's empiricism to carry his own point of view to its full logical consequences' (Mises, 1969:27f). In matters methodological, Mises was also influenced by Weber (Selgin, 1988:22), and this includes the matter of methodological individualism (Rothbard, 1979:57). He was personally acquainted with Weber and frequently discussed methodological issues with him (Mises, 1978:4). It has also been testified that Weber's interpretive sociology was a favourite topic at Mises's private seminar in the 1920s, which included members such as F.A. von Hayek, Fritz Machlup, Alfred Schutz and Felix Kaufmann (Haberler [1961] 1974:191). There is no reason to doubt this testimony. Mises's first substantial contribution to social science methodology, 'Sociology and History' (Soziologie und Geschichte, [1929] 1933), was a critical discussion of Weber's ideal type. Like Schumpeter, Mises was sympathetic to Weber's doctrine of value-freedom. Unlike the former, however, he also agreed with Weber that sociology should conform to the principle of methodological individualism. It should be noted, though, that at least initially Mises had a different conception of 'sociology'. He conceived of it as a general theory of action, which included economics, as its most developed branch. As soon as he realised that this was not in conformity with common usage, he replaced the term 'sociology' by the term 'praxeology'. What Mises liked best about Weber's sociology was its subjectivism and the fact that it is defined as a theory of action. He did not, however, agree with Weber on the status of economic laws as ideal types and on his concept of 'rationality' (Mises, 1933:68ff; 1961:124-7). For Mises, all action, as distinguished from (reactive) behaviour, is rational. Action is a category ultimately given to our experience, and praxeology is an a prioristic science resulting from pondering on this ultimate experience. It is sometimes maintained that Mises's praxeology should be understood along Kantian lines (Rothbard, 1979:35f; Parsons, 1990:296ff), as made up of a priori statements that are either analytic (Smith, 1990:279-82), or synthetic (Selgin, 1988:21), but this is not the only possibility. Praxeology may also be understood as an exact science in the sense of phenomenology (Chisholm, 1986:191; Smith, 1990:279ff). Mises's first discussion and defence of methodological individualism was in -107Socialism. An Economic and Sociological Analysis (Die Gemeinwirtschaft, 1922). First among Austrian economists, Mises explicitly insisted that economic action is rational action. Methodological individualism follows as consequence of this fact: All rational action is economic. All economic activity is rational action. All rational action is in the first place individual action. Only the individual thinks. Only the individual reasons. Only the individual acts. How society arises from the actions of individuals will be shown in a later part of our discussion. (Mises [1922] 1951:113) Mises's next step is to argue that economics is based on principles governing the action of the isolated individual. Mises goes further than his predecessors and argues that it is 'quite correct to regard all economic activity, even the economic activity of isolated man, as exchange' (p. 117). Exchange, for Mises, reduces to choice. It is to prefer (exchange) A to (for) B. This does not mean, however, that Mises operates with an abstract, or asocial, individual. Rational man is a social being. Man is already a member of a social body when he appears as a thinking, willing creature, for the thinking man is inconceivable as a solitary individual … The development of human reason and the

development of human society are one and the same process. All further growth of social relations is entirely a matter of will. Society is the product of thought and will. It does not exist outside thought and will. Its being lies within man, not in the outer world. It is projected from within outwards. (Mises [1922] 1951:291) The prerequisite of all social life is language (pp. 321f). First of all, language is a precondition for thinking and rational action. Second, it is a precondition for co-operation and, hence, for society. Society, according to Mises, is co-operation and takes the form of division of labour. Therefore, to ask 'how society arises from the actions of individuals', is to ask for an explanation of division of labour. The explanation is simple: 'Progress in the division of labour depends entirely on a realization of its advantages, that is of its higher productivity' (p. 302). This seems like a rationalistic account of society, but Mises does not accept rationalism wholesale. He rejects the theory of the social contract. The doctrine of natural law has erred in regarding this great change, which lifts man from the state of brutes into human society, as a conscious process; as an action, that is, in which man is completely aware of his motives, of his aims and how to pursue them. (Mises [1922] 1951:43) -108Like Menger, Mises recognises two types of social order: organisations and organisms; the former being conscious creations, the latter a result of growth. Mises is also influenced by Herbert Spencer, and it is probably from him, that he picks up a second way of drawing the above distinction: 'Organization is an association based on authority, organism is mutuality' ([1922] 1951:296). The Organisation is the state, the Organism is the market and do not let the former interfere with the latter. Mises's first explicit mention of methodological individualism is, probably, in the article 'On the Development of the Subjective Theory of Value' (Vom Weg der Subjektivistischen Wertlehre), first published in 1929 and included in his Epistemological Problems of Economics (Grundprobleme der Nationalökonomie, 1933). In this article, Mises ([1933] 1976:153) identifies individualism with nominalism and opposes it to universalism (Universalismus). He returns to this subject, at greater length, in the main essay in this book, 'The Task and Scope of the Science of Human Action' (Aufgabe und Umfang der allgemeinen Wissenschaft von menschlichen Handeln, 1933), which is a preparatory work for his magnum opus Human Action. For the purposes of science we must start from the action of the individual because this is the only thing of which we can have direct cognition. The idea of a society that could operate or manifest itself apart from the action of individuals is absurd. Everything social must in some way be recognizable in the action of the individual. What would the mystical totality of the universalists be if it were not alive in every individual? Every form of society is operative in the actions of individuals aiming at definite ends. What would a German national character be that did not find expression in the Germanism of individuals? What would a church be that did not express the faith of individuals? (Mises [1933] 1976:43) In this quotation, Mises uses an epistemological argument to back up a kind of procedural methodological individualism. Social science takes the individual as its point of departure, since only the individual human being is immediately given to experience. Mises differs from Schumpeter, however, by suggesting that the individual is the 'empirical' point of departure. For Schumpeter, the individual was the theoretical point of departure. Second, this epistemological argument is supported by the ontological thesis that only individual human beings exist, or that collective entities exist only in the actions of individuals. Methodological individualism is associated with nominalism and collectivism with conceptual realism. According to Mises, the development of methodological individualism in the eighteenth and nineteenth centuries, which supplanted the

older conceptual realism or universalism was the Copernican revolution of social science (Mises [1933] 1976:153). Mises returns to the principle of methodological individualism in his most important work, Human Action (1949), but little is added to his earlier treatment of -109this topic. Methodological individualism now appears as an implication of praxeology, the science of human action. Praxeology deals with the actions of individual men. It is only in the further course of its inquiries that cognition of human cooperation is attained and social action is treated as a special case of the more universal category of human action as such. (Mises [1949] 1966:41) As in Socialism, Mises argues that economics starts with the isolated individual and also that action is exchange. He now makes a distinction, however, between autistic exchange and interpersonal exchange ([1949] 1966:97f). 28 Once again, 'Society is concerted action, cooperation'. As such, it 'is the outcome of conscious and purposeful behavior' (p. 143). More surprising, Mises also endorses the following statement, if reluctantly: 'Individual man is born into a socially organized environment. In this sense alone we may accept the saying that society is - logically and historically - antecedent to the individual' (p. 143). This is a statement typically made by collectivists against individualism. The presumption is, of course, that the way society is organised to some extent determines the behaviour of individuals. This is how Schumpeter saw the matter and the reason he was a methodological collectivist (universalist) in sociology (see p. 366, note 26). But how does Mises avoid this conclusion. By shifting from methodology to ontology. '[S]ociety is nothing but the combination of individuals for cooperative effort. It exists nowhere else than in the actions of individuals' (p. 142). As in Epistemological Problems of Economics, Mises introduces the topic of methodological individualism by discussing its relation to the issue of nominalism versus realism, but now with a more uncertain relation between methodological individualism and nominalism. No less inappropriate with regard to our problem is the reference to the antagonism of realism and nominalism, both these terms being understood in the meaning which medieval scholasticism attached to them. It is uncontested that in the sphere of human action social entities have real existence. Nobody ventures to deny that nations, states, municipalities, parties, religious communities, are real factors determining the course of human events. Methodological individualism, far from contesting the significance of such collective wholes, considers it as one of its main tasks to describe and to analyze their becoming and disappearing, their changing structures, and their operation. (Mises [1949] 1966:42) Mises now seems to suggest that the problem of individualism versus collectivism has nothing to do with that of nominalism versus realism, but later on in the same work he once again lumps them together and declares that the doctrines of collectivism, conceptual realism, universalism and holism are the arch-enemies -110of individualism ([1949] 1966:44, 145). The inconsistency disappears when it is realised that Mises uses the term 'collectivism' in two senses, rejecting it in one sense and accepting it in another: Insofar as collectivism asserts that collective entities have an existence independent of, or apart from, individual human beings, and insofar as it endows these collective entities with minds, purposes and interests of their own, it is wrong. If it merely asserts that individuals associate and co-operate for certain purposes, collectivism is quite legitimate and compatible with methodological individualism (pp. 145-53).

