A critique of group selection got me thinking. Proponents of both group selection and macroeconomics suffer from the same problem: The inability to understand or imagine the emergence of complex behavior solely from the individual level (or genes within the individual). Both confuse a convenient concept with physical reality, proposing ethereal constructs devoid of any possible physical mechanism of action.
The human mind just isn’t very good at juggling large numbers of elements simultaneously. That limitation prompts mental shortcuts that work well enough in the situations in which the human brain evolved – small groups of people – but can go wildly astray when pushed beyond those limits. When people struggle to conceive of complex relationships they automatically start thinking in aggregates, even giving the aggregates properties possessed by none of the component individuals (the populist conception of the wisdom of crowds is an example). It reduces the processing load but ultimately leaves people stuck in abstraction, unable to understand the underlying mechanisms, and in some cases denying their existence.
The “economy”, the “government”, the “market” and the “military” don’t exist. They aren’t real things you can touch or see or that can knock your car into a ditch, but convenient ways to think about things that are too complex to be readily manipulated in the human mind. But these aggregates are themselves flawed models of the world, upon which further models are built. Much of the confusion in mainstream economic circles is caused by this irresistible urge to aggregate. Whether it’s because of indoctrination or simply from being paid to make models and being unable to do so without aggregating, the result is a quick divorce from reality.
When viewed at an individual level the idea of a slump in demand is preposterous. Everyone on earth, at every point in time, wants something more or different from what they have. Demand is unlimited. If nobody is buying it’s because the current price is too high or what they want simply isn’t for sale (much of what I want falls into that category). At the individual level the only possible effect of any effort to increase the mythical aggregate demand is to induce people to buy things they don’t want, don’t need, or can’t afford – otherwise they already would have bought them. If the point of economic policy is to improve the lives of individuals that result hardly seems conducive.
The “government” can’t do anything unless at least one individual takes action to bring it about. The “military” doesn’t kill anyone, individuals make choices to do so. The “economy” can’t be altered without forcing individuals to do things they didn’t want to do. Keeping those distinctions in mind radically alters prescriptions for change.