Tuesday, April 19, 2011

Hayek and Keynes: Not So Far Apart?

I see some abuse directed at Keynes in the comments on the last post. Not all Austrians are so hostile in their assessment of Keynes, however.

Consider this remarkably fair-minded post by Mario Rizzo:
“Lord Keynes: A Hayekian Appreciation,” ThinkMarkets, March 31, 2009.
Rizzo takes up comments made by Ludwig Lachmann in “John Maynard Keynes: A View from an Austrian Window” (South African Journal of Economics 51 [1983]: 253–260):
“In the field of methodology Keynes and the Austrians agree that economics is a social science to which methods that have proved successful in the natural sciences should not be applied without careful inspection, and that, in particular, all attempts to ‘give numerical values’ to the parameters of economic models ignore the essential meaning of economic theory. It is hardly surprising that even here we find differences of accent and perspective, but, with the area of agreement so broad and significant, they do not amount to much ….

Keynes concurs with Hayek’s misgivings about numerical values. In his letter to Harrod of 16 July 1938 we read ‘In chemistry and physics and other natural sciences the object of experiment is to fill in the actual values of the various quantities and factors appearing in an equation or a formula; and the work when done is once and for all. In economics that is not the case, and to convert a model into a quantitative formula is to destroy its usefulness as an instrument of thought’ ….

But Keynes’s mind also moves in another direction. ‘I also want to emphasize strongly the point about economics being a moral science. I mentioned before that it deals with introspection and with values. I might have added that it deals with motives, expectations, psychological uncertainties. One has to be constantly on guard against treating the material as constant and homogeneous. It is as though the fall of the apple to the ground depended on the apple’s motives, on whether it is worthwhile falling to the ground, and whether the ground wanted the apple to fall, and on mistaken calculations on the part of the apple as to how far it was from the centre of the earth’ (ibid, p. 300). Keynes sees in social facts manifestations of the human mind. While to Hayek it is the complexity of these facts, their multitude and diversity, that defies the attribution of numerical values to social concepts, to Keynes it is their mental character (‘mistaken calculations on the part of the apple’) that does so. Rather to the surprise of some of us, Keynes emerges as being more deeply committed to subjectivism than is his Austrian opponent” (Lachmann 1983: 256).
It might come as a surprise to the various Austrian sympathizers (who think Austrian economics begins and ends with Mises and Rothbard) that their school includes the Lachmann wing and some of the moderate subjectivists who are able to appreciate Keynes, rather than engage in endless abuse.

As I have pointed out before, Post Keynesianism has some affinities (but also major differences) with the radical subjectivist Austrian economics of Ludwig Lachmann (and Austrians influenced by him like O’Driscoll and Rizzo). You might think that this would be a starting point for building bridges, and O’Driscoll and Rizzo once in fact said so (see The Economics of Time and Ignorance, Oxford, UK, 1985, p. 9). I personally regard ThinkMarkets as the best Austrian blog on the net, miles ahead of the others.

But then I find the ignorant “pop” Austrians – ignorant even of the intellectual diversity of the Austrian school – who do nothing but foam at the mouth at the mention of Keynes’ name.

This ignorance extends to the inability to understand that the debate between Austrians and Keynes and his followers was intense in the 1930s and 1940s, and the Austrians lost that debate. The notion that Keynes was ignorant of Hayek or Austrian ideas is nonsense.

57 comments:

  1. I specifically remember one chapter of General Theory even mentioning "Professor von Mises and Professor von Hayek" by name.

    It was in Part III of "Classical Theory of Rate of Interest".

    von Mises' Theory of Money and Credit is cited on the exact same page. Keynes read that book in the original German, although he seems to have admitted his German was not too good.

    Actually, before 1940, I see a lot of open-mindedness among thinkers, who were willing to engage each other back then. They changed their minds frequently. At least in the Continental and British environment.

    It is a dirty American tactic to smear and deride opponents and their ideas. It is also typically American to focus on the character of the opponent, rather than what he or she said. Paul Samuelson comes to mind, and some bloggers have quoted instances of him boastfully dismissing his opponents. "Nobody mentions his ideas anymore", he said of one old economist.

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  2. "It is a dirty American tactic to smear and deride opponents and their ideas."

    Granted it's dirty, but how is this tactic specifically American?

    Also, nobody is more guilty of this behavior than Murray Rothbard and the Lew Rockwell people (with their "Keynes was a jerk and a perv" line of argument). And that's in spite of their own sheltering of HIV denialists.

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  3. Here is Chapter 14. The Classical Theory of the Rate of Interest in its entirety:

    http://www.marxists.org/reference/subject/economics/keynes/general-theory/ch14.htm

    I don’t find the word “Mises” or “Hayek” anywhere in that chapter. I don’t believe those words appear anywhere in the entire book. Jonathan Finegold Catalan has found what appear to be two off-handed references to Austrian theory in the entire book, neither labeled as such and neither showing the slightest understanding of Austrian theory:.

    http://mises.org/daily/4193

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  4. You still fail to understand the core difference between Misesian economists and all others (including Hayek), which is Praxeology. Misesians are not really about _conclusions_ but about _methodology_. Okay, so Keynes shared some misgivings or even conclusions with Austrians. Doesn't matter. Since Keynes does not logically deduce his theories from self evident assumptions, his theories are as worthless out-of-thin-air theoretical constructs that may or may not have anything to do with reality as any others. There shouldn't even be a special name for Praxeology, it's just common sense and logic. We only have to speak of Praxeology because only Misesians care to use common sense and logic, because as you say, Austrians have lost that debate in 1940s. Now, some guys (like Hayek) happen to be closer to the truth as far as conclusions are concerned, some other guys are further (like Keynes), but from Misesian point of view, they belong to the same irrational breed that rules contemporary economics.

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  5. Praxeology is not "self-evident." Its denial does not result in logical absurdity. It is not empirically verifiable either, we _can't_ empirically demonstrate that people behave purposefully -- which is why teleology is more of a method used for analysis and comprehension than as an explicative theory (as the Misesian wing of the Austrians try to use it).

