Methodological Individualism

2 The laws of nature (e.g., the physical, chemical, and biological laws governingthe performance of the human body and of material equipments used).3 The initial distribution of resources (e.g., bodily strength, economic resources,military equipment) among the players – including the initial distribution ofinformation, technological knowledge, and practical skill.Martin Shubik, similarly, makes clear thatEconomics: the individualist science 253my basic approach to economics is through the construction of mathematicalmodels in which ‘the rules of the game’ derive not only from theeconomics and technology of the situation, but from the sociological, political,and legal structure of society as well. Private ownership of land, therights of various public or private groups to tax, and the existence of certainfinancial institutions are examples of legal and social features that mayrequire delineation in a particular model. Similarly, rigid prices, a classstructure that sets money lenders and merchants apart from aristocrats,priests, and peasants, and the redistribution of economic goods by appealsto social justice or time-honored custom are non-economic factors that maybe present to some degree and that should be reflected in any realisticmodel.(Shubik, 1982: 10)Thus, it would seem that many, or most, real game situations are constitutedby social institutions. This seems to be Arrow’s conclusion too. In real-life games,‘the rules of the game are social’. The reason is that ‘individual behavior isalways mediated by social relations’ (Arrow, 1994: 5). 29 Therefore, if generalequilibrium theory fails to satisfy the conditions of methodological individualism,game theory does too.In a recent book on game theory by Shaun P. Hargreaves Heap and YanisVaroufakis (1995), the issue of methodological individualism appears as problematic,but unsettled. They argue that game theory makes a clear separationbetween individual choice and (social) structure – something which methodologicalindividualists like. But it is not without problems, since methodologicalindividualists, would also like to explain social structures as the outcomes ofprevious choices of individuals. According to Hargreaves Heap and Varoufakis(p. 32), it is a characteristic mark of all methodological individualists that theysee social structures, as ‘merely the deposits of previous interactions’ (see alsoField, 1979: 55; 1984: 698ff).the individualist will want to claim that ultimately all social structures springfrom interactions between some set of asocial individuals; this is why it is‘individualist’. These claims are usually grounded in a ‘state of nature’ argument,where the point is to show how particular structures (institutional