Wednesday, August 31, 2011

Prediction, Empiricism and Austrian Economics

A commentator on the previous post who supports Austrian economics asserts this:
“Since our learning is inherently unpredictable through and through, and since our learning influences what we do, and since what we do is the subject of economics, it follows that economics is not a predictive, empirical science like chemistry and physics. Atoms and molecules don’t learn over time. They don’t act. So inductive logic through empiricism is justified. The reason why almost all mainstream empiricist economists couldn’t predict the housing bubble and collapse, is because they are using a faulty methodology. The reason why so many Austrians could predict it, is because they are using a proper methodology.”
The assertion that sticks out to me is “economics is not a predictive … science like chemistry and physics.” Even if you subscribe to Austrian aprioristic praxeology (and reject the empirical approach to economics), how can economics not be predictive, yet somehow (magically?) Austrians can predict the “housing bubble and collapse”?

When we turn to Mises and Rothbard, we find a blatant contradiction of this view:
“Praxeological knowledge makes it possible to predict with apodictic certainty the outcome of various modes of action. But, of course, such prediction can never imply anything regarding quantitative matters.” (Mises 1998: 117-118).

“Economics too can make predictions in the sense in which this ability is attributed to the natural sciences. The economist can and does know in advance what effect an increase in the quantity of money will have upon its purchasing power or what consequences price controls must have. Therefore, the inflations of the age of war and revolution, and the controls enacted in connection with them, brought about no results unforeseen by economics.” (Mises 2003: 129).

“Economics provides us with true laws, of the type if A, then B, then C, etc. Some of these laws are true all the time, i.e., A always holds (the law of diminishing marginal utility, time preference, etc.). Others require A to be established as true before the consequents can be affirmed in practice. The person who identifies economic laws in practice and uses them to explain complex economic fact is, then, acting as an economic historian rather than as an economic theorist. He is an historian when he seeks the casual explanation of past facts; he is a forecaster when he attempts to predict future facts. In either case, he uses absolutely true laws, but must determine when any particular law applies to a given situation. Furthermore, the laws are necessarily qualitative rather than quantitative, and hence, when the forecaster attempts to make quantitative predictions, he is going beyond the knowledge provided by economic science.” (Rothbard 2006: 311).
Mises is quite clear that economics “too can make predictions in the sense in which this ability is attributed to the natural sciences.” So even Mises and Rothbard thought that their economics had predictive power.

And the claim that Austrian aprioristic praxeology escapes empiricism is wholly false. Why? Because praxeology requires any number of synthetic propositions that are hidden or stated premises in its deductive arguments (Schuller 1951: 188), and only empirical testing of these synthetic propositions will establish their truth, as Karen Vaughn, amongst numerous others, has pointed out:
“... Mises does not deduce all of praxeology from the action axiom. He slips in subsidiary statements that can only be viewed as hypotheses and not certain truth.” (Vaughn 1994: 77).
Even some of Mises’s fundamental starting axioms are synthetic and only provable by empirical evidence, such as the “disutility of labor” axiom:
“The disutility of labor is not of a categorial and aprioristic character. We can without contradiction think of a world in which labor does not cause uneasiness, and we can depict the state of affairs prevailing in such a world …. Experience teaches that there is disutility of labor. But it does not teach it directly. There is no phenomenon that introduces itself as disutility of labor. There are only data of experience which are interpreted, on the ground of aprioristic knowledge, to mean that men consider leisure—i.e., the absence of labor—other things being equal, as a more desirable condition than the expenditure of labor. We see that men renounce advantages which they could get by working more—that is, that they are ready to make sacrifices for the attainment of leisure. We infer from this fact that leisure is valued as a good and that labor is regarded as a burden. But for previous praxeological insight, we would never be in a position to reach this conclusion” (Mises 1998: 65).
M. Blaug has pointed out that a fundamental hidden assumption underlying Mises’s praxeology is the justification for belief in negatively inclined demand curves:
“[sc. there is a] the fundamental flaw in Ludwig von Mises’ ‘praxeology’: [sc. it is] the notion that purposive choice as a Kantian ‘a priori synthetic proposition’ is more than sufficient to account for negatively inclined demand curves. This ignores the fact that a number of a posteriori auxiliary propositions are also required, such as transitivity or consistency of choices ... To this day, this failure to recognize the limited power of a priori synthetic propositions to generate substantive implications for economic behaviour characterises neo-Austrian writings in defence of Mises” (Blaug 1994: 132–133, n. 14; see also Blaug 1997: 332ff.).
But as is now known, even in higher-level neoclassical literature, demand curves are not necessarily downward sloping, even though this is a fundamental assumption of the law of demand:
“Economists can prove that ‘the demand curve slopes downward in price’ for a single individual and a single commodity. But in a society consisting of many different individuals with many different commodities, the ‘market demand curve’ is more probably jagged, and slopes every which way. One essential building block of the economic analysis of markets, the demand curve, therefore does not have the characteristics needed for economic theory to be internally consistent.” (Keen 2001: 25).
And it has been behavioural and experimental economics, with their strong empirical character and experimentation, that are relevant to establishing this.

