a more general situation, in which the theory describes the functioning of a system of action from which the three types of relations are not easily separable. Although such explanatory systems involve both individual-level actions and system-level behavior, they are not appropriately conceived of as the linking together of relations of these three types. Relations of the sort described by Figure 5.1 or Figure 5.2 are ordinarily best thought of as macro-level empirical generalizations which might be predicted as deductions from a theory. The theory which can generate such relations as specific propositions may be thought of as a theory of individual action together with a theory of how these actions combine, under specific rules, to produce systemic behavior.
Interdependence of Actions
There are various ways in which actions combine to produce macro-level outcomes, and it is useful to discuss some of these briefly. This cataloging of forms of interdependence of actions is not intended to be exhaustive.
A simple case is that in which one actor’s independent action imposes externalities (positive or negative) on others and thus changes the structures of incentives confronting them. An example is the classic “tragedy of the commons” (see Hardin, 1968), in which the grazing of each farmer’s sheep reduces the availability of pasture for the sheep of other farmers. But there are many very different kinds of examples. Such phenomena as the South Sea bubble or the panics that may be caused by theater fires also illustrate the case.
A second case is that of bilateral exchange, as in union-management bargaining. The resulting “system” is composed of only two actors, but there are systemic outcomes: the exchange agreements or contract arrived at by the two parties.
A third case is the extension of bilateral exchange to a competitive structure in a market. The outcomes of the market, that is, prices and transactions, depend on the particular institutional rules within which the market operates; for these rules govern the form of interactions between actors (for example, closed bids or open bids, presence or absence of recontracting, price-setters and price-takers, barter, exchange with a numeraire, and so on).
A fourth case is that of collective decisions or social choice, in which the systemic outcome is the result of votes or other expressions of preference by individuals, combined by means of an explicit decision rule and resulting in selection of a single alternative.
A fifth case is the structure of interdependent actions that constitutes a formal organization producing a product. The organizational structure consists of a set of rules and incentives, which give rise to asymmetric interdependencies that could not come about through two-party exchange.
A sixth case is the establishment (through some poorly understood process) of a collective right to exercise social control over certain actors’ actions, via norms enforced by sanctions. Once established, these norms come to constitute auxiliary “rules of the game,” enforced more or less fully by the actors in the system.
These several forms of interdependence of actions show the wide variety of ways in which the micro-to-macro transition occurs. The macro-to-micro transition is in some of these cases implicitly contained in the interdependence of actions. In other cases, however, it is not. For example, in a market there is extensive variation in the flow of information by which offers are communicated throughout the system. The transmission of information from the macro level to individual actors can greatly affect the actions they take and thus affect system behavior. More generally, in any large system information is transmitted via media which are themselves actors in the system, with their own interests. This shapes the quantity and character of the information available to other actors, and different communication structures will alter this information in different ways.
The variation in information transmitted from the macro level to individual actors is just one example of possible variations in the macro-to-micro transition. In general, the environment, or social context, in which a person acts affects the relative benefit of different actions; and it is the macro-to-micro transition which shapes this social context.
REFERENCES
1 Elster, J. 1979. Ulysses and the Sirens. Cambridge. Cambridge University Press.
2 Hardin, G. 1968. The tragedy of the commons. Science 162:1243–1248.
3 Kahneman, D., P. Slovic, and A. Tversky. 1982. Prospect theory: An analysis of decision under risk. Econometrica 47:263–291.
4 Tversky, A. 1972. Choice by Elimination. Journal of Mathematical Psychology. 9:341–367
5 Weber, Max. 1958 (1904). The Protestant Ethic and the Spirit of Capitalism. New York: Scribner’s.
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