    The main argument for its "self-evidence", the one from performative contradiction also fails. It presupposes praxeology in order to prove it. In the _concrete_ performation of an argument there is nothing _observable_ that indicates adherence to praxeological principles (that is, hedonistic, teleological behavior) and as such we can't speak of performative contradiction there.

    Of course, you can just keep taunting it as "self-evident", but this does not make it so. It is just a first principle like any other and I have just as much reason to pick it as my starting point as any other principle.

    The best way to refer to Misesian methodology is as _metaphysical_.

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  6. 1. Ok. Where's that long awaited proof showing that people don't act?

    2. The statist schools all dance around the obvious and most important Austrian insight: That value is subjective and economic value is not expressed until people negotiate and engage in an actual transaction or exchange. Indeed, know one knows and no one can know what the proper interest rate should be until it is actually negotiated. That's why we're so cocky. We know what cannot be known by anyone.

    Thus, we know people act and we know what cannot be known. Everything flows from that. The statists invariably dance around these basic concepts and then start the name-calling.

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  7. "1. Ok. Where's that long awaited proof showing that people don't act"

    You clearly read none of my earlier comments.

    I repeat: that all human action is purposeful requires no "refutation", because this trivial fact is perfectly compatible with Keynesian economics.

    A subjective theory of value is also compatible with Keynesian economics.

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  8. Anonymous, I know I act purposefully, it is self evident to me, but I'm not surprised it is not so evident to you. This again goes back to Ravi Iyer study: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1665934
    If you use more "disgust, empathic concern, and neuroticism" and less "utilitarianism, need for cognition, and systemizing" than libertarians do, then ideed you are more of a bunch of reflexes rather than a purposeful human being.

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  9. Lord Keynes, irrationality is perfectly compatible with whatever. Anything can and does happen in a fairy tale.

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  10. "Anonymous, I know I act purposefully, it is self evident to me, but I'm not surprised it is not so evident to you."

    That is a very strong proof for that metaphysical statement. I am now convinced that teleological, hedonistic behavior exists.

    "1. Ok. Where's that long awaited proof showing that people don't act?"

    Do not shift the burden of proof.

    The burden is on the Austrians. They have to demonstrate that human beings exhibit hedonistic and teleological behavior. So far, they have failed to do so.

    Of course, proving metaphysical statements is hard.

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  11. Anonymous, what's all this deal with equating purposeful with hedonistic? Where do you get that from?

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  12. "Anonymous, what's all this deal with equating purposeful with hedonistic? Where do you get that from?"

    From Ludwig von Mises:

    "Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would have neither wishes nor desires; he would be perfectly happy. He would not act; he would simply live free from care." (Human Action)

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  13. Incidentally, if you disregard the hedonistic part, you throw a rather fair bit of Austrian economics away, such as the proposition that ex ante exchanges make everyone "better off" and so on.

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  14. Anonymous, so you believe altruists are unhappy just because their goals are not hedonistic? Are you unhappy when you give money to charity? Where do you take those absurdities from? Looks like you mistake happiness with corporal pleasures or something. Happiness is more complicated than that (wow, shouldn't it be you who is telling me me that, btw???). There is nothing hedonistic (or altruistic for that matter) about the simple fact that people are happy (ex ante) when they achieve their goals. Hedonistic/altruistic are descriptions of goals themselves and Austrians assume absolutely nothing about goals, Austrians simply accept them as given.

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  15. Uh. No. It isn't me saying that, it is good old Ludwig van.

    "The idea that the incentive of human activity is always some uneasiness and its aim always to remove such uneasiness as far as possible, that is, to make the acting men feel happier, is the essence of the teachings of Eudaemonism and Hedonism." (Mises, Human Action)

    Incidentally, "the idea that the incentive of human activity is always some uneasiness and its aim always to remove such uneasiness as far as possible" is also the core of praxeology.

    And that is great, except it is a philosophical statement, it is completely unverifiable (or falsifiable, for that matter; at best it is just a way to look at human behavior rather than a FACT OF REALITY as the Austrians treat it) and as such it is at best a MERE ASSUMPTION to be used in understanding human society, to be discarded if the predictions resulting from it don't come true.

    Except that the Austrians treat it as an undeniable fact (rather than a way of looking at behavior) and use it to make something they think is science.

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  16. Anonymous, I know many examples of human actions introspectively since I am human myself (can't prove this though too, btw, it's just a "mere" assumption). I cannot even _imagine_ an action that would be directed at making me _less_ happier ex ante, even as a kamikaze. Therefore I assume such actions are inherently impossible. Of course I can't _prove_ that because again, all trivial self evident truths are unverfiable. If they were verifiable, then they would not be trivial self evident truths in the first place. Basics.

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  17. Yeah. Except that isn't a good argument. That is an appeal to ignorance. "We don't know how human behavior works, so it must be this." A theist "can't imagine" a world where his favored deity doesn't exist either.

    The point is, that is a philosophical, metaphysical statement that the Austrians are _trying to make science with_. Doesn't work like that.

    (of course, you can claim ANYTHING is self-evident. It is an excellent way to instill dogma, but not very good science.)

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  18. Anonymous, no, because deities are not compatible with Ockham's razor. What I'm saying is, all purposeful actions I know and I can possibly think of increase my happiness ex ante. You say it is not necessarily true, even though you can't come up with a single conterexample. Hence, you believe in less simple explanation than is evident, both empirically and theoretically. So who is closer to deities?

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  19. "You say it is not necessarily true, even though you can't come up with a single conterexample."

    The burden is not on me. You have to demonstrate the truth of Austrian praxeology, since you are the one proposing it. Except you can't, since all you have done so far is to say that it is "self-evident" (which is one of the greatest argument-enders of all time).

    It seems that metaphysical proposition cannot be proven. It can't be empirically verified (from Mises), and it is far from "self-evident" since its denial does not result in logical absurdity. (such as, say, "the proposition 'no statements are true' is false")

    "Hence, you believe in less simple explanation than is evident, both empirically and theoretically."