Austrian economics and even praxeological methodology does not evade a fundamental empirical basis: this point should be stressed to all and every Austrian pushing the sort of nonsense I have quoted above, where they declare that their economics is somehow completely independent of empiricism. They are plainly wrong. Without elementary methods of empiricism, their theory (even as they conceive it) wouldn’t even work, and could provide no certain knowledge.

Of course, it comes as no surprise that there is another strand of Austrian economics where an empirical method is accepted. Hayek never accepted Mises’ apriorism at all, and admitted a role for empirical evidence which is far closer to Popper’s falsificationism (see Appendix 1). Gerald P. O’Driscoll and Mario J. Rizzo have offered a reconstructed Austrian methodology in their book The Economics of Time and Ignorance (Driscoll and Rizzo 1996), allowing a role for empirical testing of interpretive theories to see whether they apply to the real world.

Appendix 1: Hayek on Popperian Method

Hayek talks about Popperian ideas on methodology:
“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).
N.B.

There was a poorly phrased sentence in the original post that could be misconstrued, where I say

“this point should be stressed to all and every Austrian pushing the sort of nonsense I have quoted above, where they declare that their economics is not an empirical science.

That was a poor choice of words on my part. Of course, the Austrians think that their predictions made by praxeology are arrived at using an aprioristic method different from that used in the natural sciences. I have rewritten and clarified the sentence as

“this point should be stressed to all and every Austrian pushing the sort of nonsense I have quoted above, where they declare that their economics is somehow completely independent of empiricism.

BIBLIOGRAPHY

Blaug, M. 1994. “Why I am not a Constructivist: Confessions of an Unrepentant Popperian,” in R. E. Backhouse (ed.), New Directions in Economic Methodology, Routledge, London and New York. 109–136.

Blaug, M. 1997. Economic Theory in Retrospect, Cambridge University Press, Cambridge and New York.

Keen, S. 2001. Debunking Economics: The Naked Emperor of the Social Sciences, Zed Books, New York and London.

Mises, L. 1998. Human Action: A Treatise on Economics. The Scholar’s Edition, Mises Institute, Auburn, Ala.

Mises, L. von. 2003. Epistemological Problems of Economics (3rd edn; trans. G. Reisman), Ludwig von Mises Institute, Auburn Ala.

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.

O’Driscoll, G. P. and M. J. Rizzo, 1996. The Economics of Time and Ignorance (rev. edn), Routledge, London.

Rothbard, M. N. 2006. Power and Market: Government and the Economy (4th edn), Ludwig von Mises Institute, Auburn Ala.

Schuller, G. J. 1951. “Mises’ ‘Human Action’: Rejoinder,” American Economic Review 41.1: 185–190

Vaughn, K. I. 1994. Austrian Economics in America: The Migration of a Tradition, Cambridge University Press, Cambridge and New York.


40 comments:

  1. 1. Rothbard wrote:

    Turning from the deduction process to the axioms themselves, what is their epistemological status? Here the problems are obscured by a difference of opinion within the praxeological camp, particularly on the nature of the fundamental axiom of action. Ludwig von Mises, as an adherent of Kantian epistemology, asserted that the concept of action is a priori to all experience, because it is, like the law of cause and effect, part of "the essential and necessary character of the logical structure of the human mind." [12] Without delving too deeply into the murky waters of epistemology, I would deny, as an Aristotelian and neo-Thomist, any such alleged "laws of logical structure" that the human mind necessarily imposes on the chaotic structure of reality. Instead, I would call all such laws "laws of reality," which the mind apprehends from investigating and collating the facts of the real world. My view is that the fundamental axiom and subsidiary axioms are derived from the experience of reality and are therefore in the broadest sense empirical. I would agree with the Aristotelian realist view that its doctrine is radically empirical

    As I’ve stated many times, the Austrian vision starts with an extremely stripped down concept of human action and human knowledge. Keynesians are free to attempt to dispute that position and show that humans do not inherently lack the knowledge that Austrians insist that they lack. Thus, the theory is refutable with proper evidence. However, because that is really the gist and core of the theory, that part is what is always avoided by the Keynesians.

    Further, with human beings, nothing is inevitable. Someone receiving a funny money loan may see the light, become an Austrian and immediately pay the money back to the bank before it gets into the economy. At the height of a boom, the entire population could conceivably become benevolent Austrians and voluntarily restructure all outstanding loans to reflect deflationary reality. At the same time, someone who spends a funny money loan is necessarily bidding up the price of whatever was purchased and now owns something that he would not have owned without the funny money loan. Predicting that result in advance is a type of qualitative vs. quantitative prediction.

    http://www.lewrockwell.com/rothbard/rothbard38.html

    2. It’s always interesting how Keynesians demand a complete and deep philosophical justification of Austrian ideas when there isn’t no justification or evidence in logic or history to support even an outline of the notion that free markets inherently suffer from a lack of aggregate demand. Naturally, since there isn’t even an outline of a justification for Keynesian notions, there is no deep philosophical justification possible.

