The individual now features significantly in the writings of philosophers, economists and political scientists within the context of democracy, broadly defined. Yet, there remain differences of interpretation that have significant implications for discussions of collective action. In this short essay, I focus on one particularly important distinction: that between epistemic and subjective individualism. This distinction was brought to a head following a Liberty Fund conference in June 1988 held at Santa Cruz, California and attended, inter alia, by two combatants, Douglas Rae and James Buchanan. Let me emphasize at the outset that I strongly favor the Buchanan version.
1. Douglas Rae* and epistemic individualism
‘Epistemic’ is a fancy adjective to identify a branch of philosophy that deals with knowledge and understanding. I use it here merely to identify Douglas Rae’s line of reasoning, not because it contains substantive content.
Rae suggests that classical liberal advocacy of free institutions, notably those of market economies, rests on the notion that the individual is ‘privileged’ as a choice maker because he knows better than anyone else what is ‘best’ for his own well-being. It turns out that this notion is more complex than at first appears to be the case.
Central to this notion is the assumption that each individual can be defined with respect to a utility function that exists independently from individual choices. Surely, the arguments that enter into each individual’s utility function may differ – with respect to their characteristics and to their weightings. However, once such a utility function has been identified, it is deemed appropriate to classify certain choices as maximizing by reference to the criteria provided by that function.
Once this approach is accepted, the door opens to questioning whether or not the individual or some third party or parties can most reliably identify choices that are defined as ‘best’ by any given utility function. If the well-being of an individual is defined by his utility, the key issue is whether the individual is presumed to possess superior knowledge about his own utility function. If this individual superiority is recognized, a case for extending the range of voluntary individual choices is evident, at least until such choices impact adversely on others. If this individual superiority is denied, a contrary case for third party intervention can be advanced.
Once the Pandora’s Box of third party superiority opens, a range of justifications for meddlesomeness compete for attention: benevolent paternalism, meddlesome coercion, scientific socialism, liberal fascism, all pour into the progressive pot pourri.
2. James Buchanan** and subjective individualism
Buchanan denies categorically the notion that an individual’s utility function can be separated from his choices. In so doing, he denies the relevance of outsiders’ knowledge and information in setting limits on individual choice. This approach can be classified as one of strict subjectivism.
From such a subjectivist perspective, a ‘utility function’ as such does not exist in a form that can be observed and recognized independently of any individual’s choice behavior. All that exists are individual choices, and it is about these choices, not about some alleged relation to a utility function, that we develop theories. We may observe, for example, that individuals sometimes regret past choices. We may conjecture that some third person might have been able to predict such regret ex ante, and so advise the individual pre-choice. We cannot confirm whether or not this is so. Because the future, in a sense, is unknown, and may well be unknowable.
At the moment of choice, only the chooser confronts the choice-influencing costs that determine his decision. These costs exist only in the decision-makers mind. They are subjective and cannot be identified by outside evaluation. The choice-influenced costs that surely follow, are not the determinants of choice but the consequences. They may or may not confirm the original decision by the individual who made the choice. But that is irrelevant to the choice itself. In this sense, choice-influenced costs are not opportunity costs. For the past cannot be revisited.
From Buchanan’s perspective, the epistemic arguments in favor of third party interventions simply disappear. The justificatory premise for a classical liberal social order is the assertion that individuals are the ultimate sovereigns in matters of social organization, that individuals are the beings who are entitled to choose the organizational structures under which they will live. Buchanan does not extend this calculus of consent to all individuals in society. Lunatics and minors, conservatively defined, are excluded; but all others are included. This is not an elitist philosophy.
In accordance with this premise, the legitimacy of any social organization is to be judged against the criterion of voluntary agreement. Individuals alone can consent to such arrangements, either directly or by delegating decision-making authority to agents over whom they rule as principals. This is the essence of the contractarian philosophy for which James Buchanan is renowned.
*Douglas Rae, ‘Epistemic Individualism, Unanimity, and the Ideology of Liberty’ Liberty Fund June 1988 (working paper)
**James M. Buchanan, ‘The Foundations of Normative Individualism’, The Economics and the Ethics of Constitutional Order, University of Michigan Press, 1991, pp. 221-229.