    Praxeology is not empirical. This was stated by Ludwig von Mises himself. So apparently I believe in less empirical evidence than zero.

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  20. Anonymous,

    The proposition "there exist man's puposeful actions directed at making him less happy ex ante" does result in logical absurdity. If you purposefully act to make yourself less happy, you can't achieve that goal because it would make you more happy. Logical absurdity at its best.

    Praxeology is not empirical with regards to testing its conclusions (ie it does not use scientific method, same as math does not use it), but obviously the assumptions are empirical in that they relate to our real world experience (ie that we are conscious purposeful beings living in a world of scarcity).

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  21. "If you purposefully act to make yourself less happy, you can't achieve that goal because it would make you more happy."

    This is absurd only if you assume that human behavior aims at making humans happier. But that is circular reasoning.

    By the way, the denial of praxeology is "It is not the case that humans exhibit behavior aimed at making them happier ex ante", not "there exist man's puposeful actions directed at making him less happy ex ante."

    "Praxeology is not empirical with regards to testing its conclusions (ie it does not use scientific method, same as math does not use it), but obviously the assumptions are empirical in that they relate to our real world experience."

    Uh, no, the propositions of praxeology (humans exhibit behavior that is both teleological and hedonistic) are not empirical. That is why it is a priori.

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  22. Anonymous, no I have assumed achieving your own _goals_ makes you more happy ex ante. So logical absurdity would arise if your goal were ever to make yourself less happy. You can never achieve such goal, because that would necessarily make you more happy.

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  23. Joanna Liberation, like all Austrians I know, the way you use words beg for us to ask you what you mean by them, because you do not use classical definitions, or at least you entertain a confusion on what the words you use actually mean.

    For example, you say that achieving goals is all about making one happy. Define "happy". If we use the classical definition of "happy", as in a sentiment of euphoria, then there is a lot of counter-examples. For example, I have given to charities and it did not make me euphoric at all, I did it out of a sense of duty towards my fellow man, but I couldn't budge from the sentiment that it meant I had to delay purchases I would prefer to do with that money for my own personal gratification.

    You could try to argue that on some level it makes me happy because I feel that it is better for me to do so... But then it becomes a circular reasoning. What is a goal? It is something meant to make one happier. How do we know something makes you happier? Because you preferred to do it instead of other things, in other words, because it's the result of achieving your goal.

    See? Circular reasoning. A goal must make you happy because happiness results from achieving a goal because achieving goals make you happy because happiness results from achieving a goal because.... etc, ad vitam aeternam.

    (continued)

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  24. By the way, Joanna, you do realize you acknowledged that your theory is not absolute as you claim it is and so that it is wrong, right?

    "If you use more "disgust, empathic concern, and neuroticism" and less "utilitarianism, need for cognition, and systemizing" than libertarians do, then ideed you are more of a bunch of reflexes rather than a purposeful human being."

    In this comment, you admit that humans act in different ways than Libertarians do, which contradicts the idea that "all action is purposeful", which is at the center of praxeology. You then claim that these "don't count" because of "disgust, empathic concern and neuroticism". Even if you believe they don't count, the fact that you admit that they EXIST contradicts the basis of praxeology. Humans do not always act "purposefully", you may wish to salvage your theory by saying that, well, when they act not purposefully, then they are not really "acting", but again, circular reasoning:

    Humans always act with a purpose because purpose is necessary for one to act because humans always act with a purpose because purpose is necessary for one to act, etc...

    Of course, now you are confusing the popular definition of action and a special Libertarian definition of "action". But if people can act without "acting", then that means that your praxeology cannot be the universal truth about human behavior and economics because some actions fall outside of it. And then that means we have to study when people act according to your praxeology and when they don't, which means, you guessed it, empirical studies, which praxeology excludes.

    Praxeology is basically just a set of dogma supported by Faith and not a science. It all begins by defining a few assumptions about human behavior and then builds a strong logical building over these assumptions... but the logic is only as good as its foundations, and the assumptions at the heart of praxeology are unproven and empirically not confirmed in the universal and absolute, meaning praxeology itself is unproven and unconfirmed, no matter how often people may say it's "self-evident".

    It reminds me of the Catholic thinkers of the Middle Ages, they sometimes were very logical and their reasoning works perfectly... it's just that they assume at the core that the dogmas of the Church were true, that Heaven and Hell existed and that all that the Bible said was the Word of God. So they assumed that torturing and killing heretics was good for them because it saved their souls, which is an ultimately utterly logical conclusion... as long as you assume souls exist, that they are eternal and that the only way they can achieve salvation is through Catholic Faith.

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  25. Simon,

    Define "happy". If we use the classical definition of "happy", as in a sentiment of euphoria, then there is a lot of counter-examples.

    Eg:
    http://www.thefreedictionary.com/happy
    http://www.merriam-webster.com/dictionary/happy
    http://www.macmillandictionary.com/dictionary/british/happy
    "Happy" has _nothing_ to do with "euphoria", so looks like it's you who "entertain a confusion on what the words you use actually mean".

    Circular reasoning. A goal must make you happy because happiness results from achieving a goal because achieving goals make you happy because happiness results from achieving a goal because....

    No, I _assume_ achieving goals makes you happier ex ante, period. There is no "because" so there is no "reasoning" so there is also no "circular reasoning". Do you know what "assumption" actually mean? I'm not trying to _prove_ achieving your goals makes you happier, I'm merely _assuming_ it, and I believe it is a legitimate assumption, because I have never experienced and I can't even think of one single counterexample.

    you admit that humans act in different ways than Libertarians do, which contradicts the idea that "all action is purposeful"

    No, you may be an irrational thinker, but you are still a purposeful being. As I've already explained, Austrians assume absolutely _nothing_ about goals, they may well be goals of a madman, but they are still purposeful all right.

    the assumptions at the heart of praxeology are unproven and empirically not confirmed in the universal and absolute

    I would love to hear why. Believe me I've been looking hard for either empirical counterexamples or theoretical rebuttals of praxeological assumptions or logic, still no luck, only threats like yours. Good example is a "rebuttal" by Lord Keynes: http://critiquesofcollectivism.blogspot.com/2011/01/apodictic-certainty-of-praxeology.html

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  26. "No, I _assume_ achieving goals makes you happier ex ante, period."