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  2. Your quotation from Rothbard showing how he thinks the "the fundamental axiom and subsidiary axioms are derived from the experience of reality and are therefore in the broadest sense empirical," and "I would agree with the Aristotelian realist view that its doctrine is radically empirical" are further confirmation of the view that praxeology requires empiricism and it is itself dependent on basic concepts of empiricism, despite claims ot the contrary.

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  3. Utter garbage from top to bottom.

    A commentator on the previous post who supports Austrian economics asserts this:

    “Since our learning is inherently unpredictable through and through, and since our learning influences what we do, and since what we do is the subject of economics, it follows that economics is not a predictive, empirical science like chemistry and physics. Atoms and molecules don’t learn over time. They don’t act. So inductive logic through empiricism is justified. The reason why almost all mainstream empiricist economists couldn’t predict the housing bubble and collapse, is because they are using a faulty methodology. The reason why so many Austrians could predict it, is because they are using a proper methodology.”

    The assertion that sticks out to me is “economics is not a predictive … science like chemistry and physics.” Even if you subscribe to Austrian aprioristic praxeology (and reject the empirical approach to economics), how can economics not be predictive, yet somehow (magically?) Austrians can predict the “housing bubble and collapse”?

    It's not magic. To reject the predictive methodology of empiricism in economics does not necessitate a rejection of all predictive methodologies in economics.

    Economics is, I argued, and I will repeat, not a predictive, empirical science like that of chemistry or physics.

    You're straw manning me when you accuse me of claiming that economics is not a predictive science period.

    Austrian economics is predictive in the sense that if certain actions are taken, then inevitable results will occur. BUT WE DO NOT CLAIM TO BE ABLE TO PREDICT WHETHER OR NOT THOSE CERTAIN ACTIONS WILL OR WILL NOT OCCUR.

    So we can't know what will happen in general, but we can know that if certain actions are taken, then we hold that certain effects WILL occur.

    It is a contingent prediction methodology based on logical necessities derived from praxeology.

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  4. When we turn to Mises and Rothbard, we find a blatant contradiction of this view:

    “Praxeological knowledge makes it possible to predict with apodictic certainty the outcome of various modes of action. But, of course, such prediction can never imply anything regarding quantitative matters.” (Mises 1998: 117-118).

    “Economics too can make predictions in the sense in which this ability is attributed to the natural sciences. The economist can and does know in advance what effect an increase in the quantity of money will have upon its purchasing power or what consequences price controls must have. Therefore, the inflations of the age of war and revolution, and the controls enacted in connection with them, brought about no results unforeseen by economics.” (Mises 2003: 129).

    “Economics provides us with true laws, of the type if A, then B, then C, etc. Some of these laws are true all the time, i.e., A always holds (the law of diminishing marginal utility, time preference, etc.). Others require A to be established as true before the consequents can be affirmed in practice. The person who identifies economic laws in practice and uses them to explain complex economic fact is, then, acting as an economic historian rather than as an economic theorist. He is an historian when he seeks the casual explanation of past facts; he is a forecaster when he attempts to predict future facts. In either case, he uses absolutely true laws, but must determine when any particular law applies to a given situation. Furthermore, the laws are necessarily qualitative rather than quantitative, and hence, when the forecaster attempts to make quantitative predictions, he is going beyond the knowledge provided by economic science.” (Rothbard 2006: 311).

    None of these passages "contradict" my arguments. They CONFIRM them.

    You're gross misrepresentation of my actual argument, which is that economics is not a predictive, EMPIRICAL SCIENCE LIKE THAT OF CHEMISTRY AND PHYSICS.

    You are ignoring the most crucial aspect of my argument.

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  5. Further, with human beings, nothing is inevitable.

    So, are you saying that economics can't predict anything, and that nothing true can be said about human beings? If so, what good is economics beyond state-sponsored leisure jobs at universities and "private" think tanks?

    there isn’t no justification or evidence in logic or history

    There isn't any justification or evidence in logic - it's just a tool for deduction. Without premises it is entirely vacuous. On the other hand, plenty of people have consistent and differing interpretations of historical facts and situations, and the facts themselves are often disputed, as well as how they are situated. The difference between the Austrians and everyone else is that Austrians don't even care about figuring out what's true, they just want to push an agenda, and are virulently opposed to differing viewpoints.

    It's probably not a coincidence that every Austrian I've ever met has been largely unsuccessful in the social and interpersonal spheres of society, and the only way they can channel their misguided anger, frustration, and feelings of powerlessness is through the construction of elaborate fantasy worlds where they can act out their megalomania.

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  6. Mises is quite clear that economics “too can make predictions in the sense in which this ability is attributed to the natural sciences.” So even Mises and Rothbard thought that their economics had predictive power.

    I didn't claim that economics was not a predictive science. I said economics is not a predictive, empirical science like that of chemistry and physics.

    Mises was a vehement opponent of treating economic science like that of the natural sciences such as physics and chemistry. You're completely confused.