But Mises not only accepts the existence of collective entities; in the quotation above, he maintains that collective wholes, such as 'nations, states, municipalities, parties, religious communities, are real factors determining the course of human events'. How can this statement be compatible with methodological individualism? The answer is that his collectivism is illusory. Collective wholes do not exist 'out there'. They exist in the minds and in the acts of individuals, and as such they determine the course of human events. It is the meaning which the acting individuals and all those who are touched by their action attribute to an action, that determines its character. It is the meaning that marks one action as an action of an individual and another action as the action of the state or the municipality. The hangman, not the state, executes the criminal. It is the meaning of those concerned that discerns in the hangman's action an action of the state. (Mises [1949] 1966:42) The reason why Mises can hold that collective wholes determine the course of human events and still be a methodological individualist is that, according to him, a 'collective whole is a particular aspect of the actions of individuals and as such a real thing determining the course of human events' ([1949] 1966:43). Mises, then, does not at all accept the existence of collective wholes. Like Weber, he only accepts that individuals use collective concepts in their thinking and talking about 'society'. Collective concepts, not real collectives, determine the actions of individuals. Because of this ontology of the social world, epistemological considerations suggest that methodological individualism is the appropriate procedure. If we scrutinize the meaning of the various actions performed by individuals we must necessarily learn everything about the actions of collective wholes … Thus the way to a cognition of collective wholes is through the analysis of the individual's actions. (Mises [1949] 1966:42) It is one thing, however, to say that something determines the meaning or character of an action, and another thing to say that it determines the course of events. Mises does not clearly separate these two cases, but actually holds that ideas 'determine' the actions of individuals in both ways. It would have been -111better, had Mises said that ideas about collectives determine the course of events, for this is what, in the end, it all comes down to. Mises's methodological individualism turns out to be some kind of 'subjective idealism' opposed, primarily, to Marxian materialism. Society is a product of human action. Human action is directed by ideologies. Thus society and any concrete order of social affairs are the outcome of ideologies; ideologies are not as Marxism asserts, a product of a certain state of social affairs. (Mises [1949] 1966:187) Methodological individualism is also an important theme in Theory and History (1957), and in The Ultimate Foundation of Economic Science (1962). Very little is added, however, to his earlier views on this matter. In the first work, Mises makes the somewhat startling statement that 'collectivist philosophy denies that there are such things as individuals and actions of individuals' ([1957] 1985:256). In the latter work, he warns us against the mistake of hypostatisation, that is, the ascription of substance or existence to mental constructs. As an example of this fallacy Mises takes the way the term 'society' is used by the 'various schools of pseudo science'. Against these schools - Mises's example is Marxism - he holds that 'society itself is neither a substance, nor a power, nor an acting being' (1962:78-80). Once again methodological individualism appears as a form of 'subjective idealism' advanced in direct opposition to Marxist 'materialism'.

For if one realizes that what sets action in motion is ideas, one cannot help admitting that these ideas originate in the minds of some individuals and are transmitted to other individuals. But then one has accepted the fundamental thesis of methodological individualism, viz., that it is ideas held by individuals that determine their group allegiance. (Mises, 1962:82) So far I have concentrated on the meaning of Mises's methodological individualism, but said nothing about its status and range of application. The immediate impression is that Mises is more dogmatic about it than were the earlier Austrians. I believe that Mises conceives of methodological individualism as a principle a priori, which the sciences of human action have to follow, because epistemology and ontology dictate that it is the only correct way to proceed. I also think it is safe to suggest that, for Mises, methodological individualism is universally applicable to the sciences of human action. According to Mises, there are two sciences of human action: praxeology and history (sociology is divided between them). Praxeology, as we have seen is certainly individualistic. But what about history? It is individualistic too. Methodological individualism, therefore, is universal in scope. -112Individualism, as a principle of the philosophical, praxeological, and historical analysis of human action means the establishment of the facts that all actions can be traced back to individuals and that no scientific method can succeed in determining how definite external events, liable to a description by the methods of the natural sciences, produce within the human mind definite ideas, value judgements, and volitions. In this sense the individual that cannot be dissolved into components is both the starting point and the ultimate given of all endeavours to deal with human action. (Mises, 1962:82) Mises rejects the idea of a social science distinct from praxeology and history. There is no science of society, only sciences of human action (Mises [1957] 1985:256ff; 1962:105-8). In this respect, Mises is a follower of Weber, who saw sociology as a science of action, but not of Menger. He also agrees with Weber that sociology, if it is not a part of praxeology, is a science auxiliary to history or, rather, a part of it. We saw, at the beginning of this section, that Mises criticised Weber's doctrine of Verstehen and his notion of ideal types. But what Mises rejected was only Weber's understanding of economics. Mises actually accepted Weber's methodology, tout court, for the purposes of history. 29 Mises's version of methodological individualism derives partly from Menger, but mainly from Weber. For Mises, as for Weber, methodological individualism follows from a theory of action and from a subjectivist interpretation of social reality. There is a difference, however. For Weber, subjectivism is bound up with his idea of an interpretive sociology; subjective reality is the subject matter of sociology, but it is not necessarily the only social 'reality'. For Mises, subjective reality is the exclusive social reality. A consequence of this difference is a change of emphasis, from the methodological level in the case of Weber, to the ontological level in the case of Mises. The reason for this change of emphasis is, probably, that Mises was influenced by the phenomenology of Edmund Husserl and Alfred Schutz (see Mises 1943/44:530). When it comes to explicit formulations of methodological individualism, there is not much to touch upon in the case of Mises. One of its main tasks is said to be that of describing and analysing collective wholes in terms of individuals. This methodological principle is underpinned by the epistemological argument that all we can know about collective wholes is the actions of individuals, and the ontological thesis that collective wholes exist only in the minds and in the actions of individuals. But Mises also formulates methodological individualism as a thesis about social causation: it is ideas held by individuals that determine their group allegiance. More generally, Mises holds the ontogenetic thesis that collective wholes, including society at large, are the products of human action, which in turn are the outcomes of ideas held by individuals, so that, indirectly, society is the result of the ideas of individuals. -113-

Friedrich von Hayek The Austrian branch - actually it is more like the root and trunk - of methodological individualism culminates in the writings of Friedrich August von Hayek. His particular version of it is a development of the ideas of Max Weber, Alfred Schutz and of his teacher Ludwig von Mises, but it owes, perhaps, even more to the original version of Carl Menger. With Hayek, the circle of Austrian methodological individualism comes to a close. 30 It is a form of methodological individualism, which is less radical than that of the theory of the social contract and also of mainstream neoclassical economics. Austrian methodological individualism is based on the premise that humans are social and cultural beings (cf. Madison, 1990: and Lange-von Kulessa, 1997). In his inaugural lecture at the London School of Economics in 1933, Hayek introduced some of the main themes of his future work (cf. Caldwell, 1988). One of them was his version of methodological individualism: 'By combining elementary conclusions and following up their implications he [the economist] gradually constructs, from the familiar elements, a mental model which aims at reproducing the working of the economic system as a whole' (Hayek, 1933b: 128). The year after, he wrote an introduction to a reprint of Menger's Grundsätze der Volkwirtschaftslehre published by the London School of Economics. This piece was also published as an article in Economica (1934) presenting Carl Menger to an English public. A point to notice, because unusual, is that Hayek devotes considerable space also to Menger's methodological work, Problems of Economics and Sociology, and maintains that it was 'hardly less an achievement than the Grundsätze' (Hayek, 1934:405). 'Of the central contentions of the book one may be singled out for further comment; his emphasis on the necessity of a strictly individualistic or, as he generally says, atomistic method of analysis' (p. 406). If methodological individualism is now separated from ethical individualism and if the subjective element has been fully developed only by Austrian Economics, 'this is largely due to Menger's brilliant vindication in this book' (p. 406). In 1937 Hayek's now classic article 'Economics and Knowledge' appeared: it questioned not only the theory of general equilibrium, but also Mises's praxeology, and eventually led to a split within the Austrian movement. Hayek argued that equilibrium analysis and praxeology are both tautological and fail to say anything about reality. The general remedy for this is to work with verstehen and ideal types, as suggested by Max Weber (Hayek, 1948: p. 47, n. 12 and p. 52, n. 18). A particular problem is the assumption of isolated individuals, which fails to account for the interdependence of people's plans. For equilibrium to be possible in the real world, individuals would have to know the plans of other individuals. Game theory is one attempt to deal with this interdependence, but it does not solve the problem of knowledge (see p. 252). 31 The main source for an understanding of Hayek's ideas on methodological individualism is 'Scientism and the Study of Man', first published as articles in Economica (1942-4) and later included as Part One in The Counter-Revolution of Science (1955). 32 This work is first of all an attack on 'scientism'; the mechanical and uncritical application of habits of thought, taken from the natural sciences, -114in the social sciences. In contrast to the objective character of natural phenomena, Hayek stresses the subjective nature of human actions. In fact, most of the objects of social or human action are not 'objective facts' in the special narrow sense in which this term is used by the Sciences and contrasted to 'opinions', and they cannot at all be defined in physical terms. So far as human actions are concerned the things are what the acting people think they are. (Hayek, 1942-4: 277f; 1955: pp. 26f) Hayek's subjectivism derives from his Austrian view of economics, but also from German hermeneutics and phenomenology. Therefore, since all human action is subjective in the sense of the above quotation, every science dealing with the results of conscious human action must follow the course taken by economics.

