The Role of Aggregation Issue in The Field of Political Economy

In order to create and maintain a high-functioning and prosperous society the process of aggregation is widely seen as a basic necessity. Within the scope of political economy, aggregation is an important process which creates cohesion by combining competing viewpoints and preferences in both the political and economic realms. Through the lens of methodological individualism, this essay will argue that there is often a lack of clarity and coherence in aggregation that results in pitfalls, leading to problematic or ineffectual systems of organisation. In order to gain insights into the macro, it is valuable to look at the micro.

Simply put, aggregation can be defined as “a group, body, or mass composed of many distinct parts or individuals. ” There are many possible lenses with which to study aggregation. However, for the limited scope of this investigation, I will focus on methodological individualism. This is not to say that other methods, such as New Institutionalism, are not valuable, as they provide legitimate critique of methodological individualism’s axiomatic understanding of aggregation. But for the sake of this study I will focus on methodological individualism as it can provide a concise view into both the make-up of groups, and also their inherent flaws, by viewing the whole through the sum of its parts.

The term “methodological individualism” was coined by James Buchanan and Gordon Tullock, while analysing the actions of the entire collective through the motives of individual agents. They state, “The decision-making unit is the individual, who both makes the choices and constitutes the entity for whom the choices are made. ” These individual agents are understood to exhibit traits of the “economic man” who, as stated by Elinor Ostrom, is understood to have a “rational strategy […] in every situation [in order] to maximize expected utility. ” Preference ordering is an important part of aggregation. Individual agents all have distinct goals and motives, which leads to an internal competition of preference in the group and, thus, resulting in not everyone getting what they want. So why join the group in the first place? As Buchanan and Tullock state, “The collectivization of an activity will be supported by the utility-maximizing individual when he expects the interdependence costs of this collectively organized activity […] to lie below […] those involved in the private voluntary organization of the activity. ” So even though individual agents may lose out at certain times to others in the group, their membership rests on the understanding that overall the benefits of being part of the group outweigh the costs.

Aggregation of individuals into organisations and institutions can be seen as a key trait and necessity for an effectual society. Within the book Violence and Social Orders, North et al. carry out an in-depth study into the importance of organisations in an “open access” democratic society, showing a marked correlation between the number of organisations in a society and the extent of economic and political development. According to Francis Fukuyama the development of modern-day politics and economics can be traced back to the notion of aggregation and the forming of organisations, “A healthy capitalist economy is one in which there will be sufficient social capital in the underlying society to permit businesses, corporations, networks, and the like to be self-organizing […] The same propensity for spontaneous sociability that is key to building durable businesses is also indispensable for putting together effective political organizations. ” The ability for people to form groups creates cohesion and organization, enabling collective action in which the aggregate can accomplish goals more efficiently than the individual actors by themselves. An organisation is an aggregation of individual agents that are pursuing a variety of different goals but who use their resources and strength in numbers to their advantage. As North et al. state, “Organizations coordinate their members’ actions, so an organization’s actions are more than the sum of the actions of the individuals. ” These organisations in turn establish a modus operandi, incorporating rules, norms, and understandings through which preference ordering can be made on a collective level.

Though aggregation is a central trait of a successful society, it is not without its challenges. One of the core problems of aggregation is the collective action dilemma, in which there is often little impetus for groups to act in their own interest. Olson states that, “large groups, at least if they are composed of rational individuals, will not act in their group interest. ” This is because though it would be rational to act on a collective (macro) level, it would be irrational on an individual (micro) level. Within a group, an individual’s actions that would enhance not only his own circumstance but that of the entire group means that their sacrifice for the cause will result in “reaping only a minute share of the gains [while] those who contribute nothing to the effort gain as much as those who did. ” As a whole, it makes sense to share the sacrifice just as you would share the rewards. However, if one agent sacrifices by themselves there is slim probability of achieving success and even if they do, that success is shared equally among everyone in the group, allowing for free-riders. This is especially visible in strikes or boycotts, in which the benefits will go to the entire workforce despite often being won by a smaller group of activists.

The most famous example of aggregative pitfalls can be seen through the “tragedy of the commons, ” in which individual agents in a group will continue to act in their own self-interest, which results in collective exploitation and ultimate depletion of a resource. The rational individual would not stop taking from the resource on a micro level, as others will (at least in the short-term) reap all the gains of their sacrifice, and so no one does anything to prevent the impending “tragedy. ” This can be seen clearly in the current problems of overfishing. Currently, there is a “scallop war” between British and French fishermen. In the English Channel, French fishermen are restricted in the times they are allowed to harvest mollusks in order to maximise breeding. However, British fishermen, who are not restricted by the same rules as the French, started to fish for scallops in this area to increase their catch and, of course, decrease the resource to be shared with the French. Another example can be seen by the action of United States president Donald Trump to withdraw the US from the Paris Climate Agreement in June 2017.