    Mises, in MANY of his books and essays, CONSTANTLY argued that economic science is not a natural science like that of physics and chemistry. His magnum opus, Human Action, is essentially his elaboration on this central point. He writes:

    "It is a complete misunderstanding of the meaning of the debates concerning the essence, scope, and logical character of economics to dismiss them as the scholastic quibbling of pedantic professors. It is a widespread misconception that while pedants squandered useless talk about the most appropriate method of procedure, economics itself, indifferent to these idle disputes, went quietly on its way. In the methodenstreit between the Austrian economists and the Prussian Historical School, the self-styled “intellectual bodyguard of the House of Hohenzollern,” and in the discussions between the school of John Bates Clark and American Institutionalism much more was at stake than the question of what kind of procedure was the most fruitful one. The real issue was the epistemological foundations of the science of human action and its logical legitimacy. Starting from an epistemological system to which praxeological thinking was strange and from a logic which acknowledged as scientific—besides logic and mathematics—only the empirical natural sciences and history, many authors tried to deny the value and usefulness of economic theory. Historicism aimed at replacing it by economic history; positivism recommended the substitution of an illusory social science which should adopt the logical structure and pattern of Newtonian mechanics. Both these schools agreed in a radical rejection of all the achievements of economic thought. It was impossible for the economists to keep silent in the face of all these attacks." - pg 4(!)

    and

    "In the face of this state of affairs we cannot help withholding judgment on the essential statements of monism and materialism. We may or may not believe that the natural sciences will succeed one day in explaining the production of definite ideas, judgments of value, and actions in the
    same way in which they explain the production of a chemical compound as the necessary and unavoidable outcome of a certain combination of elements. In the meantime we are bound to acquiesce in a methodological dualism.

    "Human action is one of the agencies bringing about change. It is an element of cosmic activity and becoming. Therefore it is a legitimate object of scientific investigation. As—at least under present conditions—it cannot be traced back to its causes, it must be considered as an ultimate given and must be studied as such." - pg 18

    (cont'd)

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  7. and

    "Behaviorism and positivism want to apply the methods of the empirical natural sciences to the reality of human action. They interpret it as a response to stimuli. But these stimuli themselves are not open to description by the methods of the natural sciences. Every attempt to describe them must refer to the meaning which acting men attach to them." - pg 26

    and

    "It is not appropriate for the physicist to search for final causes because
    there is no indication that the events which are the subject matter of physics
    are to be interpreted as the outcome of actions of a being, aiming at ends in
    a human way." - pg 26

    and

    "The natural sciences too deal with past events. Every experience is an experience of something passed away; there is no experience of future happenings. But the experience to which the natural sciences owe all their
    success is the experience of the experiment in which the individual elements of change can be observed in isolation. The facts amassed in this way can be used for induction, a peculiar procedure of inference which has given pragmatic evidence of its expediency, although its satisfactory epistemological characterization is still an unsolved problem.

    "The experience 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." - pg 31

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  8. And the claim that Austrian aprioristic praxeology escapes empiricism is wholly false. Why? Because praxeology requires any number of synthetic propositions that are hidden or stated premises in its deductive arguments

    This is the same gross misrepresentation that you keep repeating as if it refutes praxeology. No Austrian claims that praxeology alone can enable us to learn everything there is to know about economics. It cannot enable us to learn anything other than the logical categories which constrain all human action, that once grasped, are a priori true to all experience.

    Praxeology does not require a posteriori synthetic propositions in order to build up the deductions. What Mises argued was that to the extent that the praxeologist makes empirical (synthetic) assumptions in the course of his reasoning, the knowledge of those assumptions are ultimately grounded in observation.

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  9. Even some of Mises’s fundamental starting axioms are synthetic and only provable by empirical evidence, such as the “disutility of labor” axiom:

    “The disutility of labor is not of a categorial and aprioristic character. We can without contradiction think of a world in which labor does not cause uneasiness, and we can depict the state of affairs prevailing in such a world …. Experience teaches that there is disutility of labor. But it does not teach it directly. There is no phenomenon that introduces itself as disutility of labor. There are only data of experience which are interpreted, on the ground of aprioristic knowledge, to mean that men consider leisure—i.e., the absence of labor—other things being equal, as a more desirable condition than the expenditure of labor. We see that men renounce advantages which they could get by working more—that is, that they are ready to make sacrifices for the attainment of leisure. We infer from this fact that leisure is valued as a good and that labor is regarded as a burden. But for previous praxeological insight, we would never be in a position to reach this conclusion” (Mises 1998: 65).

    This does not compromise the a priori logic at all. If Mises accepts that disutility of labor is empirical, then what's the problem? No Austrian has ever asserted that the necessary a priori propositions are capable of explaining everything to do with economics.

    The disutility of labor is an empirical proposition, because it is not illogical to consider someone who values work more than leisure, and would derive disutility from leisure as opposed to work. It's therefore an empirical concept that we have to observe for each individual before we can know.

    But propositions such as "action is the striving of goals using scarce means" is not hypothetical. No experience can ever refute it. It is a priori true.

