In this post I want to talk about something I read in a paper, specifically on section 5 of it. It discusses a theory which claims that any social phenoma that is explained by individual behavior actually have to involve elements of social interaction among individuals as well. Geoffrey M. Hudgson, the author of the document, named the previous proposition as “folk theorem” because there´s no formal proof offered to actually confirm its validity.
The theorem is focused on social situations, which necessarily involve two or more people. An important question that Hudgson asks is if there are any succesful explanations of social phenomena in terms of individuals alone in social sciences. Udéhn (2001) answered possitively, saying that examples such as social contract theory and general equilibrium do not involve institutions or social relations, but rather individual behavior alone. Nevertheless Arrow (1994) denied this, claiming that social phenomena cannot be reduced to individuals by themselves. The mechanisms that determine prices are in fact determined by social structures as well as the interactions among people belonging to the economy.
Hudgson agrees with Arrow in the sense that models such as the ones involving trading of goods involve the transfer of property rights from one individual to another, which are at the same time defined by previous rules that had to be arranged by a group of people, and then accepted by the society. Property rights imply not only relations among individuals, but also among individuals and institutions, since there has to be some sort of enforcement in order for all trading agreements to be respected. This also applies to contract theory.
On the section of the document I read, it´s also specified that the way every person understand the world have to be necessarily acquired through interactions and social relations. The cognitive process is not entirely individualistic, it has a social component as well. Without social interactions and institutions, individual choice cannot be conceived.
Kontopoulos in 1993 noticed that methodological individualist strategies always have to incorporate elements or references to social interactions. All the methodological individualist have never actually started their studies from individuals by themselves. It´s always necessary to assume relations among individuals to get any relevant results, and not only the individuals themselves (although this is something that always needs to be considered as well).
At the end of the section, the author says that one counterexample would be enough to reject the folk theorem. However, according to him there´s hasn´t been anyone who´s been able to propose one yet. I really found this text very interesting. I hope it will provoque the same emotion to some of you as well.