    So you reject the a priori truth of praxeology by reducing it to a mere assumption to be discarded if its predictions do not come true. That is better, but Mises would be disappointed at you.

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  27. "Believe me I've been looking hard for either empirical counterexamples"

    So you're looking for empirical counterexamples of an a priori theory. Got it.

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  28. Joanna Liberation, you said "Happy" has _nothing_ to do with "euphoria", so looks like it's you who "entertain a confusion on what the words you use actually mean"."... But here is the appropriate definition of your first link:

    "2. Enjoying, showing, or marked by pleasure, satisfaction, or joy."

    THAT is euphoria. Joy, pleasure, satisfaction. I donated to charity out of a feeling of duty, not a desire for joy. If I had wanted joy, then I would have rather spent that money for my own self-gratification. I knew it and still did it.

    "No, I _assume_ achieving goals makes you happier ex ante, period. There is no "because" so there is no "reasoning" so there is also no "circular reasoning"."

    If I assume that 2=3 then 4=6 because 4= 2 times 2 and 6 = 3 times 2 and we know that if A=B then x times A = x times B. The logic is unassailable... but the conclusion is BS because the assumption is BS.

    That's where your whole edifice falters, at the very beginning. Your assumptions are unproven, just what "feels right" to you. That might work with people who want to believe, but for more discerning fellows, it doesn't fly. You also play with words a lot, like all Austrians.

    "No, you may be an irrational thinker, but you are still a purposeful being. As I've already explained, Austrians assume absolutely _nothing_ about goals, they may well be goals of a madman, but they are still purposeful all right."

    That's not what you said. You outright said that if people didn't think the way you did (utilitarianism), then they were "a bunch of reflexes" and not a "purposeful human being". Now you're saying even if people do not act rationally, then they are still purposeful. You contradict yourself in the clearest way.

    "I would love to hear why. Believe me I've been looking hard for either empirical counterexamples or theoretical rebuttals of praxeological assumptions or logic, still no luck, only threats like yours. Good example is a "rebuttal" by Lord Keynes: "

    There is none so blind as one who will not look. Counter-examples abound, so much that you are forced to play with words to justify your affirmations, like playing with the meaning of "happy". That's the common trick of those who believe in Praxeology. When confronted by counter-examples, they expand the definition of the words they use ("action", "purpose", etc...) to be able to include these new examples in their affirmations. This means, of course, that the meaning of their affirmations has changed, since it includes now situations it didn't include before, sometimes it balloons so much that it loses all meaning. But the Austrians ignore this expansion of the meaning and keep the original meaning in their following thought experiments.

    It's like someone saying all balloons in a room are blue and so are the same color. Someone points out a light blue balloon and a dark blue balloon, so the guy says that it doesn't matter, they're still blue. Someone else points out a purple balloon, but the guy says that purple is the combination of blue and red, so it still counts and his affirmation stays valid. The problem is, he said all balloons were blue and so they were all the same color, which isn't the case. The definition of "blue" has expanded to include different shades of blue and even different colors altogether. This means that balloons aren't the same color, people can differentiate different colors easily.

    So his initial conclusion has become wrong because, though the formulation of the affirmation is the same, the meaning of it has changed.

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  29. Anonymous,

    So you reject the a priori truth of praxeology by reducing it to a mere assumption to be discarded if its predictions do not come true.

    A priori truth IS a mere assumption (that is, so fundemental that cannot be formally proven), always, I have not managed to reject nor reduce any praxeology assumption that Mises has come up with.

    So you're looking for empirical counterexamples of an a priori theory. Got it.

    Yes, praxeology is an a priori theory based on assumptions which must be empirical (eg people prefer leisure to work), otherwise praxeology would have nothing to do with reality like all other economic theories.

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  30. Simon,

    THAT is euphoria. Joy, pleasure, satisfaction.

    No, euphoria is NOT same meaning as joy, pleasure, satisfaction. I mean, ask anyone, even 3 year olds, looks like you have serious trouble with word comprehension and reading. Unless, wait, are you retarded? That might explain why you believe happiness=euphoria. Mises is not saying you are euphoric when you give money to charity, you are merely happy, ie satisfied with the fact you give money to charity, period, read the standard definitions again.

    I donated to charity out of a feeling of duty, not a desire for joy.

    Because again joy is not exactly same meaning as happy (though indeed closer than euphoria). Are you happier when you feel you have fulfilled your duties? Answer that simple question. If fulfilling your duties that you yourself feel obligated to fulfill makes you unhappy (ex ante), than you might indeed be the counterexample of praxeological assumptions.

    the conclusion is BS because the assumption is BS

    So how many more times are you going to repeat the obvious? Oh, I forget you are repeating the obvious just to make an insinuation that Austrian assumptions are somehow false... even though you have no concrete counterexample to none of them whatsoever.

    Your assumptions are unproven

    That is the point with assumptions. If you can prove an assumption, you don't need to assume it in the first place. ALL assumptions are unproven, otherwise they are not assumptions. Either you find assumptions self-evident or not (because, eg, you can think of counterexamples).

    You also play with words a lot, like all Austrians

    And I'm getting that from a person who has just been trying to equate happiness with euphoria...

    You outright said that if people didn't think the way you did (utilitarianism), then they were "a bunch of reflexes" and not a "purposeful human being".

    No, I said irrational people were merely "more of" a bunch of reflexes. I think you agree that irrational thought is closer to reflexes than rational one. Still, I believe irrational people are still way more advanced than other animals. Well, you do have to have a concept of rationality to be irrational. In fact, there is both irrational and rational part in every one of us, libertarians are merely less irrational. Hence the only feature that objectively differentiates us (even the more irrational us) from other species: ability to purposefully exchange, trade (division of labor etc).

    Counter-examples abound

    That's basically what I keep hearing. Out there, somewhere, many counter-examples about, in a never-never-land of collectivist paradise. No one seems to know any details though :( Just some stories about baloons or whatnot.

