> but, fatally, maintaining the
> methodological individualism, which I think is possibly the most
> damaging aspect of the core (vying with 'rational expectations'), as I
> briefly wrote here:
> http://scandalum.wordpress.com/2009/11/09/choleric-economic-man/
>
>
Where you wrote:
> Rationality we can actually keep, but (1) bureaucratic rather than
> personal rationality, (2) embodied in a variety of fundamentally
> different kinds of institution, and (3) bearing in mind that
> ‘rationality’ does not mean ‘omniscience’
To me, the key words are "embodied in institutions." The problem lies in ignoring institutions. Institutions are like mechanisms that coordinate individual behavior, but in accordance with *non-individual* criteria. (As opposed to the "invisible hand," which coordinates individual behavior strictly in accordance with individual-level maximizing criteria.)
Have you seen George Akerlof's AEA presidential address? In a somewhat crude, rudimentary way, it seems he's trying to introduce this way of thinking, though it's not a wholesale abandonment of methodological individualism. Tell me if I'm wrong, but it strikes me as a nod in the direction you suggest. Here's the abstract:
http://www.aeaweb.org/annual_mtg_papers/2007/0106_1640_0101.pdf
> The discovery of five neutralities surprised the economics profession
> and forced the re-thinking
> of macroeconomic theory. Those neutralities are: the independence of
> consumption and current
> income (given wealth); the independence of investment and finance
> decisions (the Modigliani-
> Miller theorem); inflation stability only at the natural rate of
> unemployment; the ineffectiveness
> of macro stabilization policy with rational expectations; and
> Ricardian equivalence. However,
> each of these surprise results occurs because of missing motivation.
> The neutralities no longer
> occur if decision makers have natural norms for how they should
> behave. This lecture suggests a
> new agenda for macroeconomics with inclusion of those norms.
SA