Re: individualism vs holism.

[Ted Winslow <egwinslow@xxxxxxxxxx>]

Lawrence Boland wrote:

> I am lost here. How is " liquidity preference" a problem for methodological
> individualism? I could see how it might by a problem of all forms of holism.
>
> All that methodological individualism claims is that _things_ do not
> decide, only individuals decide. That an individual may decide hold some
> money rather than an asset for purposes of liquidity preference does not
> seem to me to violate methodological individualism.
>
> Again, I do not see Keynes denying the micro but only saying it is not enough.
> And as I have said, methodological individualism, as opposed to
> psychologistic individualism, does not deny all macro phenomena.

As Keynes's endorsement of the passage from Paley ('although we speak of
communities as of sentient beings and ascribe to them happiness and misery,
desires, interests and passions, nothing really exists or feels but
individuals') indicates, it's consistent with "individualism" in the sense
of accepting Agassi's 1(b) "only individuals have aims and interests
(individualism)" and rejecting Agassi's 4 "if 'wholes' exist then they have
distinct aims and interests of their own". (pp. 244-5 in the 1960 British
Journal of Sociology article and pp. 146-7 in the 1975 article)

It's not consistent, however,  with "individualism" in the sense of Agassi's
2(b) "the individual behaves in a way adequate to his aims, given his
circumstances (rationality principle)".

To begin with, Keynes rejects the conception of rationality this involves.
For instance, in his review of Ramsey's The Foundations of Mathematics (X,
pp. 338-9) he points to Ramsey's idea of "human logic" as potentially able
to provide a solution to the problem of induction (while dissenting from
Ramsey's attempt to elaborate the idea in terms of Charles Peirce's
pragmatism).   A "human logic" solution had been worked out by Whitehead
(partly in direct response to what Keynes himself admits in his review was
the failed attempt of the Treatise  to ground rational degrees of belief in
formal logic i.e. in directly perceivable objective "logical probability
relations" (VIII, chap. 1)).  Whitehead's attempted solution proceeds by
using "human logic" elaborated as "direct intuitive observation" to call in
question the assumptions about experience from which Hume's radically
skeptical conclusions including the problem of induction are deduced (see,
for example, Whitehead's essay, "Uniformity and Contingency" in Whitehead,
Science and Philosophy, pp. 141-57).

Keynes's treatment of liquidity preference allows for grounds which are
"rational" in his sense, a sense that includes presupposing the possibility
of rational induction.

"partly on reasonable and partly on instinctive grounds, our desire to hold
money as a store of wealth is a barometer of the degree of our distrust of
our own calculations and conventions concerning the future.  Even though
this feeling about money is itself conventional or instinctive, it
operates, so to speak, at a deeper level of our motivation.  It takes
charge at the moments when the higher, more precarious conventions have
weakened.  The possession of actual money lulls our disquietude; and the
premium which we require to make us part with money is the measure of the
degree of our disquietude." (XIV, p. 116)

The "reasonable" (by which Keynes means "rational" in his sense) grounds
have to do with the "weight" of the evidence on which rational
"calculations" concerning the future are based i.e. they presuppose some
possibility of rational induction and prediction.

Second, this explanation of liquidity preference is inconsistent with 2(b)
because it gives a significant role to "irrationality" understood as beliefs
and feelings which are not so much mistaken as psychologically anchored in a
way the makes them largely immune to rational critique.

The irrationality is found in the "instinctive grounds" (which are
contrasted with "reasonable" grounds).  The passage associates these with
"conventions" as opposed to "calculations" concerning the future and with an
irrational "feeling about money" which "is itself conventional or
instinctive" and "operates, so to speak, at a deeper level of our
motivation."

Keynes makes the following assumption about the "vast majority" of
participants in financial markets:

"the vast majority of those who are concerned with the buying and selling of
securities know almost nothing whatever about what they are doing.  They do
not possess even the rudiments of what is required for a valid judgment, and
are the prey of hopes and fears easily aroused by transient events and as
easily dispelled.  This is one of the odd characteristics of the capitalist
system under which we live, which, when we are dealing with the real world,
is not to be overlooked."  (VI, p. 323)

One aspect of this "unreason" (VI, p. 323) is the basing of expectations on
irrational "conventions" the "chief of which is to assume, contrary to all
likelihood [since, "as we well know", "the future never resembles the
past"], that the future will resemble the past".  This denial of what,
according to Keynes, is an obvious fact is psychologically anchored.  "Peace
and comfort of mind require that we should hide from ourselves how little we
foresee." (XIV, p. 124)

This emphasis on the irrational "instinctive" is part of a general approach
to the analysis of behaviour in capitalism that takes as "the essential
characteristic of capitalism" "the dependence upon an intense appeal to the
money-making and money-loving instincts of individuals as the main motive
force of the economic machine" (IX, p. 293), a "motive force" that is "a
somewhat disgusting morbidity, one of those semi-criminal, semi-pathological
propensities which one hands over with a shudder to the specialists in
mental disease. (IX, p. 329)"

This in turn is part of a still more general approach that assumes that "the
view that human nature is reasonable" is "disastrously mistaken".  It
substitutes for this the view that "there are insane and irrational springs
of wickedness in most men" so that "civilisation" is "a thin and precarious
crust erected by the will and personality of a very few, and only maintained
by rules and conventions skillfully put across and guilefully preserved."
(X, p. 447)

Finally, and this is part of what I meant by calling Keynes's individualism
"organicist", the degree and form of the irrationality present in individual
thought, feeling and behaviour is assumed to be to some degree (to a lesser
degree in Keynes than in Marx) dependent on the social relations within
which individuals develop and live.  The degree and the form can be treated
as "given" to the extent that the relations on which they depend can
themselves be reasonably treated as "given" i.e. subject to relatively slow
change.  This is one of the prerequisites for rational induction and
prediction; it explains why the long run consequences of wealth accumulation
are radically uncertain.  In this long run, very little that is relevant can
be treated as "given".

Ted