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All theories developed in microeconomic analysis are based on propositions about individual behavior in response to changes in environment. Although the point may seem self-evident, many of us are rather loose in our discussions of "society" or "the public." If you were to tell me that the public has decided to clean up the nation's water because that is what is best for society, such a statement would sound somewhat unscientific. There is no such thing as an organized group called "the public" capable of making that decision. Moreover, an attribution to "society" is a reference to some sort of entity that presumably is capable of deciding what is good for itself. Individuals can determine whether they like the outcome of a particular economic change, and individuals can determine whether they are happy or sad. Society, however, cannot.
Perhaps a more appropriate way of making the same statement would be as follows: Politicians who expressed an interest in passing legislation to clean up the nation's waterways got voters to respond to them because of the increasing level of pollution in those waterways which caused harm to many individual voters. When a sufficiently large percentage of the electorate became concerned, those individuals in positions of political power made the decision to pass legislation to reduce the level of pollution.
It is worth noting that many individuals will be affected adversely by the cleanup of the nation's waterways. They are the ones who will incur the relatively high direct costs of the cleanup, e.g., polluting firms, their employees, shipowners, and the like. Thus, this fact is inconsistent with saying that the "public interest" has been served. What has been served are the dominant private interests, in this particular case, the interests of those who have the most concern for cleaner waterways.
Notice that the analysis here has been in terms of individual behavior. When we look at it this way, we see that the terms "public" and "society" are a bit too broad and vague to have much scientific meaning in rational discourse.
It should not seem very unusual that the basic unit of analysis in the science of economics is the individual. The physicist, for example, in the course of scientific investigation, may wish to describe the response of a "typical" molecule of gas when there is an increase in the temperature, even though the behavior of one particular molecule is unpredictable for all practical purposes. The economist may wish to predict the response of consumers in New York to a rise in the relative price of food, even though a particular individual living in a specific condominium near Central Park, perhaps in response to other stimuli, may actually buy more food when the price rises.
Although we treat the individual as the basic unit of analysis, we normally apply price theory to the behavior of individuals in groups. From a methodological point of view, we talk in terms of individualism because we obtain better predictions about group behavior by identifying and taking into account the diverse and often conflicting objections of the individuals who make up the group. Thus, our understanding of the behavior of groups is not dissimilar to the physicist's understanding of the behavior of a gas by considering the behavior of the molecules involved. In other words, we assert that more accurate predictions about group behavior are derivable from predictions about individual behavior.
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