Data examination of collective can also often lead to problems and misconceptions in studying aggregation. ‘Ecological Fallacy’ can be defined as the, “failure in reasoning that arises when an inference is made about an individual based on aggregate data for a group. ” William S. Robinson’s study on illiteracy and immigration in the United States in the 1930s stated that on the macro level there was a negative correlation between illiteracy and US immigration. However, on a micro level, individual immigrants were more likely to be illiterate. This misleading correlation was due to the fact that immigrants usually settled in high-literacy states, which in turn skewed the data. This “Robinson Paradox” was a seminal work in aggregate data critique. This highlights the possible pitfalls of using methodological individualism to study aggregation, as it uses the macro-level outcome to make statements about the micro, and not necessarily taking into account other independent variables that can affect the results.

Buchanan’s “theory of clubs” can also be seen as highlighting how and why aggregation is so central to the field of political economy. Buchanan states that his theory is based around “optimal exclusion, as well as inclusion” in which members of a group reap the benefits of goods that are neither public nor private. Buchanan uses the example of a swimming pool in which there is a pare to efficiency between members and pool size. Hence, the ability for exclusion must be possible in order prevent exploitation. As Buchanan states, “If individuals think that exclusion will not be fully possible, that they can expect to secure benefits as free riders without really becoming full-fledged contributing members of the club, they may be reluctant to enter voluntarily into cost-sharing arrangements. ” A current, political example of possible exclusion from a club can be seen in the European Parliament within the European People’s Party (EPP).

The EPP is one of the most influential caucuses in European politics with both Jean Claude Juncker and Angela Merkel being members. Hungarian prime minister Victor Orbán is causing division and tension within the EPP which, according to the Financial Times, “has proved to be an invaluable club for Mr Orbán since he joined in 2000, ” due to its high-profile and well-connected members. After the recent release of the Sargentini report, it is alleged that his party, the Fidesz, have “clamped down on the media, academics and non-governmental groups and denied rights to minorities and migrants, ” which greatly contrasts the EPP’s supposed collective outlook. Orbán was able to act with impunity because, according to Buchanan, he was unlikely to suffer exclusion from the club, and thus there was less pressure on him to obey the club rules.

There are many reasons why Orbán felt safe from exclusion, which highlights how aggregation can be greatly ineffective. Firstly, the EPP is currently in the majority of the European Parliament (with 219 seats out of 751) and with the expulsion of Orbán and the Fidesz there is a potential loss of influence (5 seats). This club (EPP) within a club (European Parliament) has proved to be put under strain in competition with other clubs. This leads to the issue of the Sargentini report, which was produced by Judith Sargentini from the Green-Left party, and not a member of the same ‘club. ’ This can be seen as problematic as it stokes rivalry, for they are both self-interested groups in competition with each other in the parliament.

Olson’s theory of the need for homogeneity within the group is also clearly visible in this instance. Olson states that, “Heterogeneous groups make aims more difficult, reduces consensus and makes collective action even less likely. ” The EPP is a group made up of seventy-seven internal groups from different countries with different aims and motives, and so reaching consensus is proving a challenge.

Orbán is causing difficulty for the EPP, undermining the club’s values, harming its reputation and challenging EU institutions. To prevent further damage, the most efficient reaction would be exclusion from the club. However, the complexities of the aggregation process have made this difficult. In order to spur rational individuals to act, what is needed are selective incentives. Olson states that a selective incentive “applies selectively to the individuals depending on whether they do or do not contribute to the provision of a collective good. ” MEPs seek to be re-elected in the upcoming European elections in May 2019, and the media reports showing their inaction towards Orbán negatively impacts their reputation, and thus chances of re-election. As an insider from the EPP stated about Orbán to the Financial Times, “We won’t help him if he doesn’t help us. He will lose his last allies. ” MEPs were then incentivised to act in the group interest, and a vote was passed to reprimand Orbán on September 12th. This example shows clearly how aggregation can lead to inefficient systems of organisation, where time and resources are often needlessly wasted in striving to reach a majority consensus for collective action.

As can be seen, aggregation is central in the field of political economy, however there is often a lack of clarity and coherence on how aggregation works. Through the lens of methodological individualism, one can see that the collective group, though made up of rational and self-interested actors, can obstruct efficiency. This is especially problematic in large, heterogeneous groups which can hinder collective action, and highlights the flaws of the aggregative system our societies are built upon.