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  10. M. Blaug has pointed out that a fundamental hidden assumption underlying Mises’s praxeology is the justification for belief in negatively inclined demand curves:

    “[sc. there is a] the fundamental flaw in Ludwig von Mises’ ‘praxeology’: [sc. it is] the notion that purposive choice as a Kantian ‘a priori synthetic proposition’ is more than sufficient to account for negatively inclined demand curves. This ignores the fact that a number of a posteriori auxiliary propositions are also required, such as transitivity or consistency of choices...To this day, this failure to recognize the limited power of a priori synthetic propositions to generate substantive implications for economic behaviour characterises neo-Austrian writings in defence of Mises.”

    That is no flaw in Mises' praxeology of purposeful choice. Blaug doesn't understand praxeology. The propositions transitivity and consistency of choices are not only not "auxiliary" at all, but they are not even required for the law of demand.

    The law of demand is not, in the praxeological framework, specific to money prices. It is much more general, in that from action we can deduce that since ends can only be attained through means (which are scarce, or else there would be no action), more means implies the accomplishment of more ends.

    The proposition that prices falling leads to higher quantities demanded, is an empirical proposition. But that is not the law of demand as such. It is a special case of it in the praxeological framework. If we observe the price of a good to fall, but the quantity demanded falls instead, then this does not mean that a priori logic "failed" to account for something it allegedly claimed to be able to do. It means that the fall in price is perceived by the actor to be in actuality a fall in a means to accomplish ends, and thus a fall in ends. For example, it is possible that an actor might perceive the high price of a good to be itself value deriving, as in conspicuous consumption, and if the price falls, then the actor cannot attain the goal he was seeking using the high price as means.

    In other words, we must REINTERPRET economic history and UPDATE our understanding of why an individual would buy less of a good when the price falls. The praxeologically derived law of demand is ubiquitous and universal. If you see an empirical case seeming to refute it, it means your theory is not correct.

    Thus, it is true that if a praxeologist claims that a priori praxeology is somehow capable of proving the proposition that the lower the price of a good, the more of the good will be bought, then it is quite right to say no, that's not right. But the REASON it is not right, the way we come to know it is not right, is not by the empirical observation of falling prices leading to falling quantity demanded. It is impossible to observe that cause and effect anyway. It is entirely possible that a fall in price could lead to a fall in quantity demanded not because the law of demand was violated, but because some other factors acted to offset the law of demand, which means there would have otherwise been an even greater fall in quantity demanded, had it not been for the fall in price, which itself acted to raise the quantity demanded.

    The a priori character of the law of demand is not at all compromised by ANY empirical observation.

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  11. But as is now known, even in higher-level neoclassical literature, demand curves are not necessarily downward sloping, even though this is a fundamental assumption of the law of demand:

    “Economists can prove that ‘the demand curve slopes downward in price’ for a single individual and a single commodity. But in a society consisting of many different individuals with many different commodities, the ‘market demand curve’ is more probably jagged, and slopes every which way. One essential building block of the economic analysis of markets, the demand curve, therefore does not have the characteristics needed for economic theory to be internally consistent.”

    "Market demand curves" are rejected by praxeologists as incoherent, because no actor can demand the market's products, and not only that, but it is impossible to extrapolate a CURVE from observable point prices, without a priori arguments. Nobody can observe curves. Every new price is not necessarily a movement along a curve. It could be a new price on a completely new curve, and nobody would know, because nobody can read the minds of what others would have done had the price or supply been slightly different.

    This problem is an excellent example of the superiority of praxeology in enabling one to understand this. Empiricism can never derive this understanding. All it can say are what point prices and point supplies are over time.

    And it has been behavioural and experimental economics, with their strong empirical character and experimentation, that are relevant to establishing this.

    Yes, absurd concepts are rejected by praxeologists, which is why they find their homes in non-Austrian schools of thought.

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  12. Austrian economics and even praxeological methodology does not evade a fundamental empirical basis: this point should be stressed to all and every Austrian pushing the sort of nonsense I have quoted above, where they declare that their economics is not an empirical science.

    Empiricism does not evade a fundamental a priori basis, namely, that the truth of things don't change over the course of time. Whenever a positivist empiricist claims that a past hypothesis has now been falsified or confirmed, they are tacitly presuming the non-empirical proposition that the truth of things did not change from the time he proposed the hypothesis, to the time he collected data, ran a test, and concluded yes, the hypothesis has been rejected, or no, the hypothesis has not been rejected.

    Empiricism claims that such a priori propositions are not valid, and yet empiricists use this a priori proposition in the very course of their methodology.

    Austrians on the other hand do NOT REQUIRE empiricism as a basis. Thinking is an action, and that is the non-empirical basis for the entire Austrian framework. It does not deny the validity of such a priori propositions.

    Thus, Austrian economics is not self-contradictory. Empiricist schools are self-contradictory.

    They are plainly wrong. Without elementary methods of empiricism, their theory (even as they conceive it) wouldn’t even work, and could provide no certain knowledge.

    False. You have not shown how they are plainly wrong.

    Nobody in history has ever refuted the human action axiom without contradicting themselves. Whether you take the side of Mises that action is a synthetic a priori proposition, or Rothbard's side that action is an a posteriori empirical proposition, it doesn't matter t othe validity of what logically follows from it.