The points which we want to stress are that in all such attempts we must start from what men think and mean to do, from the fact that the individuals which compose society are guided in their actions by a classification of things and events in a system of sense qualities and concepts which has a common structure and which we know because we, too, are men, and that the concrete knowledge which different individuals possess will differ in important respects. Not only man's action towards external objects but also all the relations between men and all social institutions can be understood only in terms of what men think about them. (Hayek, 1942-4: 283; 1955:33) So far, Hayek's concern is with our understanding of human action. His aim seems to be the justification of a subjectivist methodology by epistemological arguments. Hayek is talking about knowledge. But his subjectivism goes deeper and turns out to be of an ontological nature, like that of Mises. Not only is our knowledge of society limited to knowledge about the beliefs of individuals. Society, itself, is made up of the beliefs of individuals. This is the reason knowledge of society is knowledge about the beliefs of individuals. Society as we know it is, as it were, built up from the concepts and ideas held by the people; and social phenomena can be recognized by us and have meaning to us only as they are reflected in the minds of men. (Hayek, 1942-4: 283; 1955:33f) This does not imply, however, that the aim of social science is limited to investigating the minds of individual human beings. Social science is interested in social structures, but the true elements of social structures are beliefs existing in the minds of a plurality of individuals. -115 The structure of men's minds, the common principle on which they classify external events, provide us with the knowledge of the recurrent elements of which different social structures are built up and in terms of which we can alone describe and explain them. While concepts or ideas can, of course, exist only in individual minds, and while, in particular, it is only in individual minds that different ideas can act upon another, it is not the whole of the individual minds in all their complexity, but the individual concepts, the views people have formed of each other and of things, which form the true elements of the social structure. (Hayek, 1942-4: 283f; 1955:34) In order to illustrate his subjectivism, Hayek gives some examples from the social sciences. The first example, presumably taken from functionalist anthropology, concerns the concepts of 'tool' and 'instrument'. Such concepts - that of 'hammer', for instance - cannot be defined by their physical attributes, but must be defined in terms of their function, or the 'purpose for which men think they can be used' (1942-4: 278; 1955:27). From archaeology Hayek takes the example of the problem of determining 'whether what looks like a stone implement is in truth an "artifact", made by man, or merely a chance product of nature'. According to Hayek, the only way to answer this question is 'by trying to understand the working of the mind of prehistoric man, of attempting to understand how he would have made such an implement' (1942-4: 278; 1955:27). A final example concerns a problem that belongs to economics, but would occur as a problem only in economic history or economic anthropology. That the objects of economic activity cannot be defined in objective terms but only with reference to a human purpose goes without saying. Neither a 'commodity' or an 'economic good', nor 'food' or 'money', can be defined in physical terms but only in terms of the views people hold about things. Economic theory has nothing to say about the little round disks of metal as which an objective or materialist view might try to define money. It has nothing to say about iron or steel, timber or oil, or wheat or eggs as such. The history of any particular commodity indeed shows that as human knowledge changes the same material thing may represent quite different economic categories. Nor could we distinguish in physical terms whether two men barter or exchange or whether they are playing some game or performing some religious ritual.

(Hayek, 1942-4: 281f; 1955:31) Now, the subjectivism of Hayek should not be interpreted as implying that the social scientist must use only such concepts as are used in everyday life, and in the same way. Hayek is careful to guard himself against such misunderstanding of his standpoint (1942-4: 284f; 1955:36). The ideas and concepts used in everyday life are only the starting-point, the elements from which the social scientist gradually builds up his model of the social structure. The reason -116why the social scientist must not and cannot confine himself to the use of such concepts as guide individuals in their acting, is that social phenomena are 'the unintended or undesigned results of the actions of many men' (1942-4: 276; 1955:25). In order to make clear his own idea of a scientific model of social structure, as distinguished from a naive collectivist approach, Hayek makes a distinction between, on the one hand, those ideas which motivate people in their actions and which are constitutive of social phenomena and, on the other hand, those speculative ideas people form about these phenomena in order to explain them (1942-4: 285; 1955:37). He is aware that the same idea may occur in both capacities, but insists that the social scientist starts his analysis from ideas in their constitutive capacity, and takes speculative ideas for what they are; popular myths. It is the ideas which the popular mind has formed about such collectives as 'society' or the 'economic system', 'capitalism' or 'imperialism', and other such collective entities, which the social scientist must regard as no more than provisional theories, popular abstractions, and which he must not mistake for facts. That he consistently refrains from treating these pseudoentities as 'facts', and that he systematically starts from the concepts which guide individuals in their actions and not from the results of their theorizing about their actions, is the characteristic feature of that methodological individualism which is closely connected with the subjectivism of the social sciences. (Hayek, 1942-4: 286; 1955:37f) The subjectivism and individualism of the social sciences make them in an important respect different from the natural sciences. The difference is epistemological and Hayek uses it in support of his methodological individualism. In the natural sciences complex phenomena are observed; material things which, for their explanation, must be analysed into their component parts. Their method, therefore, is 'analytic'. In the social sciences the opposite is the case. We know by direct acquaintance only the parts; the individuals, from which the complex phenomena must be constructed. The method of the social sciences, therefore is 'compositive', or 'synthetic' (1942-4: 287; 1955:39). The complex phenomena to which the social scientist must give his sole attention are those phenomena which are the unintended results of the conscious action of many men. Consciously designed social phenomena, though sometimes in need of a psychological explanation, are in no need of a social scientific explanation. Hayek gives an example of how order is produced by the actions of many men without being intended by any one of them. The way in which footpaths are formed in a wild broken country is such an instance. At first everyone will seek for himself what seems to him the best path. But the fact that such a path has been used once is likely to make it easier to traverse and therefore more likely to be used again; and thus -117gradually more and more clearly defined tracks arise and come to be used to the exclusion of other possible ways. Human movements through the region come to conform to a definite pattern which, although the result of deliberate decisions of many people, has yet not been consciously designed by anyone. This explanation of how this happens is an elementary 'theory' applicable to hundreds of particular instances … It makes no difference for our present purpose whether the process extends over a long period of time as it does in such cases as the evolution of money or the formation of language, or whether it is a process which is constantly repeated anew as in the case of the formation of prices or the direction of production under competition.

(Hayek, 1955:40; cf. 1942-4: 289) This example shows the imprint of Menger on the methodology of Hayek. It is an attempt to illustrate the 'exact' and atomistic analysis of institutions suggested by Carl Menger in Problems of Economics and Sociology and used by Menger in his theory of money (see pp. 90f). The particular example of the footpath, however, is borrowed from Descartes. 33 Like Mises, Hayek sees a clear connection between individualism and nominalism, and collectivism and realism, respectively. Methodological collectivism is an outgrowth of conceptual realism. It makes the mistake of treating collective entities, such as society, economy, capitalism, or class as definite objects when, in fact, they are 'models constructed by the popular mind to explain the connection between some of the individual phenomena which we observe'. The fundamental obstacle to the assumption made by naive realism is that 'the wholes as such are never given to our observation but are without exception constructions of our mind' (1942-4: 43; 1955:54). But as with Mises, there is a certain ambiguity on this point. Hayek denies that collective entities exist as definite objects, but at the same time takes the view that wholes - the market, for instance exist as structures of relationships (1942-4: 44; 1955:55). The fallacy Hayek wants to avoid is also partly that of Mises. He wants to avoid the danger, inherent in collectivism, of treating collective entities as some kind of 'superpersons' endowed with 'social' or 'collective' minds (1942-4: 45; 1955:57). In support of his view that collective entities are not definite objects, Hayek points to the fact that social wholes are not 'natural units' like flowers and butterflies; unlike physical things, they are not continuous in space and time, but 'selections of certain elements of a complex picture on the basis of a theory about their coherence' (1942-4: 43; 1955:55). The social sciences, thus, do not deal with 'given' wholes but their task is to constitute these wholes by constructing models from the familiar elements - models which reproduce the structure of relationships between some of the many phenomena which we always simultaneously observe in real life. (Hayek, 1942-4: 44; 1955:56) -118Hayek's methodological individualism is also expounded in an article from the same period, 'The Facts of the Social Sciences' (1943), which is a concise statement of his views on the methodology of the social sciences. Social facts, including not only human actions and written language, but also 'things' such as tools, food, medicine and weapons, are subjective in contrast to the objective character of natural facts. 'Collective wholes' are not observable, and do not exist as definite objects, independent from the 'theories' people have about them. Collective wholes are 'created by an act of construction or interpretation'. Terms denoting collective wholes refer to certain activities of individuals. This is all the theories of the social sciences aim to do. They are not about the social wholes as wholes; they do not pretend to discover by empirical observation laws of behaviour or change of these wholes. Their task is rather, if I may so call it, to constitute these wholes, to provide schemes of structural relationships which the historian can use when he has to attempt to fit together into a meaningful whole the elements which he actually finds. (Hayek [1948] 1972:72) In this quotation, methodological individualism is opposed to the search for empirical laws about social wholes. This is another return to Carl Menger, who opposed the atomism of the exact orientation to the collectivism of the realistic-empirical approach. But it is also an adjustment to the views of Weber and Mises. Hayek does not accept a social science based on the realistic-empirical approach. This type of research belongs to history. But social science is an aid to history by providing individualistic models of collective wholes. Or, in the terminology of Max Weber, sociology is an auxiliary discipline to history, providing individualistic ideal types of collective phenomena.

