This topic came up indirectly today in conversation about communitarian ethics versus classical liberalism.
Classical liberals usually envision a human subject who can choose who and what to associate with, joining or leaving various communities depending on which offers the best "bundle" of services. This search by individuals, finding their private optimums, is supposed to induce efficiency between providers of services who want to attract as many users as possible. The result, classical liberals say, is a spontaneously generated system of social goods which emerge from individuals' entry and exit into various associations.
The communitarian critique (represented by Habermas, Barber, etc.) is to say that people are social animals; we develop our selves through interaction with others. Classical liberals, according to this account, underrate the role of community which can both enrich life beyond what mere individualism can offer, and also restrict the free exercise of choice which classical liberal social theory depends on.
The classical liberal retort to this is "methodological individualism." It is simply a truism that at the core, all choices must be made by individuals so it only makes sense to ground political/philosophical views on individual choices. A community does not exist beyond the coordinated actions of its members, so to speak of "collective preferences", or similar, is just the fallacy of composition writ large.
Methodological individualism is the basis for most good, mainstream economics and from a practical standpoint I think it makes a lot of sense. Talking about the "good of the community" without addressing the incentives of its members invites fuzzy-headed thinking and bad policies which sound good on paper but never work out in the real world. In practice, most people's everyday political heuristics operate on some notion of communal good, so a strong counter-dose of methodological individualism can often lead to improved conclusions.
But, from a philosophical perspective, it's not clear that this fully resolves the communitarian critique of classical liberalism. Indeed, how can we say that methodologically individualist stance is an objective one, derived by us wise political economists with the uncommon privilege of standing outside all the social structures which block the view of others? To put it differently, if we are always already situated within social roles (to borrow some annoying post-modern rhetoric) then perhaps the classical liberal stance simply emerges from growing up in a society where classically liberal and individualistic values are commonly accepted.
Of course, the communitarian stance falls prey to this as well, because Habermas et al are also socially situated in their formulation of communitarian ethics. They have no privileged "eye from above" stance either. At this point we spiral into a long infinite regress of navel-staring and the entire discussion of political economy is put on hold, perhaps indefinitely.
Is there any grounding for methodological individualism, aside from the tautology that "only the individual chooses for the individual"? I can see two possible resolutions for this dispute.
1. Look to results (pragmatism). Which stance works better? From the historical record it appears that individualist societies have grown and prospered much more so than others.
However, there are no pure cases in the real world, and a dedicated communitarian could probably look for the social roots of Western historical success, and/or piously lament the crisis that overly-individualized society has brought upon us today.
2. Dismiss the search for grounding entirely. It may be that no code of social ethics can claim a solid foundation, and all philosophy is built upon chutzpah, pulling itself up by its bootstraps, and assuming its own foundational values into being. In this case we are left with large mental edifices that have been built upon sand, but appear to be functioning pretty much okay, so maybe it's better just not to worry about these grounding questions at all.
In an earlier time this grounding issue could be resolved with an appeal to God, divinely inspired creation, innate human dignity, and so on. But, in an era of secularized social science, competing social perspectives seem to be engaged in an endless bootstrap-pulling competition.