There must
be a starting point in every debate, and science is no exception. If we have
disputes over the starting point, science will be difficult to thrive.
Therefore, in scientific development, participants have to comply with a
self-evident rule: where a postulate or an axiom is specified, this basis is
not arguable. Not that everyone has to whole-heartedly agree with these
postulates or axioms. Whether assent or not is not essential, the essence is
agreement on not arguing about the starting point. The rules of scientific
dialectics are: “First do not oppose to my necessary starting point in
theorizing, and let me logically derive from this starting point a set of
theory. After testable or refutable implications have been derived, you will
then have a basis for opposition. If testable implications are mercilessly
refuted by facts, then I cannot but consider my postulates wrong.”
By the
way, those postulates or axioms that are not arguable could be quite ridiculous
and implausible. For instance, an important postulate in mathematics says: “If
one plus one equals a number, that number is called two; and if two plus one
equals another number, that number is called three …” Sounds a bit stupid, but
without this postulate, we will never know that it is impossible to have
another number between one and two. If we have disputes over this basis without
any compromise, how could mathematical theories develop?
Let’s cite
another example. In geometry, the definition of a straight line is the shortest
distance between two points. Sounds like a hard-to-swallow joke, yet it is far
less abstract than the postulate of “a point”. Geometry specifies: “A point is
not measurable!” If a point is not measurable, how could there be a measurable
straight line? Nonetheless, based on these controversial starting points,
geometry enabled mankind to build pyramids in ancient times (although these
postulates were not at that time clarified), to build Hong Kong’s Bank of China
Building today. Our conclusion therefore is: postulates next to ridiculous
could lead to amazing knowledge.
The first
postulate in economics is: “individual” is the basic unit in economic analysis.
That is, when analyzing whatever economic issue, the starting point cannot be
from a group of people, an organization, a society or a nation. The analytical
unit must be an individual irrespective of macroeconomics, social welfare, or
government planning.
No
economic theory uses a collective group as the starting point. Regardless of
how “macro” the viewpoint is and whether cited at the start of analyzing, if a
theory is not based on an “individual” as the starting point, it is no
commendable economic theory. That is, it is a must to use an individual as the
starting point in analyzing macroeconomics. Certainly, there are economic
theories using a group or an entire society as the starting point, but these
have divorced from the basis. Occasionally we will hear comments like macro is more
important than micro. These would only come from people with no foothold in
economics. Macro is made up of the sum of units in terms of individual. The
difference between macro and micro is merely whether the combination is big or
small. In contemporary economics, the difference between macro and micro, in
the eyes of certain scholars, is not according to the degree of combination but
rather in accordance with the importance attached to money.
Using
“individual” as an analytical unit disregards sex, age, or state of mind.
Regardless of whether A is a genius or B is a fool, we consistently treat
individual as an analytical unit. As to “individual”, it can be so identified
by any observant person. Equally important, postulates cannot be easily
altered. The postulate of “individual” is no exception. We cannot use
individual as the starting point for certain issues and collective group as the
starting point for others. For sure, certain issues concern a group and not an
individual, but even when analyzing such collective issue, the starting point
remains an individual.
Why is
“individual” so important? The answer is all choices are made by an individual.
Collective choice is the combination of individual choices. That is, even if an
individual loses freedom under a totalitarian regime – without freedom given
the circumstances – this individual has nevertheless chosen to give up freedom.
In other words, there is neither absolute non-freedom nor absolute freedom in
this world. Choice definitely is subject to constraints, yet this choice is
made by an individual.
The first
postulate in economics is that decision is made by an individual. The so-called
decision is choice. It involves a non-trivial philosophy. Economics is a
science inferring human behavior to explain phenomena. We profess that all
human behavior results from choices. Whether the choice is smart or rational is
not essential; of essence is we assume human makes choices. Neither is it
essential that all human behavior is actually derived from choices, nor purely
by chance without any aim; of essence is we consistently follow this postulate
or axiom.
“Human
makes choices” is a “convention” in economics. This convention is different
from that in other natural sciences. In explaining the phenomenon of an object,
physicists will not say the object’s behavior is the result of the object’s
choice. In principle, it is not forbidden if physics says objects themselves
make choices, though physicists have not done so. Any science has its own
established starting point, and this starting point is not arguable. When the
“individual makes choices” postulate in economics becomes widely accepted, all
economic issues become an issue of choice. There are certainly grounds for the
most important theory in economics – the price theory – to be called the choice
theory.
In order
to apply the choice theory to explain human behavior, it is a must to assume
human behavior can be predicted. In a stricter sense, the first axiom in
economics is that the behavior of every individual is derived from individual
predictable choice. This is an axiom, a postulate in economics. Regardless of
right or wrong, this is not arguable.
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