In its early development, especially in Weber and Schumpeter, methodological individualism was clearly distinguished from political individualism. In Mises, this distinction is totally blurred. His allegiance to value-freedom is mere lip-service. Methodological individualism appears as inseparable from, sometimes even identical with, the political doctrine of liberalism. But Hayek is first among the proponents of methodological individualism to treat it as part of a wider system of ideas, something like a world view, including, or related to, a certain ideology. In his article 'Individualism: True and False' (1945), Hayek is careful to distinguish the 'true individualism' of the Scottish Enlightenment, and men such as Alexis de Tocqueville and Lord Acton, from the 'false individualism', which originates with Réné Descartes. The most significant expressions of the latter are the philosophy of the French Enlightenment, especially Jean-Jacques Rousseau, and the English philosophical radicalism of Jeremy Bentham and the two Mills. The most mistaken element of 'false individualism', is the 'design theory' of social institutions; the belief that society can be constructed according to a plan, or blueprint. -119What, then, are the essential characteristics of true individualism? The first thing that should be said is that it is primarily a theory of society, an attempt to understand the forces which determine the social life of man, and only in the second instance a set of political maxims derived from this view of society … its basic contention … is that there is no other way toward an understanding of social phenomena but through our understanding of individual actions directed toward other people and guided by their expected behavior. This argument is directed against the properly collectivist theories of society which pretend to be able directly to comprehend social wholes like society, etc., as entities sui generis which exist independently of the individuals which compose them. (Hayek [1948] 1972:6) The main insight of true individualism is that most social phenomena are the unintended and unforeseen results of the actions of individuals; that like living organisms they have grown, step by step, without being consciously aimed at and constructed. This insight is used by Hayek, as by many other conservatives and liberals, to argue against social planning and social engineering. But Hayek has probably done more than anyone else to develop this argument in great detail, including the theory of society on which it is based. Like Menger, Hayek distinguishes two types of order: organisations and spontaneous orders (organisms). The main part of Hayek's theory is about spontaneous orders, and the way they have developed in the course of history. The most important contributions to this theory are from the 1960s onwards. From about this time, Hayek also stops mentioning methodological individualism in his writings. I interpret this fact as an indication that Hayek no longer adheres to this principle, and for a good reason. His theory of society is no longer compatible with methodological individualism (see pp. 282-4). To sum up: Hayek's methodological individualism is, like that of Weber and Mises, inseparable from subjectivism. Society exists only in the minds and actions of individual human beings. Social wholes do not exist as definite objects, on a par with natural units, like physical things and biological organisms. Concepts such as 'society', 'capitalism' and 'imperialism' are popular abstractions, and the concepts used by social science, such as 'government', 'trade' or 'army', are theoretical constructions. But neither the collective concepts of everyday life, nor those of social science, denote collectives that are real, independently of any idea, or theory, about them. I think it is possible to give the following explication of Weber's, Mises's and Hayek's individualist analysis of collective concepts: their intension is ideas in people's mind, their extension is the actions of individuals. But the subjective meaning individuals attach to actions and things is only the point of departure. The real task of social science is to construct and explain large-scale social (complex) phenomena. This is done by constructing models of individual actions and their intended and unintended consequences. The subjective meaning individuals attach to their actions (and to physical things) are the -120elements out of which the social scientist constitutes 'social wholes'. Hayek's methodological individualism is both procedural and substantive. The individual is the point of departure, but also

the end of social science. The ultimate explanation of all social phenomena is in terms of individuals, their actions and the consequences of these actions. Like Menger, Hayek is especially interested in the evolution of social institutions, which he tends to see as conventions, in the manner of Hume.

The Austrian influence Although part of neoclassical marginalism, Austrian Economics has never really been part of mainstream economics. After the first generation, it disappeared definitely from the mainstream and formed a small marginal stream all of its own. At an early stage of its development, however, it made an impact on some important non-Austrian economists, who helped to propagate methodological individualism. I am going to end this chapter by mentioning three of them: Frank H. Knight, Lionel Robbins and the early Gunnar Myrdal. Frank H. Knight was an American economist and a founding father of the famous Chicago School of Economics, which counts among its members such prominent economists as George J. Stigler, Milton Friedman, Armen A. Alchian, Harold Demsetz, Richard Posner and Gary S. Becker. Knight was clearly influenced by all three versions of marginalism. He mentions Wicksteed, Pareto and Marshall, as especially important, but there is little doubt that also the Austrians loom large in his writings. His emphasis on uncertainty and his view that economics is an exact science, for instance, indicate an Austrian influence. 34 In his classic treatise Risk, Uncertainty and Profit (1921), Frank H. Knight was first to make the important distinction between risk and uncertainty, where the former implies knowledge of the probabilities of different alternative outcomes, whereas the latter means that we are left completely in the dark concerning future states of affairs. According to Knight, it is the existence of uncertainty that gives rise to profit. If economic life were characterised by perfect knowledge, or even by risk, competition would eliminate profits. Despite the obvious problem of defining rationality in a state of uncertainty, Knight may have been the first to explicitly suggest that economics is a theory of 'rational choice' (Knight, 1921:89). 35 Following Wicksteed, he maintains that economics is a theory of choice, not of pleasure and pain. The term 'rational choice' is probably introduced to avoid the psychologism implicit in Wicksteed's expression 'psychology of choice'. The theory of conduct, relevant for economics, is the 'Law of Choice', stated by Knight in the following way: In the utilization of limited resources in competing fields of employment, which is the form of all rational activity in conduct, we tend to apportion resources among alternative uses that are open in such a way that equal amounts of resource yield equivalent returns in all fields. (Knight, 1921:65) -121This is the Austrian view of economics, stated most succinctly by Weber and later by Lionel Robbins. It is possible to recognise an Austrian element also in Knight's distinction between a Robinson Crusoe and a social economy. Economics is a theory of choice and exchange, but not of choice alone. This view is stated most clearly in The Economic Organization ([1933] 1971; see also 1961:185-93, 273-82), where Knight draws the obvious conclusion that economics is limited in scope to systems of free market economics, but is repeated in The Ethics of Competition (1935/6). In its second aspect or stage, economic theory deals with social, in the sense of interindividual, relations. But the 'economic man' is not a 'social animal', and economic individualism excludes society in the proper human sense. Economic relations are impersonal. The social organization dealt with in economic theory is best pictured as a number of Crusoes interacting through the markets exclusively. (Knight, 1935/6:282)