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  13. Of course, it comes as no surprise that there is another strand of Austrian economics where an empirical method is accepted. Hayek never accepted Mises’ apriorism at all, and admitted a role for empirical evidence which is far closer to Popper’s falsificationism (see Appendix 1).

    And wouldn't you know it? Hayek delved into advocating for statist policies. Coincidence?

    Gerald P. O’Driscoll and Mario J. Rizzo have offered a reconstructed Austrian methodology in their book The Economics of Time and Ignorance (Driscoll and Rizzo 1996), allowing a role for empirical testing of interpretive theories to see whether they apply to the real world.

    They too fail to understand that praxeologically based economic propositions are not capable of being refuted by experience. They are temporally and logically prior to experience.

    Appendix 1: Hayek on Popperian Method

    You should read Hoppe's critique of Popper. Popper also bases his epistemology on a non-empirical foundation.

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  14. Your quotation from Rothbard showing how he thinks the "the fundamental axiom and subsidiary axioms are derived from the experience of reality and are therefore in the broadest sense empirical," and "I would agree with the Aristotelian realist view that its doctrine is radically empirical" are further confirmation of the view that praxeology requires empiricism and it is itself dependent on basic concepts of empiricism, despite claims ot the contrary.

    Not at all. Praxeology can also perform the function of using logically deduced truths from empirical observations to make conclusive universal propositions that cannot be refuted by further experience.

    Praxeology does not at all "require the basis concepts of empiricism." It is precisely empiricism that requires the basic concepts of praxeology!

    Empiricists base their entire methodology on non-hypothetical, non-empirical propositions about reality.

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  15. "I didn't claim that economics was not a predictive science. I said economics is not a predictive, empirical science like that of chemistry and physics."

    And that assertion is contradicted directly, clearly and explicitly by Mises:

    "“Economics too can make predictions in the sense in which this ability is attributed to the natural sciences. (Mises 2003: 129).

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  16. "Praxeology does not at all "require the basis concepts of empiricism."

    Let me get this straight: Praxeology does not at all require any basic concepts of empiricism, such as basic empirical evidence to support a posteriori any synthetic proposition it uses?

    You assert this rubbish after it is made clear to you that Mises himself requires empirical support for axioms like disutility of labor?

    If seriously believe that praxeology does not at all require basic concepts of empiricism, how do you know that the disutility of labor axiom will continue to hold true in the future? How do you know you can accept it as true now without appeal to past empirical data and an inductive argument? Or if you reject induction, how do you know you can accept it as true now without some Popperian falsificationist argument by hypothetico-deduction using empirical evidence to test your hypothesis?

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  17. "Empiricism claims that such a priori propositions are not valid,

    That is ridiculous nonsense. What empiricist has argued that analytic propositions are not valid?? Or that deduction is invalid?

    Name one philosopher, etc. This is a statement of laughable, gross ignorance.

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  18. It is precisely empiricism that requires the basic concepts of praxeology!

    Wait ... did you really just try to argue that empiricism - the idea that there is some objectively knowable reality independent of human perception, which has locally predictable behavior - relies on praxeology - the idea that economic behavior is independent from human action - as a more fundamental concept? Really, you should write a book.

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  19. "I didn't claim that economics was not a predictive science. I said economics is not a predictive, empirical science like that of chemistry and physics."

    And that assertion is contradicted directly, clearly and explicitly by Mises:

    "Economics too can make predictions in the sense in which this ability is attributed to the natural sciences."

    ABILITY, not METHODOLOGY. For the love of hanna, LK, Mises' whole career was essentially a justification for economics being an a priori science, not an empirical one as in the natural sciences like chemistry and physics.

    You are misreading that statement. You have to read Mises whole body of works to know what he meant when he says things that to the layman like you, can be taken in other ways.

    I provided a boatload of passages from Human Action detailing that Mises' attempt was to rescue economics from empiricist and historicist attacks.

    Hayek also held that positivism empiricism was the wrong methodology for economics. His Nobel Prize winning speech was a huge criticism of economists who try to mimic physicists.

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  20. "Nobody in history has ever refuted the human action axiom without contradicting themselves. Whether you take the side of Mises that action is a synthetic a priori proposition, or Rothbard's side that action is an a posteriori empirical proposition, it doesn't matter t othe validity of what logically follows from it."

    The human action axiom is a trivially true proposition - no one has "ever refuted" it because it doesn't require refutation.

    The level of logic in this argument is like some teenager sreaming that no one has "ever refuted the proposition that the sky is blue on a clear day!!"

    "Whether you take the side of Mises that action is a synthetic a priori proposition, or Rothbard's side that action is an a posteriori empirical proposition, it doesn't matter t othe validity of what logically follows from it."

    The human action axiom is a trivial observation that can also be held by Marxists, communists, Keynesians, neoclassicals, monetarists, or any other economist you care to name. And there is nothing significant you can deduce from it without other premises, since the most simple, useful deductive argument like the syllogism requires 2 premises to infer anything.

    Praxeology requires any number of synthetic propositions that are hidden or stated premises in its deductive arguments.

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  21. Statement 1:

    "If Mises accepts that disutility of labor is empirical, then what's the problem? No Austrian has ever asserted that the necessary a priori propositions are capable of explaining everything to do with economics.
    The disutility of labor is an empirical proposition, ..."