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  31. "A priori truth IS a mere assumption"

    Reread this again. And again. And again. Realize what you have said. Think about it.

    "Yes, praxeology is an a priori theory based on assumptions which must be empirical (eg people prefer leisure to work), otherwise praxeology would have nothing to do with reality like all other economic theories."

    Uh, what? That people prefer leisure to work is NOT part of praxeology, it is a subsidiary assumption (alongside the variety of natural resources) needed to make economic theory with. But it is not a postulate of praxeology, nor is it derived from it (like time preference is derived from praxeology).

    The postulates of praxeology -- people exhibit behavior that is both teleological and hedonistic -- are not empirical. You literally can neither verify or falsify them. "A priori based on empirical assumptions" is so nonsense of a phrase I don't even know where to begin.

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  32. Euphoria is a medically defined term associated to happiness. Someone who feels euphoric feels happy. So what I pointed out is that "happiness" can mean different things, its definition as a state defined by euphoria is one of them and a popular one. But the term you use, in order to make your argument stand, is expanded to incorporate more states or emotions, even mere satisfaction.

    The meaning of the word expands and thus the word becomes less meaningful, more vague. But you still use the limited definition in your reasoning, which makes it dishonest. It is based on semantic tricks, not on realities.

    Ultimately, the whole thing stinks to me of egoists just trying to justify morally their egoism. "I'm egoist, yes, but I'm better than you, because I'm honest, since your altruism is just egoism too because you feel good by doing good to others." That old canard.

    ...

    So it doesn't matter that assumptions are unproven? Nice, I'll just assume that I can fly and I'm going to do it! Yeah! Absurd.

    You know, the more I read about the Austrian school, the more I think it looks like religion. The idea of "I'm going to assume this is true, the basis of Praxeology/the existence of God, I don't need to prove it, you have to prove to me that it is wrong."

    As to your whole rational/irrational spiel, you know what? It doesn't matter if you're right or not, it still demolishes the Austrian School of Economics based on praxeology. Why? Because they are using praxeology as a basis to drawn supposedly universal economic laws, but you admit that people do not always "act" "purposefully" or "rationally". Which means that you accept that people do not always follow the rules of praxeology, which means that thus it isn't universal and of course can't be used to draw economic conclusions regardless of evidence. If people can act differently, then it means that any economic theory must then take that into account and study when people act "rationally" and when they don't. Austrians instead think that we should presume people always act "rationally". They think that when the theory and reality diverge, it is reality that is wrong, not the theory.

    BTW, talking of non-rational behavior, here's another example of playing with words from the Libertarians and the Austrians group in particular. You assume that rational behavior is selfish behavior, but that is actually incorrect according to game theory. Researchers on game theory do not look only at the personal benefits people receive, they look at "utility", and they agree, as proven in experiments, that some people include other people's interests in their "utility". That means, in short, altruism exists. So someone who considers others' benefits on the same footing as their own benefits and who then acts to maximize the benefits for everyone is acting rationally.

    Altruism can thus be rational, even if it may not be in one's personal self-interest.

    There is also super-rationality, in which people assume people are like them and act in order to maximize returns for both supposing a symmetrical strategy by both. It is irrational, but it exists and it has the potential to yield great results if one or more super-rational players do this in a game. An example of super-rationality is people voting in elections, where their vote individually is likely worth nothing, but people still vote because they think "but if everyone that thinks like me did that, then the result would be against my wishes, I better vote". Of course, since the fact that you are, say, a libertarian and vote, has no impact at all on whether or not other libertarians vote, but many still do it.

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  33. Reread this again. And again. And again. Realize what you have said. Think about it.

    So what's the purpose of such statement, just to make some insinuation? There is only one apriori truth that is more than an assumption: we exist.

    The postulates of praxeology -- people exhibit behavior that is both teleological and hedonistic -- are not empirical. You literally can neither verify or falsify them.

    And you can verify or falsify that people prefer leisure to work? Same, you can't. But it's still empirical.

    "A priori based on empirical assumptions" is so nonsense of a phrase I don't even know where to begin.

    Make assumptions which reflect reality as you know it and draw logical conclusions. Common sense must be mind boggling to liberals huh ;)

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  34. So what I pointed out is that "happiness" can mean different things, its definition as a state defined by euphoria is one of them and a popular one.

    No, you are saying this only now, earlier you've said euphoria "IS" happiness, tried to redefine happiness simply as euphoria and then even made "counterexamples"...

    But the term you use, in order to make your argument stand, is expanded to incorporate more states or emotions, even mere satisfaction.

    Happiness has not been expaned by Austrians to also include mere satisfaction, mere satisfaction is precisely part of standard definition of happiness, read the definitions again.

    But you still use the limited definition in your reasoning, which makes it dishonest.

    No, I use the full popular definition of happiness from comment one while you use some "medical" definition limited to euphoria. Finally you accuse me of your own wrongdoing. Now that's dishonesty!

    I'm egoist, yes, but I'm better than you, because I'm honest, since your altruism is just egoism too because you feel good by doing good to others.

    No, it's you altruists who are always trying to pose as "better" than egoists. No egoist has ever said he is better than an altruist, it has always been vice versa, altruists keep posing as the morally superior guys. Again you dishonestly accuse me of your own wrongdoing.

    So it doesn't matter that assumptions are unproven? Nice, I'll just assume that I can fly and I'm going to do it! Yeah! Absurd.

    Looks like you indeed do not know what "assumption" means. Again please see (ufffff):
    http://www.thefreedictionary.com/assumption
    4. Something taken for granted or accepted as true without proof

    the basis of Praxeology/the existence of God

    If faith in existance of God was self-evident, it would not be called faith in the first place.

    I don't need to prove it, you have to prove to me that it is wrong

    No, I'm merely asking you to find _counterexamples_. I have never seen nor otherwise experienced God so I assume he does not exist. Same with praxeological assumptions. I have never seen nor otherwise experienced anyone who prefers work to leisure, so I assume such person does not exist.

    you admit that people do not always "act" "purposefully" or "rationally"

    No I have nowhere said people do not always act purposefully. People do always act purposefully, that's one of praxeology assumptions. Irrational people are precisely as purposeful as Nobel Prize winners.