Knight was not in any sense a radical individualist even though he did favour an individualistic organisation of the economy. He was fully aware of the significance of social institutions and social organisation for an understanding of social phenomena in general, and of economic phenomena in particular (see, e.g., Knight 1956: chs 1 (1951) and 5 (1941). It is difficult to tell, therefore, whether Knight was a programmatic methodological individualist, or not; and if so, what kind of methodological individualist he was. One thing is certain, however: like Schumpeter, he did conceive of theoretical economics as an individualistic science. By the nature of its fundamental conceptions, theoretical economics is an individualistic science. As explained at length in an earlier part of this essay, the 'economic man' is not a social man, and the ideal market dealings of theory are not social relations. The science takes its economic individual as a datum, in his three aspects of wants, resources and technical knowledge, ignoring all questions of origin; and it abstracts from all his social relations with other human beings, except those of the perfect market, which are really relations to commodities as such. (Knight, 1935/6:337) Lionel Robbins was an English economist working at the famous London School of Economics in its most glorious days, from 1929 to 1961. He was an economist of somewhat similar bent as Frank Knight, but even more influenced by the Austrians and by Wicksteed. Robbins was the author of one of the most cited books on economic theory and methodology, his classic An Essay on the Nature and Significance of Economic Science (1932). In this book you find, I am sure, the most often cited definition of economics ever produced: 'Economics is the science which studies human behaviour as a relationship between ends and -122scarce means which have alternative uses' ([1932] 1935:17). It may be added that, in this situation, 'behaviour necessarily assumes the form of choice' (p. 14). Robbins made no secret of the fact that this is the Austrian conception of economics, or at least half of it. Robbins did not follow most of the Austrians and Frank Knight in conceiving of economics as a theory of exchange, or catallactics. Without this limitation, economics becomes a general theory of human action applicable to various social phenomena other than market exchange. Robbins was thus a precursor of theoretical economic imperialism, and also made some suggestions in this direction: 'There is an important sense in which the subject-matter of political science can be conceived to come within the scope of our definition of the economic. Systems of government, property relationships, and the like, can be conceived as the result of choice' (Robbins [1932] 1935:134.). Unlike some later proponents of economic imperialism, however, Robbins was keenly aware also of the limitations of the economic approach (pp. 131-5; see also Udehn, 1991; 1996). Robbins was one of the main figures in the project to free economics from its dependence on psychological hedonism and turn it into a theory of rational choice. Economics does not in any way indulge in speculation about the psychological 'causes' of human action. It takes people's motives and wants as given and treats them as data in its own theories. The psychological content of economics boils down to two simple assumptions: (1) 'that individuals can arrange their preferences in an order, and in fact do so' (pp. 78f); and (2) 'that each final choice is consistent with every other, in the sense that if I prefer A to B and B to C, I also prefer A to C' (p. 92). This is the meaning of the term 'rational' in economics (p. 91). Another important strain in Robbins's thought, is his (individualist) denial of the possibility of interpersonal comparisons of utility. 'There is no means of testing the magnitude of A's satisfaction as compared with B's' (pp. 139f). Hence, the impossibility of a scientific concept of 'social utility'. The only possible significance of such a concept is as part of ethical theory, which must be clearly distinguished from the positive theory of economics. 'It is simply the accidental deposit of the historical association of English Economics with Utilitarianism: and both … will be the better if this is clearly recognised' (p. 141). There are many similarities between Robbins's An Essay on the Nature and Significance of Economic Science (1932) and Gunnar Myrdal's The Political Element in the Development of Economic Theory (1929), even though they came to different conclusions and Myrdal, eventually, took off in another direction. 36 Myrdal was even more critical, than Robbins, of the dependence of

early British marginalism on utilitarian psychological hedonism and on the idea of 'social value', or 'social utility', as a sum of the utilities of individuals. Such addition of individual utilities is only possible by the scientifically illicit procedure of comparing the utilities of different individuals. The utilitarian economists were individualists, but they were also radicals and social reformers. As such they had a strong inclination to develop their doctrine in a politically relevant direction. By adding the utilities of all members of -123society it was possible to arrive at the politically relevant notion of 'social value' or 'social utility', which is at the basis of welfare economics. From the very beginning, methodological individualists have been sceptical about welfare economics, and especially about notions such as 'social value' or 'social utility'. A first objection is that it presupposes the possibility of comparing the utilities of different individuals. The most serious defect of concepts such as 'social value' and 'social utility', however, is that they seem to suggest some kind of collective subject, engaged in 'collective', or 'social housekeeping' (Myrdal [1929] 1953: ch. 6). There is a clear echo of Carl Menger's critique of the concept of 'national economy' in Myrdal's objections to the concepts of 'social value' and 'social utility'. The worst sinners are, of course, the German political metaphysicians, with their organicism and their speculation about the essence of the state. But also the utilitarian economists - especially when they draw political conclusions from their doctrine - 'tend to be forced into an untenable "communistic fiction" about the unity of society' (p. 54). Like Robbins, Myrdal observes that economics has progressively freed itself from its dependence upon psychological hedonism, and from any other psychological theory for that matter. Economics has become a 'behaviourist' theory of choice (Wahlhandlungstheorie). Unlike Robbins, however, Myrdal did not at all welcome this development. From his point of view, a 'behaviourist theory' of choice, 'is an attempt to construct a subjective theory of value without psychological content. Such an attempt is bound to lead to empty mathematical scholasticism' ([1929] 1953:97f). For Myrdal, the solution is not to reintroduce psychological hedonism in the science of economics - this theory is proven wrong by the science of psychology - but to find some better psychological theory to replace it. Myrdal, then, appeared as one of the first in a long line of critics, who have tried to reintroduce the programme of psychologism in economics, but in vain.

Conclusion The Austrian School of Economics is the single most important source of methodological individualism in modern social science. Its founder Carl Menger defended the use of an atomistic method in theoretical economics against members of the German Historical School and Joseph Schumpeter coined the term 'methodological individualism' to refer to this method. An important part of Menger's individualist programme was his suggestion that not only prices, but all social institutions are amenable to individualist analysis. A possible problem with this extension of the individualist programme has been pointed out by Robert Nozick, who notices that Menger provides an explanation of the creation and maintenance of institutions, but adds the seemingly obvious point that '[e]xisting institutions also shape and affect the actions of individuals' Nozick, 1977:357). According to Nozick, therefore, the interplay of individuals and institutions should rather look like this: -124-

Figure 4.2 Actions and institutions according to Robert Nozick Source: Nozick (1977:358)

The pertinent question, now, is this: 'If each time we explain the current situation as arising from previous actions in a certain institutional setting, then why are actions prior? In this apparent chicken and egg situation, why aren't we equally methodological institutionalists?' As we shall see in chapter 6 on Popperian methodological individualism, Nozick was not first to ask this question, but he may have been first to ask it explicitly about Menger's methodological individualism. I do not know if the later Austrians, Weber, Mises and Hayek, were aware of this problem, or saw it as a problem, but they did suggest a way of escape. While Nozick implies that social institutions are irreducible to individuals and their actions, Weber, Mises and Hayek adopted an intersubjectivist theory of society, which situates social institutions in the minds of individuals. Social institutions are the subjective meaning individuals attach to social actions or social things like money. Instead of conceiving of individual and society as two levels, we get a horizontal, or flat picture of individuals interacting with one another. Since there is a shift from methodology to ontology involved in this common route of escape, I call it the 'ontological turn' or 'twist'.

Figure 4.3 Individuals in society according to Weber, Mises and Hayek -125-

5

Society as subjectively meaningful interaction In the beginning, sociology was mainly holistic. Most sociologists saw society as a reality sui generis, with laws of its own, irreducible to the acting individuals. But there were also some early sociologists, who took a more individualistic view of society: Gabriel Tarde, George Simmel and Max Weber, for instance. The early Simmel and Weber conceived of society as constituted by the subjectively meaningful action of individuals. The most important sources of this conception of society were German Völkerpsychologie and the descriptive psychology of Wilhelm Dilthey, who also saw society as interaction. Simmel, who, like Dilthey, had intellectual roots in Völkerpsychologie, saw society as both subjective meaning and interaction. Borrowing a distinction from Kant, he saw society as both form and content. Society consists of forms of interaction, but its content is subjective meaning. This is, I believe, the main sociological version of the individualistic theory of society. It differs from the theory of the social contract and the economic theory of the market by taking a broader view of social action, but, above all, by its interest in the meaning of social phenomena. 1 In the further development of the individualist theory of society in sociology, there was an important input from two philosophical schools: American pragmatism and German phenomenology. Of these, the former was not really individualistic, but nevertheless it exerted a profound influence on one particular version of the individualist theory of society, namely symbolic interactionism. The philosophical phenomenology of Edmund Husserl, finally, is the source, not only of phenomenological sociology, but also of existentialism - which is a theory somewhere in between philosophy, psychology and sociology - and of ethnomethodology. Symbolic interactionism, sociological phenomenology, existentialist sociology, and ethnomethodology are all sociological theories, which conceive of society as interaction and intersubjective meaning, even if they do not attach the same importance to both elements. Because these theories typically focus on interaction between human beings, in co-presence, or face-to-face relations, they are usually considered as 'microsociology' (Knorr-Cetina, 1981:1ff) or as belonging to the 'microinteractionist tradition' (Collins, 1985: ch. 3). According to the American sociologist Jeffrey Alexander, the theories belonging to microinteractionist tradition are caught in an 'individualist -126-

dilemma'. I agree with Alexander (and Parsons) that there is such an individualist dilemma, but my interest, in this chapter, is in individualism per se, without the dilemma.

