Methodological Individualism

“The explanation of economic phenomena stems from the actions (or inactions) of individuals; groups or “collectives” cannot act except through the actions of individual members.”

Based on the principle of methodological individualism, the individual becomes the foundation for all economic activity. To understand any phenomenon in economics one must first understand the behavior of the individual.

The single act of an individual amounts to what systems thinkers refer to as an event. It gives evidence of the preferences of the individual involved.

A series of actions by an individual creates a pattern of behavior. This pattern can indicate the consistency of the values of the individual. Likewise, a series of actions by several individuals provide an indication of the preferences shared by individuals. Price patterns can provide an example of these patterns of behavior.

When individuals share values the system will develop recognizable patterns of behavior. That does not, however, indicate that the individuals are acting as a collective. More accurately they represent a network of individual's acting separately.

I cannot overemphasize the importance of individualism and the comprehension of economic activity. But, individualism should not be confused with solitude. As referenced in the paragraph above individuals can form networks that typically define the scope of markets.