    Austrians instead think that we should presume people always act "rationally".

    No, again total ignorance on your part. But purposeful all right :)

    You assume that rational behavior is selfish behavior

    No, the fact that rational behavior _should_ be selfish is _conclusion_ of praxeology, not assumption.

    Altruism can thus be rational, even if it may not be in one's personal self-interest.

    Libertarians are not fighting against altruism. Libertarians merely fight against _forcing_ (by eg taxing) people to be "altruists" (slave-like) whether they want it or not. In fact, the less taxes, the more money goes voluntarily to charitable causes. If libertarians wanted to fight against altruism, they would have to support statism.

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  35. You try to deform what I say. I never endorsed happiness as euphoria, I said it was one possible definition amongst many possible ones, and a definition that was popular. I pointed out how you and the Austrians play with words. You are trying to turn this against me because you are at wits' end, but I have never endorsed one definition of a word over others, I have instead pointed out how you expand and contract definitions of words to make them fit your theory depending on context.

    From what I see, I have basically hit the bullseye regarding egoists trying to justify their egoism. That's exactly what you are doing and more likely than not the reason why you like Austrian economics, it gives a theoretical base to argue that, not only there's nothing wrong with egoism, but in fact, people who are egoists are just more rational and better than other people.

    Your denial that egoists want to argue they're better people is laughable considering you cited "empathic concern" (empathy is the source of altruism more often than not) as equal to "neuroticism" and said that people who relied on this to make decisions were "bunch of reflexes" and not "purposeful human beings". So basically, you denied the humanity of altruistic people. But no, no egoist has ever argued they were better than altruists... right.

    Your defense of praxeological assumptions is also ridiculous. You say that an assumption is something affirmed without proof, so you do not have to prove assumptions in a reasoning. It doesn't work that way. Assumptions are things assumed to be true by someone making a logical reasoning, but if they are challenged, then they have to be proven, they don't get a pass on evidence.

    As to knowing people who prefer work to leisure, yes, they exist sometimes. I've seen people retire who were forced to by rules and who would have preferred to keep working, even if they wouldn't have made more money. My mother for one. A quote I remember from childhood is "The best way to kill a man is to pay him to do nothing."

    People don't prefer work to leisure all the time, but sometimes, yes they do.

    Libertarians fight altruism because they support a system that encourages egoism and punishes altruism. In a free market, people ready to sacrifice their interest for others are disadvantaged unless you have collective reactions to pressure people in a different direction. By opposing any such collective action, libertarians are trying to create a world where altruists are forced by economic misery to adopt the egoist mindset libertarians think is superior.

    As to the usual accusations that States are slavery, I will quote a French thinker of the 19th century:

    "Between the strong and the weak, the master and the slave, the rich and the poor, it is freedom that oppresses and law that sets free."

    Democratic states allow people to have power over their lives no matter their economic status. It is a shared power, and not an individual one, but it is power nonetheless. In a free market, people may choose not to collaborate to the system, but if they do, they risk starvation and death. Is that really better? I personally prefer a quick bullet to the brainstem than an agonizing death of starvation, but others may disagree.

    The argument that the free market has no coercion is also laughable. Force is needed to maintain property rights, vital to the system. That's a degree of coercion, no matter how you may claim otherwise. If workers run a factory and the owner decides to close it against their will, it is force and the threat of violence that will get the will of the owner done, and nothing else.

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  36. "There is only one apriori truth that is more than an assumption"

    Then you can't speak of praxeology as apodictically certain. Mises didn't regard the "action axiom" (not that he used the term, but still) as a mere assumption, for him it was an irrefutable truth.

    (and I'm not even sure if I understand what you just said, "an a priori truth that is more than an assumption"? If it is a truth, then it isn't assumed.)

    "Common sense must be mind boggling to liberals huh ;)"

    Common sense isn't mind boggling to "liberals." (not even sure why you use the term, I could still be a savage free marketer who calls the Austrians out on being the cranks they are, who knows?)

    Trying to make science with metaphysical statements, as the Austrians do, is. Trying to explain concrete reality from a philosophical starting point is mind-boggling, yes. Trying to pass it off as science, even more so.

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  37. "No, the fact that rational behavior _should_ be selfish is _conclusion_ of praxeology, not assumption."

    I just noticed this. You sure you have actually read anything on praxeology? Because none of its postulates say anything about what should be.

    It only tells us what is -- humans only desire the satisfaction of their own needs, to go to a state of affairs that is more preferable to them; it is not that "if you want to be rational, you should do this", but "when you are rational, you do this and it is impossible for it to be otherwise." That is, if you have three kids to feed and in spite of that you decide to buy the new shiny, very expensive TV (to keep up with the Joneses, of course), you are being perfectly rational, or so says praxeology.

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  38. If we use the classical definition of "happy", as in a sentiment of euphoria
    [...]
    I never endorsed happiness as euphoria

    Wow, so you say you are basically feeling good about yourself, in life?

    egoists trying to justify their egoism

    Note I'm expending time to argue with you for the sole purpose to help the poor and disadvantaged of this world.
    If I were really egoist in your meaning, wouldn't I have better things to do?

    you denied the humanity of altruistic people

    Neihter. I have merely said irrational behavior is more similar to animal instincts than rational one.
    It has nothing to do with altruism. Libertarians are not less altruistic than collectivists.
    Libertarians are merely against _forcing_ people to be "altruistic".
    How can you distinguish involuntary altruism from slavery?

    You say that an assumption is something affirmed without proof

    No, it's dictionary saying.

    if they are challenged, then they have to be proven

    You can challenge an assumption by showing a counterexample.
    But there is never any proving or disproving of an assumption.

    who would have preferred to keep working, even if they wouldn't have made more money

    If you keep "working" with no pay it means it is not work proper.
    Such activity is then indistingushable from any other hobby you may pursue and has to be classified as such.

    The best way to kill a man is to pay him to do nothing.