Symbolic interactionism Symbolic interactionism is an American movement of thought usually associated with the name of George Herbert Mead, but really a creation of his pupil and follower, the sociologist Herbert Blumer. A philosopher and social psychologist of the pragmatist school, Mead was influenced by the work of Charles Peirce, William James and John Dewey. 2 Also important for Mead's theory of the individual and society were some ideas of the sociologist Charles Horton Cooley. A third influence - in this case it is probably better to talk about cross-fertilisation - was the so-called Chicago School of Sociology, founded by William I. Thomas and Robert E. Park. Although mainly an American product (Alexander, 1987:196ff; Joas, 1987:94ff), symbolic interactionism was also influenced by European thinking. Among the more remote sources of symbolic interactionism we find Adam Smith and other representatives of the Scottish Enlightenment, the German Romantics and Hegel. 3 A more immediate influence came from Völkerpsychologie, Dilthey and Simmel. 4 I take Cooley, Thomas and Mead to be the most important progenitors of symbolic interactionism. I dispute, however, that any one of them was a 'symbolic interactionist', in the present-day sense of that term. I also doubt that any one of them held the intersubjectivist theory of society, or was a theoretical individualist (cf. Joas, 1987:94ff). 5 I do agree, however, that all of them developed certain ideas, which, if taken in isolation, were important contributions to the further development of symbolic interactionism into an individualist theory of society. Cooley's contribution to symbolic interactionism was his theory of the looking-glass self and the theory of society that it suggests. The looking-glass self has 'three principal elements: the imagination of our appearance to the other person; the imagination of his judgement of that appearance, and some sort of self-feeling such as pride and mortification' (Cooley [1902] 1964:184). An important part of our selves, then, is the way we imagine we appear in other peoples' minds. From this, it is but a short step to suggest that people exist primarily or, exclusively, as ideas in the minds of one another. Cooley's conception of society, as advanced in his first and most influential book Human Nature and Social Order (1902), is probably the most extreme version of an idealist and intersubjectivist theory of society ever proposed by a sociologist. Society, according to Cooley, is mental: 'The immediate social reality is the personal idea … Society, then in its immediate aspect, is a relation among personal ideas … Society exists in my mind as the contact and reciprocal influence of certain ideas named 'I' Thomas, Henry, Susan, Bridget, and so on' ([1902] 1964:119). A consequence of this view is 'that there is no separation between real and imaginary persons; indeed to be imagined is to become real, in a social sense' (p. 95). -127Another consequence is that corporeal existence is immaterial for the question of social existence. Historic persons, characters of fiction and mythological figures are as real as corporeal persons, since they exist as ideas in the minds of people. Indeed, they may be more real, since a corporeally existent person is not socially real unless he is imagined. If the nobleman thinks of the serf as a mere animal and does not attribute to him a human way of thinking and feeling, the latter is not real to him in the sense of acting personally upon his mind and conscience. (Cooley [1902] 1964:123) W.I. Thomas shared Cooley's subjectivism, at least in methodology. His main contribution to symbolic interactionism was his stress upon the importance for social scientific investigation of taking account of the individual's own definition of his situation. 'There is always a rivalry between the spontaneous definitions of the situation made by the member of an organized society and the definitions which his society has provided for him' (Thomas [1923] 1967:42).

On the other hand, this definition of the situation is from one standpoint as good as if it were true. It is a representation of the situation as appreciated by the subject, 'as if' it were so, and this is for the behavior study the most important phase of reality. (Thomas [1927] 1966:160) The subjectivist strain in Thomas's thought is best epitomised in his famous dictum, sometimes called Thomas's theorem; 'if men define situations as real, they are real in their consequences' (Thomas and Thomas, 1929:572). Thomas' subjectivism, then, was more methodological than that of Cooley. The reason for this is probably that he was much more engaged in empirical investigation than the latter. His most famous study is The Polish Peasant in Europe and America (1918), written together with the Polish sociologist Florian Znaniecki. In the methodological introduction to this work, they state a methodological principle which, according to them, is fundamental both in social psychology and sociology: 'The cause of a social or individual phenomenon is never another social or individual phenomenon alone, but always a combination of a social and an individual phenomenon' ([1918] 1927:44). This principle is of course written as a direct reply to Durkheim's famous dictum (see p. 34), which denies the role of individual phenomena and individual psychology altogether. Thomas and Znaniecki opt for a less extreme alternative, which recognises the need for microfoundations, but not reduction, or, at least, only a partial reduction of sociology to psychology. George Herbert Mead's main contribution to symbolic interactionism is his social psychological theory of the self and the main source for this theory is Mind, Self and Society (1934). It must be counted as an original and important contribution to social psychology, even if it was foreshadowed by Adam Smith, William James and Charles Horton Cooley. Mead's theory deals with the rise of -128the self, both phylogenetically, in the human species, and ontogenetically, in the human individual, but above all, ontogenetically. As such, it is a theory about socialisation. The main contention of this theory is that the self can only arise in a human society. In very brief outline Mead's theory of the self amounts to this: The self arises in communication by means of significant symbols, i.e., symbols that evoke the same kind of response in the self and in the other. The rise of the self, thus, presupposes a universe of discourse, a system of common or social meanings, that is, a common language. The self arises in the individual by his/her taking the attitude, or the role, of the other. It is only by taking the role of the other that the individual can become an object to him/herself, and it is only by becoming an object to him/herself that the individual acquires a self. Mead distinguishes two stages in the development of a social self in the child. The first stage is that of play, where the individual takes the role of a particular or 'significant other'; a mother, a father, a policeman or a teacher. The second stage is that of game, where the child takes the role of all the others taking part in a certain activity. A game is an organised activity governed by a set of rules. Mead's term for all others involved in a group activity is the 'generalised other'. More generally, the generalised other is the form in which the individual confronts society. 6 Closely related to the concept of the 'generalised other' is Mead's distinction between the 'I' and the 'me'. Both the 'I' and the 'me' are selves, or rather, belong to the self, as phases of the undivided self. 'The "I" is the response of the organism to the attitudes of the others; the "me" is the organized set of attitudes of others which one himself assumes' ([1934] 1962:175). This process of relating one's own organism to the others in the interactions that are going on, in so far as it is imported into the conduct of the individual with the conversation of the 'I' and the 'me', constitutes the self. (Mead [1934] 1962:179) The 'I', then, is the spontaneous element in action. In most cases the 'I' is aware of the 'me' and acts according to its strictures, but it sometimes happens that it acts entirely on its own, as when we are surprised by our own actions. The 'I' exists in the specious present. As soon as an act is completed and becomes part of the past, as soon as we can reflect upon it, it sinks down into the

'me'. The 'me' is the conventional, the habitual, the institutional element in action. The 'me' sets limits to the actions of the 'I' and is thus the means for the exercise of social control in the individual. The 'me' is then, it would seem, the internalised generalised other. 7 Mead's theory of the self could be interpreted as implying an individualist and intersubjectivist theory of society. This is the interpretation made by the symbolic interactionists. But it is not the only possible interpretation and it is hardly the correct interpretation. In the recent literature about Mead and symbolic interactionism, it has been argued convincingly that Mead's social behaviourism was not individualistic. According to Lewis and Smith (1980: ch. 5), -129Mead was a social realist, who saw society as an objective reality sui generis. As Jeffrey Alexander has pointed out, Mead saw symbolic structures and social institutions as, in a sense, prior to the actions of individuals (see Alexander, 1987:205-14). This view is shared by Wiley (1994: chs 2 and 6), who argues that Mead had a semiotic theory of the self, which means that it is irreducible to the subjective, or psychic, level. It may be added that Mead frequently referred to society as a whole, and not just to a meaningfully integrated whole, but also a functionally integrated whole. The implication is that also the method of social psychology must be holistic: We are not in social psychology, building up the behavior of the social group in terms of the behavior of the separate individuals composing it; rather we are starting out with a given social whole of complex social group activity, into which we analyze (as elements) the behavior of each of the separate individuals composing it. We attempt, that is, to explain the conduct of the individual in terms of the organized conduct of the social group, rather than to account for the organized conduct of the social group in terms of the conduct of the separate individuals belonging to it. For social psychology, the whole (society) is prior to the part (the individual), not the part to the whole; and the part is explained in terms of the whole, not the whole in terms of the parts. (Mead [1934] 1962:7) This is a perfectly clear statement of methodological holism, taken from Mind, Self, and Society, and yet Mead has been interpreted as an individualist by the symbolic interactionists. According to Anselm Strauss, for instance, Mead's social psychology is a form of 'socialized individualism'. But this interpretation is possible only on the basis of a certain interpretation of the concept of the 'generalised other'. It is possible only if the generalised other, that is society, is situated in the self. This interpretation is far from self-evident, but it is the interpretation made by most 'symbolic interactionists'. According to Strauss ([1956] 1964: xxiii), 'The generalized other is society's representative in the individual'. Mead, although undoubtedly its most important progenitor, is not the creator of symbolic interactionism. Mead's ideas found their way to the sociologists mainly through the influence of Ellsworth Faris and, above all, through Herbert Blumer (Fischer and Strauss, 1979:459). Of these, the former was closer to Mead's social behaviourism (Lewis and Smith, 1980:170f, 187-9). 8 The real architect of symbolic interactionism is, I suggest, Herbert Blumer. It was Blumer who coined the term 'symbolic interactionism' and who turned Mead's social psychology into a 'sociological' theory of society; 'society as symbolic interaction' (Blumer, 1969: ch. 3). 9 But Blumer's symbolic interactionism is clearly different from Mead's social behaviourism, in important respects. Above all, it is certainly more individualistic. 10 In a presentation of social psychology as a discipline (1937), Blumer recognises, besides the instinct and stimulus-response approaches, a third important -130view of human nature, represented by a group of social psychologists 'who may be conveniently labelled "symbolic interactionists"'. The theory of society ascribed to this group by Blumer is, in my terminology, typically 'intersubjectivist' (p. 153).

