The question of how to approach economics is a fundamental methodological issue that has deeply divided economists. Should we understand economic mechanisms collectively and globally, through a mathematical and statistical allocation of resources, or should we start from the smallest existing social unit, the individual? This question lies at the heart of the quarrel between mainstream economists and Austrian economists. It's not simply a question of differing conclusions, but of opposing views on how to construct economic analysis. Methodological individualism thus represents the second fundamental pillar of the Austrian school, after value subjectivism.

Classical and neoclassical economics have historically favored an aggregate approach to understanding economic phenomena. Classical economists such as Smith, Ricardo and Marx divided society into large, coherent and rigid groups: producers, workers, capitalists and landowners. While this classification enabled a structural analysis of the economy, it overlooked the diversity of individual behavior within each category. The neoclassicals, following Walras' lead, continued along this path, assuming homogeneous, predictable behavior among economic agents, thus reducing human complexity to standardized mathematical models.

For Carl Menger, founder of the Austrian school, this aggregate approach misses the point. Individual choices are not based on objective data that can be calculated and formalized, but on dynamic and deeply subjective considerations. His conception of marginalism goes beyond the simple subjectivism of other marginal economists by integrating determining factors such as time and the emerging notion of opportunity costs. Friedrich von Wieser would later develop this concept explicitly, demonstrating that the value of a good is closely linked to the utility of the alternative sacrificed in an economic choice.

Menger's dynamic subjectivism challenges a dominant idea in the economic thought of his time, according to which an individual's choices are static and determined by history, institutions or his social group. On the contrary, Menger asserts that choices are changeable and dynamic, constantly evolving under the influence of internal or external causes. The passage from a state of need to a state of satisfaction requires forces at work, either within the organism itself, or in its environment. The individual is therefore not a passive statistic, but an active agent constantly evolving in his or her relationship with the world.

Menger's perception of economic life is based on a dual relationship between the individual: to himself and to his environment. This dual dimension is crucial to understanding his marginalism. Let's take the example of time preference, i.e. the valuation of present goods over future goods. This preference cannot be determined objectively by an external observer, as it varies from one individual to another and from one moment to another. The current situation, geographical singularity, psychological state, pressing or deferred needs are all parameters that can only be appreciated and conceived by the individual concerned. The intrinsic value of a good therefore does not exist: it inevitably derives from the individual's subjective relationship with that good, in a specific context at a given time.

Methodological individualism is much more than a philosophical preference for the individual over the collective. It is a fundamental epistemological position on how economic knowledge should be constructed. This principle asserts that social and economic phenomena can only be truly understood by reducing them to the actions and intentions of the individuals who make up society. Any attempt to explain the economy in terms of abstract collective forces, deterministic historical laws or statistical aggregates misses the concrete reality of human action. Macroeconomic phenomena are merely the aggregate consequences of millions of individual decisions.

This approach is radically opposed to the holism advocated by the German historical school, an opposition that gave rise to the famous Methodenstreit, the battle of the methods. Combined with methodological subjectivism, methodological individualism forms the epistemological foundation of the Austrian school. These two principles fit together perfectly: value is subjective, and this subjectivity can only be apprehended at the individual level. Where standard neoclassical theory encounters an insurmountable obstacle in seeking to mathematically fix changing preferences, Menger's theory finds its footing, for change is not an obstacle to be overcome, but the very reality of the human condition.