    You had a wise mother. But this is precisely what collectivism leads to, eg:
    http://mises.org/daily/2367
    The Common Agricultural Policy Explained published by the European Commission in 2004 states that financial assistance is given "to reduce the number of animals per hectare of land, leaving field boundaries uncultivated, creating ponds or other features, or by planting trees and hedges and so going beyond conventional good farming methods."

    Libertarians fight altruism because they support a system that encourages egoism and punishes altruism.

    No, precisely the opposite, libertarians fight statism in order to support more _voluntary_ altruism.
    Libertarians oppose involuntary altruism which is just a modern euphemism for slavery.

    In a free market, people ready to sacrifice their interest for others are disadvantaged

    Rubbish. Sacrificing your interest for others is indistinguishable from private _consumption_.
    How are consumers disadvantaged? You consume what you produce.
    If you want to consume by helping out others, it does not affect your production in any way.

    As to the usual accusations that States are slavery

    I have nowhere said that State itself is slavery.
    State can be limited to private ownership protection.

    agonizing death of starvation

    Developed capitalist countries real problem is obesity among the poorest, not starvation.

    If workers run a factory and the owner decides to close it against their will

    Then workers are no worse than if the owner never built the factory in the first place.

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  39. Then you can't speak of praxeology as apodictically certain.

    But it's just philosophical. Praxeology is as true as the fact that we are human beings living on Earth, no more, no less. Sure, you can argue we may well live in a Matrix, which is an interesting concept, but at the end of the day, shouldn't we get back to Earth before we can come up with anything useful in real life?

    I could still be a savage free marketer who calls the Austrians out on being the cranks they are.

    Yes, you can be, but it does not matter, tomorrow you can be a socialist if you meet a right person. Your political views are just gut feelings and impressions because you don't logically derive conclusions from self-evident propositions.

    Because none of its postulates say anything about what should be.

    But it's just philosophical. Praxeology conclusion says private ownership and free market makes for the most happy and affluent society. Sure, you can argue happy and affluent society may not necessarily be the things we _should_ strive for, but at the end of the day, shouldn't we get back to Earth before we can come up with anything useful in real life?

    if you have three kids to feed and in spite of that you decide to buy the new shiny, very expensive TV (to keep up with the Joneses, of course), you are being perfectly rational, or so says praxeology.

    The choice itself has nothing to do with rational/irrational. The rationality here (in terms of praxeology) is to leave that choice to parents. In other words, praxeology says, if you pass a law that says parents cannot make such a choice as they wish, _children_ will also be worse off.

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  40. "But it's just philosophical."

    Yes, exactly.

    "Praxeology is as true as the fact that we are human beings living on Earth"

    Except that there are human beings living on Earth is observable. The postulates of praxeology are not.

    "Your political views are just gut feelings and impressions because you don't logically derive conclusions from self-evident propositions."

    You need to make up your mind. Either praxeology is an assumption, in which case it is to be discarded if its predictions don't come true, or it is a "self-evident" truth (ah, "self-evidence", the last refuge of crank), in which case you have yet to demonstrate it, because its "self-evidence" is lacking.

    "The choice itself has nothing to do with rational/irrational. The rationality here (in terms of praxeology) is to leave that choice to parents. In other words, praxeology says, if you pass a law that says parents cannot make such a choice as they wish, _children_ will also be worse off."

    Praxeology says no such thing. It refers only to the point of view of the actor. Methodological individualism.

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  41. Praxeological inferences are not all drawn by deduction from analytic propositions: praxeological arguments require hidden and present synthetic propositions.

    That's where empirical evidences comes in.

    http://socialdemocracy21stcentury.blogspot.com/2010/10/mises-praxeology-critique.html

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  42. Except that there are human beings living on Earth is observable. The postulates of praxeology are not.

    I'm observing them all right ;) People act to achieve their goals, observable all right. People prefer leisure to work, observable all right. We live in a world of scarcity, observable all right. All observable as observable can be. But sure, maybe humans have no free will. Maybe people just pretend they prefer leisure to work, some big conspiracy of all against me. Maybe we live in a fairy tale Matrix that merely simulates reality. And maybe liberalism/socialism is the way to go. Maybe ;)

    Either praxeology is an assumption, in which case it is to be discarded if its predictions don't come true

    Here you have a proof that praxeology predictions do come true. Well philosophically it is indeed not a proof proper, but good enough to me, same as it is good enough truth to me that we do _not_ live in a Matrix:

    http://doctorbulldog.wordpress.com/2006/10/13/north-korea-at-night-as-viewed-by-a-satellite/

    Praxeology says no such thing. It refers only to the point of view of the actor. Methodological individualism.

    And where exactly have I spoken of a collective action? "if _you_ pass a law" means precisely what it says, read it again.

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  43. LK, can we at least agree that if you cite Mises stating some assumption explicitely then it is not "hidden" any more? :)

    I do agree the rest of the assumptions are hidden though. Indeed, they are so hidden that you never even state them explicitely in your post ;) Just cite some people stating they exist ;) Way to hide the hidden assumptions! ;)

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  44. "Indeed, they are so hidden that you never even state them explicitely in your post"

    That is pure rubbish.
    I have already shown how Mises's (and Ricardo's) hidden assuptions that underlie the argument for free trade by comparative advantage are false.

    http://socialdemocracy21stcentury.blogspot.com/2011/01/mises-on-ricardian-law-of-association.html

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  45. No they are Ricardo's assumptions, not Mises ones. So basically nothing new on that front huh?

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  46. Ricardo's argument for comparative advantage is essentially taken over by Mises in Human Action.

    Therefore Ricardo's hidden assuptions carry over and are also Mises's hidden assumptions in his argument.

    That's why they both fail.

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  47. Firstly, Ricardo stated them explicitely in his work, so they were never "hidden".

    Secondly, I can't see how Mises argument is allegedly "dependent" on Ricardo. After all, you quote Mises saying Ricardo's assumptions do _not_ hold (again, where do you take that "hidden" part from if you keep quoting both guys stating them explicitely?).