A third view of human group life is that held by those social psychologists whom we have termed the symbolic interactionists. They, also, recognize that the life of human groups presents itself in the form of a body of customs, traditions, institutions, and so on, but they do not regard these forms of culture as consisting merely of so many ways of acting. Instead, they believe that these forms of culture consist of common symbols, which are mutually shared and possessed by the members of the groups. Individual ways of acting are alike because these individuals are guiding their behavior by a symbol that they share in common. Thus, individuals wear clothing, in accordance with the custom of their group, because each of them shares the common understanding that he is supposed to wear clothing. In the same way, any custom, folkway, or way of acting common to a group of individuals is traceable back to their common symbol or understanding. (Blumer, 1937:158f) Contemporary symbolic interactionism is sometimes divided in two branches; the Chicago school, associated with the name of Herbert Blumer, and the Iowa school centred around Manfred H. Kuhn (Manis and Meltzer, 1967: vi). 11 Of these schools, it is undoubtedly the Chicago school, including names such as Everett C. Hughes, Tamotsu Shibutani, Anselm Strauss and Howard S. Becker which can make the most legitimate claim to calling itself 'symbolic interactionist' (Charon, 1979:289). 12 It is also the Chicago school which is most relevant for my purposes, since it was within this school that Mead's social psychology was turned into an individualist and intersubjectivist theory of society. 13 Having said this much, some qualifications are necessary. All Chicago interactionists do not adhere to an intersubjectivist theory of society, nor do Blumer and his followers explicitly deny the existence of social wholes. It is rather a matter of most of them positively fostering an individualist and intersubjectivist theory of society. In his article 'Society as Symbolic Interaction', Blumer postulates 'that human society is made up of individuals who have selves' (1969:82). From this point of departure, he goes on to attack sociological thought for reducing human beings to organisms responding to various forces acting upon them, whether in the form of 'social system', 'social structure', 'culture', 'status position', 'social role', 'custom', 'institution' or whatever. The main fault with traditional sociological theory, then, is that it seems to deny or, at least, to ignore the fact that individuals have selves. Blumer recognizes two fundamental sociological views: symbolic interactionism, which lodges social action in individuals and sees society as consisting of acting people, and traditional sociology, which 'lodges social action -131in the action of society or in some unit of society', and which tends to view human society in terms of social structure or social organisation. 14 The same message is repeated in the article on the 'Sociological Implications of the Thought of George Herbert Mead'. Blumer renews his attack on traditional sociology for resorting to 'societal factors, such as cultural prescriptions, values, social roles, or structural pressures', thereby missing 'the central point that human interaction is a positive shaping process in its own right' (1969:66). Against the structuralist view of traditional sociology, Blumer posits Mead's view of society as an ongoing process of social action. Mead's scheme definitely challenges this conception. It sees human society not as an established structure but as people meeting their conditions of life; it sees social action not as an emanation of societal structure but as a formation made by human actors; it sees this formation made by human actors; it sees this formation of action not as societal factors coming to expression through the medium of human organisms but as constructions made by actors out of what they take into account; it sees group life not as a release or expression of established structure but as a process of building up joint actions … accordingly, it sees society not as a system, whether in the form of a static, moving, or whatever kind of equilibrium, but as a vast number of occurring joint actions, many closely linked, many not linked at all, many prefigured and repetitious, others being carved out in new directions, and all being pursued to serve the purposes of the participants and not the requirements of a system. (Blumer, 1969:74f)

The same points are repeated and expanded upon in Blumer's introductory essay to his Symbolic Interactionism. In opposition to a 'structuralist' conception of society, Blumer insists that 'human groups or society exists in action and must be seen in terms of action'. More specifically, 'a society consists of individuals interacting with one another'. Even more specifically, such interaction in human society is characteristically and predominantly on the symbolic level' (1969:6-7). This is the view of society as symbolic interaction. The necessary precondition for this view, however, is intersubjectivity. In addition, therefore, Blumer suggests that the nature of an object, including social objects consists of the meaning that it has for the person for whom it is the object … The meaning of objects for a person arises fundamentally out of the way they are defined to him by others with whom he interacts … Out of a process of mutual indications common objects emerge - objects that have the same meanings for a given set of people and are seen in the same manner by them. (Blumer, 1969:11) -132Concerning joint or collective action, the action of groups, institutions, organisations and social classes, Blumer takes the view that they 'consist of individuals fitting their lines of action to one another … The joint action of the collectivity is an interlinkage of the separate acts of the participants' (1969:16f). Blumer ends his introductory essay by drawing the methodological implications of the symbolic interactionist view of society. Being a subjectivist theory of society, the methodology proper to that theory is also subjectivist. In order to understand social life, it is necessary that the social scientist sees the actions of people, the objects towards which these actions are directed and the situation in which the action take place, in the same way as the acting individuals themselves. It is also necessary that the social scientist analyses the process in which human action is formed or constructed and refrains from explaining human action in terms of antecedent conditions or causes. Concerning the activity of organisations, symbolic interactionism 'seeks explanation in the way in which the participants define, interpret, and meet the situations at their respective points' (Blumer, 1969:58). Symbolic interactionism, then, is Herbert Blumer's interpretation of George Herbert Mead's social psychological theory of the self and the view of society it suggests. Typical for this interpretation is the view of society as an ongoing process of symbolic interaction or communication, together with an insistence that society is continually constituted and reconstituted by the actions of individuals. A typical representative of this view is Tamotsu Shibutani who sees society as a 'communicative process' based upon consensus in the form of shared meanings (1961, passim; 1962:134ff). This consensus is not such as to give rise to anything like a stable social structure. On the contrary, Shibutani underscores the transient character of society. Society consists of the recurrent adjustment and cooperation of associated persons through which action patterns of all kinds are formed, sustained, modified, evaded, or contravened. Sometimes the coordinated activities become highly organized, but there are also transient forms of interaction. All this suggests that human society might best be regarded as an on-going process, a becoming rather than a being. Society might be viewed most fruitfully as a succession of events, a flow of gestural interchanges among people … In this sense society can be said to exist only in the give and take among human beings. (Shibutani, 1961:174f) Another illustration of the symbolic interactionist view of society is Anselm Strauss's image of society as a 'negotiated order'. Strauss, at first takes over Shibutani's view of society as a 'communicative process' (Strauss [1969] 1977:148ff, 162), but later, while investigating the organisation of work in the hospital, develops his own vision of the social order. 15 -133-

