(1) Mises adhered to aprioristic praxeology with deduction, andIt is now well known that Hayek disagreed with Mises on the role of empirical evidence. In a letter that Hayek wrote to Terence W. Hutchison dated 15 May, 1983, Hayek stated:
(2) The methodology of Hayek, which rejected pure a priorism and admits a role for empirical evidence and is closer to Popper’s falsificationism.
“I had never accepted Mises’ a priorism .... Certainly 1936 was the time when I first saw my distinctive approach in full clarity – but at the time I felt it that I was merely at last able to say clearly what I had always believed – and to explain gently to Mises why I could not ACCEPT HIS A PRIORISM” (quoted in Caldwell 2009: 323–324).In fact, in 1937 Hayek had published an article called “Economics and Knowledge” where he criticised Mises’ apriorism, and appears to have moved closer to Popperian ideas on methodology in later years:
“I became one of the early readers [sc. of Karl Popper’s Logik der Forschung, 1934]. It had just come out a few weeks before …. And to me it was so satisfactory because it confirmed this certain view I had already formed due to an experience very similar to Karl Popper’s. Karl Popper is four or five years my junior; so we did not belong to the same academic generation. But our environment in which we formed our ideas was very much the same. It was very largely dominated by discussion, on the one hand, with Marxists and, on the other hand, with Freudians. Both these groups had one very irritating attribute: they insisted that their theories were, in principle, irrefutable. Their system was so built up that there was no possibility – I remember particularly one occasion when I suddenly began to see how ridiculous it all was when I was arguing with Freudians, and they explained, “Oh, well, this is due to the death instinct.” And I said, “But this can’t be due to the [death instinct].” “Oh, then this is due to the life instinct.” … Well, if you have these two alternatives, of course there’s no way of checking whether the theory is true or not. And that led me, already, to the understanding of what became Popper’s main systematic point: that the test of empirical science was that it could be refuted, and that any system which claimed that it was irrefutable was by definition not scientific. I was not a trained philosopher; I didn’t elaborate this. It was sufficient for me to have recognized this, but when I found this thing explicitly argued and justified in Popper, I just accepted the Popperian philosophy for spelling out what I had always felt. Ever since, I have been moving with Popper” (Nobel Prize-Winning Economist: Friedrich A. von Hayek, pp. 18–19).One wonders what Hayek would have thought about the hordes of ignorant and “pop” Austrians on the internet today, claiming that the inferences of praxeology are irrefutable and praxeology has no need for empirical evidence (which is a distortion of what even Mises believed). If Hayek were alive today and gave an honest answer to this, he would have to class such vulgar Misesians as talking nonsense on a par with Marxism and Freudian psychology.
The recognition that the pure deductive method and apriorism are not valid methods for economics appears to have been accepted by modern Austrians like O’Driscoll and Rizzo. As John Pheby says
“… O’Driscoll and Rizzo, following Hayek, seem to envisage a moderate role for empirical tests in establishing whether or not particular interpretative theories are applicable to specific real-world situations …”, John Pheby, New directions in post-Keynesian economics, p. 65.In support of this, Pheby cites O’Driscoll and Rizzo’s The Economics of Time and Ignorance (Oxford, UK, 1985), chapter 2.
It also surprises me how often vulgar supporters of Austrian economics on internet blogs haven’t the foggiest idea who O’Driscoll and Rizzo are, or their contributions to Austrian economics.
Caldwell, B. 2009. “A Skirmish in the Popper Wars: Hutchison versus Caldwell on Hayek, Popper, Mises, and methodology,” Journal of Economic Methodology 16.3: 315–324.
Hayek, F. A. 1937. “Economics and Knowledge,” Economica n.s. 4.13: 33–54.
Nobel Prize-Winning Economist: Friedrich A. von Hayek. Interviewed by Earlene Graver, Axel Leijonhufvud, Leo Rosten, Jack High, James Buchanan, Robert Bork, Thomas Hazlett, Armen A. Alchian, Robert Chitester, Regents of the University of California, 1983.