    Statement 2:

    Praxeology does not at all "require the basis concepts of empiricism."

    Sheer brazen logical contradiction.

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  22. "Praxeology does not at all "require the basis concepts of empiricism."

    Let me get this straight: Praxeology does not at all require any basic concepts of empiricism, such as basic empirical evidence to support a posteriori any synthetic proposition it uses?

    It depends on the logical status of the propositions you are making. If your propositions are empirical, then praxeology is not sufficient to justify it. If your propositions are not empirical, then praxeology is sufficient.

    You assert this rubbish after it is made clear to you that Mises himself requires empirical support for axioms like disutility of labor?

    That an individual should experience disutility of labor is an empirical proposition, does not at all compromise the concept of praxeologically derived propositions.

    If seriously believe that praxeology does not at all require basic concepts of empiricism, how do you know that the disutility of labor axiom will continue to hold true in the future?

    I never claimed the disutility of labor is a praxeologically derived proposition.

    How do you know you can accept it as true now without appeal to past empirical data and an inductive argument?

    You can't. Nobody claimed you can.

    Or if you reject induction, how do you know you can accept it as true now without some Popperian falsificationist argument by hypothetico-deduction using empirical evidence to test your hypothesis?

    I don't accept it as true a priori. Action is not by itself sufficient for us to deduce whether or not an individual will experience disutility or utility of labor.

    But action can be sufficient for us to conclude, for example, the law of marginal utility to be always true, or the quantity theory of money (if there is an increase in the quantity of money, then provided there is no change in the demand for money, then the purchasing power of money will fall from where it otherwise would have been) to always be true. No experience can ever falsify them.

    Why are you going on and on about the disutility of labor? It's a single empirical proposition. What does that have to do with the meat and bones of the validity of rationalism vis a vis empiricism?

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  23. More, to accept that

    "What Mises argued was that to the extent that the praxeologist makes empirical (synthetic) assumptions in the course of his reasoning, the knowledge of those assumptions are ultimately grounded in observation.

    is to accept that praxeology requires basic concepts of empiricism to even work properly.

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  24. "Empiricism claims that such a priori propositions are not valid,

    What empiricist has argued that analytic propositions are not valid?? Or that deduction is invalid?

    Straw man and straw man.

    I never said that empiricists reject analytic propositions and logical propositions.

    I said that empiricists claim that a priori, i.e. non-empirical, non-hypothetical, propositions do not say anything about the real world. That's why they are empiricists!

    Empiricists hold that all propositions are either analytic, and hence merely verbal conventions, or they are empirical, and hence hypothetical.

    My argument was that empiricists reject a third type of proposition, which are propositions that are neither analytic/definitional, nor empirical/hypothetical.

    But because they reject that third type of proposition, their own doctrine collapses. For if ALL propositions are either analytic/definitional or empirical/hypothetical, then that very proposition about all propositions must itself be either analytic/definitional or empirical/hypothetical.

    Either way, empiricism does not qualify as a valid epistemology, at least when it comes to human action and economics. For if the proposition about all propositions is analytic, then it's just a verbal convention about how we define propositions. Well so what, I'll just define them differently, because we're free to do that. If on the other hand the proposition about all propositions is empirical/hypothetical, then it is only a hypothesis about how things are, which means it must be open in principle to the possibility that there exists a third type of proposition, which empiricism claims does not exist. Those are rationalist, a priori synthetic claims.

    Name one philosopher, etc. This is a statement of laughable, gross ignorance.

    Please read what I said again and realize that you set up yet another one of your millions of straw men. You suck at this.

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  25. Statement 1:

    "If Mises accepts that disutility of labor is empirical, then what's the problem? No Austrian has ever asserted that the necessary a priori propositions are capable of explaining everything to do with economics.
    The disutility of labor is an empirical proposition, ..."


    Statement 2:

    Praxeology does not at all "require the basis concepts of empiricism."

    Sheer brazen logical contradictio

    No you idiot, it's not a contradiction, because I never claimed that praxeology is sufficient for justifying the validity of the disutility of labor proposition!

    Statement (1) is a statement that the disutility of labor is an empirical proposition. SO far so good? Nobody denied this.

    Statement (2) is a statement that praxeology does not require the basic concepts of empiricism.

    Statement (1) and statement (2) do not contradict each other at all. You are just MISTAKEN in believing that I hold the position that praxeology is sufficient at justifying an individual's disutility of labor.

    Are you trolling or are you really this dense?

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  26. "Mises' whole career was essentially a justification for economics being an a priori science, not an empirical one as in the natural sciences like chemistry and physics."

    I am well aware that Mises and Austrians don't regard the method for social sciences (including economics) as the same as that of the natural sciences, and that they adhere to the concept of methdological dualism.

    But the issue was clearly whether economics "is not a predictive, empirical science like chemistry and physics."

    In fact, Mises makes it perfectly clear that - for all of his methdological dualism - he does think that “Economics too can make predictions in the sense in which this ability is attributed to the natural sciences." Obviously he still thinks economics has a different fundamental methdology.