    Thirdly, even though Ricardo used factor immobility assumption (both of the conditions you specify) in his basic models, comparative advantage does not need them:
    http://www.cato.org/pubs/journal/cj23n3/cj23n3-6.pdf

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  48. The hidden assumptions are as follows:

    (1) it does not matter what you produce (e.g., you could produce pottery), as long as you do it in a way that gives you comparative advantage;

    (2) technology is unchanging and uniform; and

    (3) there are no returns to scale.

    Clear??

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  49. The falseness of hidden assumption (3) is particularly devastating to comparative advantage.

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  50. This is the reason why comparative advantage as pursued in Mongolia in the 1990s led to disaster.

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  51. 1 So why would pottery be worse than agriculture, the single most subsidized industry by the central planners of the developed world?

    2 & 3, no the proper assumptions are (pretty explicit too afaik): there are no technology nor returns to scale which cannot be duplicated in a competing country. In other words, they can be ignored in ceteris-paribus comparative-advantage law. If you ever succeed to keep some technology or returns to scale in some good production secret within one nation, then yes, that nation would be better off producing that good rather than any other. Quite unusual, same as with all other "rebuttals" of free market. BTW, any asteroid heading to Earth recently? Good we have North Korea and Cuba or we'd be doomed :)

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  52. "I'm observing them all right ;)"

    That's cool, I'll call Mises and say you just slapped him in the face when he said praxeology isn't observable.

    "People act to achieve their goals, observable all right."

    There is nothing observable that tells us that human behavior is 1) teleological and 2) hedonistic.

    Nothing.

    You see someone reaching for an apple, but from that alone you can't tell that this behavior is final nor hedonistic. You can philosophize about it alright, but your credibility ends the second you try to sell it as science.

    "People prefer leisure to work, observable all right."

    Not a praxeological postulate, but a subsidiary assumption and one of the few empirical observations used in Austrian economics. (alongside the "diversity of natural resources.")

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  53. That's cool, I'll call Mises and say you just slapped him in the face when he said praxeology isn't observable.

    Yes Mises was extreme apriorist but along with Rothbard I say assumptions of praxeology are also confirmed by empirical observation when you do not artificially limit "empirical" to observing external phenomena:

    A priori: Man acts purposefully. If you try to refute this, you've just acted purposefully and logical absurdity arises.

    Empirical: Man acts purposefully to achieve their goals. That's what I introspectively know I've been doing my whole life, that's what others tell me they have been doing their whole life, I can't even _imagine_ how I could act so that I do _not_ achieve my goals (again, logical absurdity arises) so true enough for me.

    So you have it confirmed both philosophically as well as empirically, but still not true enough for you?

    You see someone reaching for an apple, but from that alone you can't tell that this behavior is final nor hedonistic.

    And why don't you just go ahead and ask the guy? I know it won't be philosophically apodictic proof, maybe there indeed is a big world-wide conspiracy of all people that tries to deceive you into thinking people act purposefully, but don't you think it may be useful to assume otherwise and deduce some useful logical conclusions just in case? Especially that whole humanity's progress/affluence/happiness is at stake?

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  54. Rothbard definitely wasn't an "empiricist" in the common way the term is used. He wasn't a Kantian like Mises, that is for sure; he just said praxeological postulates were self-evident and thus praxeology was -- to use his words -- "broadly empirical", but then he went on and said that this wasn't very different from Mises's approach in most cases and could as well be called a priori.

    I would say Rothbard's approach is even lazier than Mises's. Mises at least tried to make it coherent, Rothbard just played the self-evidence card and was done with it.

    "A priori: Man acts purposefully. If you try to refute this, you've just acted purposefully and logical absurdity arises."

    See, this makes sense only if you assume beforehand that humans exhibit hedonistic, final behavior. That is, if you assume what you want to prove.

    "And why don't you just go ahead and ask the guy?"

    Because that won't help me in anything?

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  55. Mises at least tried to make it coherent, Rothbard just played the self-evidence card and was done with it.

    If you have some fact confirmed by two different source, does that mean more certainty or less coherency? What's the supposed empirical point of view on that, huh?

    this makes sense only if you assume beforehand that humans exhibit hedonistic, final behavior

    No I didn't, "Man acts purposefully" is just a hypothesis here, not an assumption. But if it is to ease your mind, you can also do it with the opposite hypothesis:

    Man does not act purposefully. I hereby refute this by the mere fact I'm trying to refute this. Hence, man acts purposefully.

    Because that won't help me in anything?

    Again, aren't you supposed to be the empirical one? But too lazy even to make a simple poll?

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  56. "Man does not act purposefully. I hereby refute this by the mere fact I'm trying to refute this. Hence, man acts purposefully."

    Which only makes sense if you underlying assume that praxeology is true. When someone says "praxeology is false", all you can observe is that they are saying that praxeology is false. You cannot observe whether this behavior is teleological or hedonistic; while this is a way of interpreting it but it says nothing about it. So the proof by performative contradiction of praxeology doesn't work (oh god did austrians just try to prove a metaphysical statement empirically?).

    "Again, aren't you supposed to be the empirical one?"

    Protip: empiricism doesn't mean asking people around.

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  57. Such existential argument "refutes" _any_ statement except "I exist", so useless for any practical purposes. For example, this would be your reasoning for a statement "we are human beings living on Earth":

    This only makes sense if you assume that we are human beings living on Earth. When someone says "we are human beings living on Earth", all you can observe is that they are saying that "we are human beings living on Earth". You cannot observe whether we are human beings living on Earth; we might as well be in a Matrix with artificial neurosignals sent to our brain to simulate our experience of human beings living on Earth, along with some computer generated human-like avatars saying that "we are human beings living on Earth". While saying that "we are human beings living on Earth" is a way of interpreting the observation, it says nothing about the real situation we are in.

    In short, what you are doing is dishonest, unless you are really such a total nihilist and claim we should not pursue _any_ science whatsoever.

    Protip: empiricism doesn't mean asking people around.

    Well it doesn't hurt too, unless you again assume we live in a big world-wide Matrix-like conspiracy, which is not very useful.

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