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September 2014

Social Laws, Part 7

Smith discusses some controversial features of praxeology, as defended by Ludwig von Mises. 

This essay touches on some features of praxeology—a term coined during the 1890s to designate the science of human action—as developed by Ludwig von Mises, principally in Human Action: A Treatise on Economics (3rd ed., 1963). I rank this book as one of the greatest theoretical contributions to classical liberalism ever written, second only to Adam Smith’s Wealth of Nations. Human Action is an original and monumental achievement not only in economics but in social theory generally; but, outside of free-market circles, it has not gotten the attention it deserves. This is partly because of its eccentric approach, as judged by conventional academic standards. Grand theories of the sort defended by Mises have been out of fashion for many decades, and Mises’s defense of “apriorism” has made his approach an appealing and seemingly easy target for critics, including some libertarians, many of whom display little understanding of even the essential points defended by Mises.

This is not to say that I agree with all the details of Misesian praxeology. I don’t, but I know genius at work when I see it, and I know better than to dismiss the ideas of a first-rate mind with the same promptitude with which I might dismiss the latest trendy theory concocted by some second-rate sociologist, economist, or philosopher. Among twentieth-century classical liberals, only F.A. Hayek rivals Mises; and without wishing to detract from the achievements of Hayek, I should call attention to the unfortunate if obvious fact that Hayek has been taken far more seriously, and has received considerably more attention, in conventional academic circles than has Mises. There are a number of reasons for this imbalance, which I cannot discuss here. I should note, however, that Mises, unlike Hayek, was a vigorous champion of Enlightenment “rationalism” who did not share the conservative propensities found in Hayek, such as needless deference to customs and traditions that cannot be rationally justified. Additionally, Mises did not get mired down in misleading speculations about social and moral evolution, as Hayek did in his later writings.

Misesian praxeology, which is concerned with the formal relationship between means and ends in human action, is a comprehensive discipline that subsumes not only economics but other social sciences as well. Despite general agreement about the subject matter of economics, Mises argued that we cannot draw a bright line between economic actions and other types of goal-directed behavior. Since “choosing determines all human decisions,” we must base our analysis of economic activity on a “general theory of choice and preference.”

Mises thus rejected the classical conception of “economic man” as unduly narrow. Economics is concerned with the logical implications of human action, specifically, the necessity of choosing among scarce means in pursuit of our goals. But this describes all human actions, not merely economic actions, so there is nothing unique about economic choices that fundamentally sets them apart from other kinds of choices. Mises concluded:

The economic or catallactic [from the Greek for “to exchange”] problems are embedded in a more general science, and can no longer be severed from this connection. No treatment of economic problems proper can avoid starting from acts of choice; economics becomes a part, although the hitherto best elaborated part, of a more universal science, praxeology.

We can better appreciate this effort to ground economics in a universal science of human action if we view praxeology from a historical perspective. (Mises’s Epistemological Problems of Economics is essential reading in this regard.) There is a sense in which Misesian praxeology was a definitive, if delayed, solution to the nineteenth-century Methodenstreit (“battle of methods”) between Austrian economists (principally Carl Menger) and the Prussian Historical School. Proponents of historicism, according to Mises, “tried to deny the value and usefulness of economic theory. Historicism aimed at replacing it by economic history.”

Despite his dislike of historicism, Mises shared its repudiation of positivism, which “recommended the substitution of an illusory social science which should adopt the logical structure and pattern of Newtonian mechanics.” Mises insisted that economics must take into account value judgments, purposes, choices, and other subjective aspects of human action. Mises therefore joined his historicist adversaries in rejecting the “unity of science” that positivism sought to achieve by gutting the human sciences of everything distinctively human. Instead he advocated a “methodological dualism” which posits “two separate realms: the external world of physical, chemical, and physiological phenomena and the internal world of thought, feeling, valuation, and purposeful action.”

Mises was profoundly influenced by the historicist theory of Verstehen (understanding), especially the version that Max Weber integrated into this theory of “ideal types.” (See the section “On Ideal Types” in Human Action.) Verstehen, a type of empathy, is the distinctive methodology of the historical disciplines. It is the mental tool that enables the historian to understand the subjective meanings of singular historical actions and the motives of individual human beings.