In short, the bases of concerted action (social order) must be reconstituted continually; or as remarked above, 'worked at'. Such considerations have led us to emphasize the importance of negotiation - the process of give-and-take, of diplomacy, of bargaining - which characterizes organizational life. (Strauss et al., 1963:148) Shibutani's and Strauss's views of society seem to me like new wine in old bottles. They are, in all essentials, new versions of the old theory of society as a social contract. What is new, is the emphasis upon change and renewal. People are constantly engaged in 'signing' new contracts. It is the theory of society as an ongoing social contract. This is the reason why consensus over rules does not give rise to a stable structure. When professionals are brought together and enjoined to carry out their work in the same locale, concepts of structure (formal or informal) as relatively set systems of norms and expectations are inadequate to explain resulting activity. The activity of interacting professionals is, we submit, largely governed by continual reconstitution of bases of work through negotiation. (Strauss et al., 1964:375) The notion of 'negotiated order' was initially developed by Strauss and his colleagues in order to capture the nature of work organisation in the hospital, but was extended in its use to cover the nature of social organisation generally. Society becomes an arena on which individuals meet and carry out their complex negotiations. Pushing our logic to its extreme, we might even argue that the very idea of 'nation' or 'society' is only a fiction and that, if the sociologist subscribes to this common-sense fiction, rather than viewing a nation or society as an exceedingly complex arena, he may fall into the deadly trap of merely studying the fiction as if it were a fact. (Strauss et al., 1964:377) Admittedly this is an extreme example. Symbolic interactionism, I have said, is individualistic not so much by explicit denial of the existence of social wholes, as by a positive fostering of the alternative view of society as an intersubjective community based on shared meanings. There are also many symbolic interactionists who do not present any general picture of society at all, and some who do not deny the utility or even the truth of a holist approach to society, but who have chosen to concentrate on the more 'microscopic' processes of face-to-face interaction, thereby unwittingly contributing to the spread and maintenance of the intersubjective theory of society. An obvious example of this kind of attitude is Erving Goffman, who is usually included among the symbolic interactionists, even if he did not include himself in this category. -134Goffman has, in his various studies, focused consistently on face-to-face interaction, especially in the form of so-called 'encounters' or focused gatherings, using the models of the theatre and the game as his main analytical instruments. Most well known is the model of the theatre and the dramaturgical approach, which he used in his path-breaking study of The Presentation of the Self in Everyday Life (1959). 16 It is not at all that Goffman denies the existence of social structures; quite the contrary. He explicitly affirms their existence and also discusses their relation to the kind of 'situated activity systems' and the kind of social interaction he is interested in (Verhoeven, 1985). I think it is fair to say that Goffman's main concern is with human behaviour as a manifestation of the 'degrees of freedom' there are within social structures. A particularly clear example of this is his discussion of 'role distance' in Encounters (1961:85ff), which deals with the relative autonomy of the individual with respect to social structure. Sometimes, Goffman's focus is on the autonomy of actors, who are then depicted as strategically rational, more or less, in the manner of rational choice. The most obvious example of this approach is his book with the title Strategic Interaction [1969] 1970. At other times his focus is on social action as a manifestation of social structure. The essays assembled in Interaction Ritual (1967) exemplify this Durkheimian view of social life. Both

approaches are used in Relations in Public (1971), where Goffman points to the problematic nature or concept of 'individual' and casts doubt on the idea of the individual as the unit of analysis in sociology. The individual turns out to be different things in different systems of activity (pp. 23ff). Goffman, then, is an individualist, if at all, in practice only, but not always in practice, and not at all in principle. The following disclaimer comes from the 'Introduction' to his Frame Analysis (1974), but is typical for his position: This book is about the organization of experience - something that an individual actor can take into his mind - and not the organization of society. I make no claim whatsoever to be talking about the core matters of sociology - social organization and social structure. Those matters have been and can continue to be quite nicely studied without reference to frame at all. I am not addressing the structure of social life but the structure of experience individuals have at any moment of their social lives. I personally hold society to be first in every way and any individual's current involvements to be second; this report deals only with matters that are second. This book will have weaknesses enough in the areas it claims to deal with; there is no need to find limitations in regard to what it does not set about to cover. (Goffman, 1974:13) Recent symbolic interactionism seems to go in several directions. Some parts are more individualistic, others more structuralistic (Fine, 1990). If we accept that Blumer is the founder of 'symbolic interactionism', we may call the individualistic tendency 'orthodox' symbolic interactionism. This tendency unites around some version of the intersubjectivist theory of society. In his introductory contribution to the first reader on symbolic interactionism Arnold M. Rose -135depicts society as 'a network of interacting individuals - with its culture - the related meanings and values by which individuals interact' (1972:13). In the introductory contribution to another reader on symbolic interactionism Bernard N. Meltzer suggests that 'human society rests upon a basis of consensus, i.e., the sharing of meanings in the form of common understandings and expectations' (1967:8). The clearest and most elaborated statement of symbolic interactionism as an intersubjectivist theory of society is probably to be found in Joel M. Charon's Symbolic Interactionism (1979: ch. 11). Charon bases his view of society mainly on the writings of Blumer, but also on those of Shibutani, Strauss and Meltzer. Society is characterised by two things: symbolic interaction and cooperation. 'Society, then, is defined here as individuals in symbolic interaction with each other, aligning their acts, and acting cooperatively to resolve problems in situations' (p. 161). The year after Charon's book was published, there appeared another book with the same concise title, Symbolic Interactionism (1980), by Sheldon Stryker, but with a different message. Stryker tried to launch a more structuralist version of symbolic interactionism. In order to do so, he had to return to the pragmatist roots of symbolic interactionism and to replace Blumer by Ralph Turner, as the most important figure in recent symbolic interactionism. The main interest of Turner has been in a theory of collective behaviour, but he has also made an important contribution to sociological role theory (Turner, 1956; 1962; 1978). Like Goffman, Turner has been interested in the difference and interrelation between role and person, and, especially, in the process of role-taking, first anlysed by Mead. I have nothing to object to Stryker's attempt to create a more structuralist tradition within symbolic interactionism - the conditions are at hand - but the fact remains that there is a more well-known individualist tradition in symbolic interactionism, associated with Herbert Blumer, Anselm Strauss, Tamotsu Shibutani and others. This tradition has created an individualist theory of society which, like that of the early Simmel, is both intersubjectivist and interactionist. The combination of these elements, may be represented as in Figure 5.1. (Horizontal arrows represent intersubjectivism and vertical arrows represent interactionism).

Figure 5.1 Society according to symbolic interactionism -136-

As has been noticed by two symbolic interactionists, Chad Gordon and Kenneth J. Gergen, there are certain affinities between symbolic interactionism and the phenomenological sociology of Alfred Schutz. According to the latter, 'the cardinal feature of the social world is its intersubjectivity. This view emphasizes the shared-in-common and mutually sanctioned set of expectations and interpretative categories within a culture' (Gordon and Gergen, 1968:33).

Phenomenological sociology [S]ociety as such is a concept, an abstraction - What exists in reality are individuals in whose minds society exists as a factor determining certain types of behavior. If the mental attitude no longer exists, society does no longer exist either. If people were not aware of each other's existence, society would not exist, even if all the same people were still in existence … Thus, society is an attitude in the mind of the individual which is subject to X changes each second. It is unstable and undetermined, although it may appear constant and concrete on the surface during long periods, or made to appear this way by social theorists. (Landheer, 1952:22) This is one of the clearest statements of the intersubjectivist theory of society I have seen. It is written by a phenomenological sociologist, who is also a methodological individualist, or so it seems. Landheer writes: 'The individual has historical and logical priority in regard to the group; or quite simply, a group develops out of individuals because no group can exist otherwise while the individual can, at least theoretically' (p. 38). Two methodological rules follow from this ontological thesis: (1) 'Social science deals with processes of change which must be explained in terms of the individual' (p. 38), and (2) 'Social science deals with those changes in the individual which occur in a plurality of individuals and which form, consequently, the basis for what is termed social patterns' (pp. 38f). According to Landheer, 'the individual is the basic unit of social science, although the changes in the individual may in turn be influenced by social processes' (p. 39). Landheer, then, is both an ontological and a methodological individualist. 17 As such he is typical of phenomenological social science. In this section I am going to substantiate this claim, by a presentation of the founder of phenomenological sociology, Alfred Schutz. As we have seen in chapter 3 (pp. 80-5), phenomenology is the name of a philosophical school, founded by Edmund Husserl. Other philosophers associated with the phenomenological movement are Max Scheler, Karl Jaspers, Martin Heidegger, Jean-Paul Sartre, Maurice Merleau-Ponty and Aron Gurwitch. This list of names reveals a close, but controversial, relationship between phenomenology and existentialism. Sociologists, inspired by phenomenology, include, besides Schutz, himself, Maurice Natanson, Thomas Luckmann, Peter Berger, John O'Neill, Kurt H. Wolff, Edward A. Tiryakian and, more recently, those who call themselves 'ethnomethodologists'. 18 -137Schutz claims to draw his ideas on the foundations of the social sciences from the work of Husserl. This claim is not uncontested, but very difficult to assess, due to the diverging interpretations of the development of Husserl's own thought. 19 The most radical critique comes from Barry Hindess (1973a: 5ff; 1977:49-77), who argues that Schutz's claim to base his phenomenology upon that of Husserl is totally unfounded. That, in fact, Schutz's phenomenology is a serious distortion of Husserl's views. According to Hindess, the basic premise and project of Schutz is instead to be found in the methodology of Max Weber. This project is to reduce the world of objective mind to that of the actions of individuals. As such, Schutz's 'phenomenology' is a continuation of the humanism and individualist idealism of the German Geisteswissenschaften tradition. I believe that the accusation of a distortion of Husserl's views is considerably exaggerated, if not entirely unfounded, but there is little doubt about Schutz's place in the tradition of German individualist idealism, a fact which is readily acknowledged also within the phenomenological camp. What Hindess does not seem to realise, however, is that also Husserl, especially the later Husserl, was close to the German Geisteswissenschaften tradition (see pp. 82-5). 20 Schutz's phenomenological sociology is based on the ideas of the later Husserl (Schutz [1932] 1972:31-44), ideas which Schutz knew well from his frequent discussions with Husserl himself (Schutz, 1940:164ff; 1959:86ff). 21

I will not enter the debate about the relationship between Schutz's