the neoclassical research program

such a framework, institutions develop in the process of approaching a game equilibrium, then being crystallized as explicit objective rules.

The important thing to underline is that the approach suggested by Aoki (2007) does not contradict V. Smith’s (2010) view of institutions. However, V. Smith’s (2010) framework seems to be more relevant to the present discussion. It naturally incorporates both the notions of constructivist and ecological rationality in governing the process of social exchange, putting more emphasis on the formal institutional framework design. Respectively, the formal institutional environment is assumed to be exogenous in the short-run perspective, being the product of central authorities’ design and carrying the role of the “variety generator”. Correspondingly, social norms, triggered by the changes in the external environment, are adjusted and calibrated. Still, formal institutions are also subject to natural selection in the long-run perspective: unless they are not designed in line with the principles of social sustainability, sooner or later, there will be no society to serve as a medium for the particular formal institutional framework33 .

1.6. The principles of reductionism and methodological individualism in the neoclassical research program

Verschuren (2001) describes the reductionist approach as the paradigm based on the idea that any complex system can be decomposed into the basic elements and studied through analysing the elements mentioned above. According to Trout, “reduction is often formulated as the claim that some object, state, process, event, or property “is just” or “is nothing more than” the physical ingredients that compose it” (Trout, 1991, p. 387). Following the notion of predicate reductionism (Trout, 1991), no complex system can possess any features other than features of its components. Silberstein and McGeever (1999) distinguish between the strong and the weak form of ontological reductionism. The former entails that the complex system is nothing but the sum of its elements, while the latter also incorporates the effects of interactions between the agents. Nevertheless, the perfect micro-determination is assumed. To make this more relevant to the present discussion, the process of social interaction is frequently assessed under the conventional game theory framework under the neoclassical research program. Although such a framework includes the

33 Although Smith (2010) attributes the role of variety generator to constructivist rationality, leaving the task for appropriate institutions selection to ecological rationality revealed in the process of social exchange, the latter idea about natural selection of formal institutions is not presented explicitly. Nevertheless, since it naturally arises from what Smith (2010) discusses, it shall not be presented as the product of own effort.

effects of strategic interaction (i.e., the agents deliberately and consciously maximize their expected pay-offs, keeping in mind that the pay-offs are determined not only by their strategies but also by the strategies pursued by the counter-players), the game framework remains unchanged. In other words, perfectly rational agents are still perfectly predictable; their interaction cannot result in any outcome besides the set of outcomes specified by the exogenous game setting.

Some examples of the weak form of reductionism in economic research arise, for instance, from introducing the element of game theory to the analysis of social exchange (see, for instance, Hoffman et al., 1994). However, as long as perfectly rational and perfectly predictable agents act under the exogenously defined rules, there is no place for evolution and spontaneous structures. In other words, the system remains perfectly predictable. According to Chorafakis (2020), atomistic aggregativity (interpreted in the same way as Trout’s reductionism and Colander’s methodological individualism) is one of the prominent features of the neoclassical research program.

Verschuren (2001) juxtaposes reductionism to holism, defining the latter as “the tendency to look at an object as a whole” (p. 393). However, as the author admits, the ability to perceive the phenomena holistically is beyond the capacity of a human mind: even when trying to assess a phenomenon comprehensively, we cannot concentrate on all its aspects simultaneously. “True holism” is rather an idealistic concept; therefore, in the present discussion, the terms “holistic” and “holism” are used to indicate the denial to apply the reductionist logic to analysing social phenomena. Chorafakis (2002) opposes reductionism to emergentism, explaining it based on Wimsatt’s (2000) notion of non-aggregativity34 .

Under the neoclassical framework, assessing the preferences of the “representative individual” is assumed to be sufficient for analysing social exchange dynamics. Perfectly rational agents (in the sense of the choice consistency) are perfectly predictable. Consequently, the dynamics of the complex social system can be assessed through the process of individual agents’ self-optimization. Since altruism and pro-social behaviour are the undeniable social reality facts, the neoclassical framework cannot neglect these phenomena. However, due to its reductionist nature, the aforementioned framework cannot assume any social environment traits which are not featured by individual agents (i.e., elements of the complex system). Informally, pro-social and altruistic behaviour arises exclusively from deliberate

34 “A system which is aggregative for a given decomposition is almost trivially mechanistically explicable: the parts all have the property in question, and enter into the explanation of how the system has it in the same simple way. Relationships with other parts are usually either monadic (i.e., non-existent) or of relatively low order, and would tend to meet strong conditions of symmetry and homogeneity” (Wimsatt, 2000, p. 288).