This partial alliance with historicism left Mises with a potentially serious problem. If, as many historicists claimed, Verstehen was the appropriate method for dealing with the subjective aspects of human action, then it should be used not only in history but in every human science, including economics, as well. But this would transform economics into what the philosopher Wilhelm Windelbandt called an “idiographic” science, i.e., a discipline that is limited to the study of unique particulars. If Mises accepted Verstehen as the primary method of economic reasoning, then economics would be compelled to abandon the quest for universal laws of the sort found in the “nomothetic” sciences. This is what Mises meant when he said that historicism sought to replace economic theory with economic history.

Mises thus faced the problem of charting a course between the Scylla of historicism and the Charybdis of positivism. Historicism offered a subjectivist methodology that was unable to formulate universal laws; whereas positivism offered to bestow upon economics the status of a universal, nomothetic science, but only at the cost of robbing economics of its subjective orientation.

Mises found a solution to this problem in praxeology, a nomothetic science that arrives at general principles by abstracting the universal form of human action from its material content. As Mises put it, “Praxeology is not concerned with the changing content of action, but with its pure form and categorical structure. The study of the accidental and environmental features of human action is the task of history.”

Closely related to the formalism of praxeology is the claim that this science begins with a priori categories, forms, and concepts, after which it arrives at theorems and conclusions by purely deductive reasoning, without ever appealing to facts derived from experience. Human knowledge, according to Mises, is conditioned by the structure of the human mind. Working within this quasi-Kantian framework, Mises said of praxeology: “Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori….They are both logically and temporally antecedent to the comprehension of [empirical] facts.” Moreover, “no experience, however rich, could disclose [praxeological theorems] to a being who did not know a priori what human action is. The only way to a cognition of these theorems is logical analysis of our inherent knowledge of the category of action.”

Apriorism is unquestionably the most controversial aspect of praxeology. Although Mises emphatically disagreed with the contention that a priori reasoning is unable to generate factual knowledge, so deeply ingrained is this belief in the modern mind that many economists, convinced that an a priori method would completely strip their discipline of all empirical relevance and authority, tend to rule praxeology out of court without further consideration.   

Even some avid defenders of praxeology have expressed their disagreement with its Misesian foundations. For example, Murray Rothbard argued that praxeology can dispense with apriorism without suffering any detrimental effects. Praxeological reasoning is equally secure when based on Aristotelian empiricism. This epistemological theory explains how, through a process of abstraction, we can mentally separate the “essence” of human action from our observations of particular actions and thereby isolate a pure conception of “action” for the purpose of analysis. After this, if the Aristotelian follows the deductive method proposed by Mises, he will arrive at the same conclusions, and he will be able to justify those conclusions with the same degree of certitude.  (For the record, I basically agree with the Rothbardian version of praxeology.)

It is interesting to note that even strict empiricists, such as J.S. Mill, have defended an a priori method in economics (or “political economy,” as it was known in Mill’s day). We find this in Mill’s important essay “On the Definition of Political Economy” (1836). Regarding those who reject abstract theory in economics, claiming instead that economics should be based solely on experience, Mill claimed that “those who disavow theory cannot make one step without theorizing.” Properly conceived, economic theories always draw from experience, but there is a crucial difference between citing specific experiences in every case and those theorists who, “having argued upwards from particular facts to a general principle including a much wider range than that of the questions under discussion, then argue downwards from that general principle to a variety of specific conclusions.” Economic reasoning is not based on pure induction; it does not merely generalize from repeated instances of similar experiences. Rather than rely on this “method à posteriori,” economics employs “the method à priori.” “We are aware,” Mill continued, “that this last expression [à priori] is sometimes used to characterize a supposed method of philosophizing, which does not profess to be found upon experience at all,” but he was unaware of any political or economic theory to which this description would apply. In defending apriorism Mill certainly did not mean to deny that economic theories are ultimately grounded in experience. Mill explained what he meant by “à posteriori” and  “à priori” as follows:

By the method à posteriori we mean that which requires, as the basis of its conclusions, not experience merely, but specific experience. By the method à priori we mean (what has commonly been meant) reasoning from an assumed hypothesis…. In the definition which we have attempted to frame of the science of Political Economy, we have characterized it as essentially an abstract science, and its method as the method à priori. Such is undoubtedly its character as it has been understood and taught by all its most distinguished teachers.

