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Unfortunately, attempts to construct the kind of rock-bottom explanations that methodological individualists imagined have all run smack into the micro-macro problem. In practice, therefore, social scientists invoke what is called a representative agent, a fictitious individual whose decisions stand in for the behavior of the collective. To take a single example, albeit an important one, the economy is composed of many thousands of firms and millions of individuals all making decisions about what to buy, what to sell, and what to invest in. The end result of all this activity is what economists call the business cycle—in effect, a time series of aggregate economic activity that seems to exhibit periodic ups and downs. Understanding the dynamics of the business cycle is one of the central problems of macroeconomics, in no small part because it affects how policy makers deal with events like recessions. Yet the mathematical models that economists rely on do not attempt to represent the vast complexity of the economy at all. Rather, they specify a single “representative firm” and ask how that firm would rationally allocate its resources given certain information about the rest of the economy. Roughly speaking, the response of that firm is then interpreted as the response of the economy as a whole.9

By ignoring the interactions between thousands or millions of individual actors, the representative agent simplifies the analysis of business cycles enormously. It assumes, in effect, that as long as economists have a good model of how individuals behave, they effectively have a good model for how the economy behaves as well. In eliminating the complexity, however, the representative-agent approach effectively ignores the crux of the micro-macro problem—the very core of what makes macroeconomic phenomena “macro” in the first place. It was for precisely this reason, in fact, that the economist Joseph Schumpeter, who is often regarded as the founding father of methodological individualism, attacked the representative-agent approach as flawed and misleading.10

In practice, however, methodological individualists have lost the battle, and not just in economics. Pick up any work of history, sociology, or political science that deals with “macro” phenomena, like class, race, business, war, wealth, innovation, politics, law, or government, and you will find a world populated with representative agents. So common is their use in social science, in fact, that the substitution of a fictitious individual for what is in reality a collective typically happens without so much as an acknowledgment, like the magician placing the rabbit in the hat while the audience is looking elsewhere. No matter how it is done, however, the representative agent is only and always a convenient fiction. And no matter how we try to dress them up in mathematics or other finery, explanations that invoke representative agents are making essentially the same error as commonsense explanations that talk about firms, markets, and societies in the same terms that we use to describe individual people.11

GRANOVETTER’S RIOT MODEL

The sociologist Mark Granovetter highlighted this problem using a very simple mathematical model of a crowd poised on the brink of a riot. Say a crowd of a hundred students is gathered in a town square, protesting the government’s proposed increase in student fees. The students are angry about the new policy and frustrated with their lack of input to the political process. There’s a possibility of things getting out of hand. But being educated, civilized people, they also understand that reason and dialogue are preferable to violence. To oversimplify somewhat, each individual in the crowd is torn between two instincts—one to go berserk and smash things up, and the other to remain calm and protest peacefully. Everyone, whether they are conscious of it or not, has to make a choice between these two actions. But they are not making a choice between violence and peaceful protest independently