The Individual as Basic Unit of Analysis

This chapter assesses the choice that orthodox theory makes of its basic unit: the individual. It is not about the particular results that orthodox theory derives by the addition of other assumptions, such as perfect competition, non-interdependence of preferences, and so on. These are the subject matter of later chapters. Here we are concerned with solely the basic method, the use of the individual as starting point. In doing this, results will be cited that use other assumptions, but in all cases these assumptions are not essential. They can be modified, with a corresponding modification of the results, without altering the basic structure of the argument. In particular, the first two sections discuss orthodox theory and a criticism of it within a framework of perfect competition. This is not, however, essential to the argument. The method whereby economic phenomena are to be deduced from individual tastes, endowments and technologies applies also to orthodox attempts to cope with non-competitive economies. The results arrived at are not so neat; uniqueness of equilibria, for example, certainly breaks down, but the methodological approach is the same, and it is this that concerns us here.