I cited Mill on this subject to assure my fellow empiricists that they needn’t run for the hills whenever they encounter a defense of apriorism, for the term has been used in various ways, and we find significantly different meanings in Mill and Mises. The latter did indeed contend that a priori categories are independent of all experiences, not mere specific experiences (as Mill maintained). According to Mises, the a priori categories of praxeology cannot be gleaned from experience because they are essential preconditions that make our experiences of human action coherent and meaningful. Without them our experiences would be nothing more than what William James called “blooming, buzzing confusion.”

In The Ultimate Foundation of Economic Science (1962), Mises stressed that a priori categories “are not innate ideas.” We are not born with ideas, but we are born with forms of thought determined by the  “logical structure of the human mind.” Mises (again, in Ultimate Foundation) summarized the essential features of the a priori as follows:

If we qualify a concept or a proposition as a priori, we want to say: first that the negation of what is asserts is unthinkable for the human mind and appears to it as nonsense; secondly, that this a priori concept or proposition is necessarily implied in our mental approach to all the problems concerned, i.e., in our thinking and acting concerning these problems.

The a priori categories are the mental equipment by dint of which man is able to think and to experience and thus to acquire knowledge. Their truth or validity cannot be proved or refuted as can those of a posteriori propositions, because they are precisely the instrument that enables us to distinguish what is true or valid from what is not.

This brings me to two final points that require clarification. First, Mises did not contend that every concept and principle employed by economists (and social theorists generally) can be derived from the a priori categories of praxeology. While maintaining that some key principles, such as marginal utility and time preference, are implicitly contained in the concept of human action and so can be discerned by unraveling the logical implications of that concept, he also believed that other principles, such as the “disutility of labor,” can only be discovered through experience.  It is therefore an error, if a common one, to attribute to Mises the view that every economic principle is based on a priori reasoning.

Second, we should understand what Mises meant when he argued that the a priori principles of economics can neither be verified nor falsified by particular experiences. This has proven an especially contentious claim for critics, who have interpreted it to mean that economic principles, according to Mises, have no direct relationship to our experiences of the external world and so can never be falsified, as a matter of principle. This characterization, though not wholly mistaken, is scarcely a sympathetic account of the point that Mises wished to make—a point that holds even if we do not agree with Mises about the a priori nature of praxeological concepts. Let’s take a look at this problem.

Particular facts, including facts of economic history, can neither verify nor falsify an economic theory because they carry no meaning per se. Only a theory can impart significance to a specific fact, so no empirical fact, if stripped of a theoretical understanding of that fact, can falsify a theory. After dividing the “sciences of human action” into two main branches—praxeology and history—Mises went on to say:

The experiences with which the sciences of human action have to deal is always an experience of complex phenomena. No laboratory experiments can be performed with regard to human action. We are never in a position to observe the change in one element only, all other conditions of the event remaining unchanged. Historical experience as an experience of complex phenomena does not provide us with facts in the sense in which the natural sciences employ this term to signify isolated events tested in experiments. The information conveyed by historical experience cannot be used as building material for the construction of theories and the prediction of future events. Every historical experience is open to various interpretations, and is in fact interpreted in different ways.

The postulates of positivism and kindred schools of metaphysics are therefore illusory. It is impossible to reform the sciences of human action according to the pattern of physics and the other natural sciences. There is no means to establish an a posteriori theory of human conduct and social events. History can neither prove nor disprove any general statement in the manner in which the natural sciences accept or reject a hypothesis on the ground of laboratory experiments. Neither experimental verification nor experimental falsification of a general proposition is possible in its field.

To put the matter somewhat differently: Although an empirical fact about human action may cause us to reexamine a theory, that fact alone, which will be consistent with myriad theoretical interpretations, can neither corroborate nor falsify a theory. Specific empirical facts may be relevant to a theory, insofar as they may cause us to doubt that theory, but they are not decisive. In the human sciences only a theory can refute a theory.

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