    But the belief that praxeology is not dependent on empiricism - that it somehow transcends it - is wholly false.

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  27. More, to accept that

    "What Mises argued was that to the extent that the praxeologist makes empirical (synthetic) assumptions in the course of his reasoning, the knowledge of those assumptions are ultimately grounded in observation.

    is to accept that praxeology requires basic concepts of empiricism to even work properly.

    Non sequitur, combined with vague appeals to subjective "work properly."

    That making empirical arguments requires observations in order to be justified does not refute praxeology as such. It just means that just like empiricism is alone not sufficient to understand all of reality, so too is praxeology not sufficient to understand all of reality.

    Praxeology is for human action and economic theory, empiricism is for natural sciences, and economic history.

    Disutility of labor is an economic history proposition, not an economics theory as such. We have to go out and observe who would rather work than have leisure, and who would rather have leisure than work. Every data we collect will necessarily be historical, and based on the ideas and values of the individual at the time they acted which you then observed.

    Economics as such does not deal with history. It deals with regular patterns in human action. Law of marginal utility, quantity theory of money, etc, etc.

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  28. "Mises' whole career was essentially a justification for economics being an a priori science, not an empirical one as in the natural sciences like chemistry and physics."

    I am well aware that Mises and Austrians don't regard the method for social sciences (including economics) as the same as that of the natural sciences, and that they adhere to the concept of methdological dualism.

    Then why did you write that Mises held that economic science is like natural sciences?

    But the issue was clearly whether economics "is not a predictive, empirical science like chemistry and physics."

    Yes, and you fallaciously argued that Mises held that it was.

    In fact, Mises makes it perfectly clear that - for all of his methdological dualism - he does think that “Economics too can make predictions in the sense in which this ability is attributed to the natural sciences."

    There you go again with the same fallacious interpretation of that passage.

    He was talking about ABILITY to make predictions, not METHODOLOGY in HOW to make predictions.

    This is a discussion on the methodology of predictions between the Austrian School and Empiricist Schools.

    Obviously he still thinks economics has a different fundamental methdology.

    That's what I have been trying to convey to you the whole time after you incorrectly claimed Mises held that economics predictions can be made the way natural science makes predictions.

    But the belief that praxeology is not dependent on empiricism - that it somehow transcends it - is wholly false.

    Incorrect. You have not at all shown how that is the case.

    I on the other hand have shown that empiricism is based on praxeologically derived foundations, namely, that the truth of things does not change over time. Action presupposes this to be the case.

    Empiricism requires praxeology, praxeology does not require empiricism, when it comes to acquiring any knowledge at all.

    Once knowledge expands, then further propositions become empirical or praxeologically founded.

    The basis of all knowledge is praxeological. Researchers who perform experiments are necessarily bounded to the logical categories of action themselves, and thus all epistemology is grounded in action.

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  29. "praxeology does not require empiricism, when it comes to acquiring any knowledge at all."

    Given that praxeology is a system of deduction, the only way that it would not require empiricism is if ALL of its axioms and ALL hidden and stated premises in ALL arguments were analytic, a priori or (if such a thing exists) synthetic a priori.

    That is not the case - as even some of the foundational axioms are empirical. Rothbard overthrows even the synthetic a priori or a priori status of the human action axiom, undermining the pure aprioristic character of the system even more.

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  30. Human action is more predictable than you may think. But that's not the case is a fundamental axiom you use so we won't get anywhere with it.

    Off course under all this lies the issue of determinism, free will, information entropy and other complex stuff at how you look at the world.

    The fact that 'austrians' (seriously, come with a better name) are metaphysical instead of positivist in these issues prevents any interesting conversation on the challenging of these axioms, intellectually not very stimulative tbh.

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  31. Also, I see there is a sentence in the original post that could be miscontrued, where I say "where they declare that their economics is not an empirical science."

    That was poorly phrased. I have clarified it as

    "this point should be stressed to all and every Austrian pushing the sort of nonsense I have quoted above, where they declare that their economics is somehow completely independent of empiricism."

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  32. The fact that 'austrians' (seriously, come with a better name)

    Well, "The Austrian School" makes me think of Arnold Schwarzenegger's awesome bad action movies; I think it perfectly exemplifies the theory, and I hope that mental image helps you tolerate their existence.

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  33. I don't even get the point of this argument. Austrian economists use historical episodes or current data in their arguments and make predictions about the results of policies all the time. All you have to do is read their blogs to see this.

    Given this evidence, what does it even mean for Austrian Economics to be an 'a priori' science?

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  34. I certainly do not claim that Austrian economics is devoid of empirical evidence. The evidence supports the stripped down concepts of action and economic ignorance. The theory develops from that. There is never anything offered in your historical anecdotes that refutes that basic analysis. In a chicken/egg analysis, the axioms come first. In an alternative universe where the axioms didn't exist or were different, things might be different. What historical events do you claim refute the basic action and ignorance axioms? Further, do you agree or disagree with the basic Austrian insistence that people do not respond to stimuli like projectiles or molecules?

    The Keynesians ALWAYS ignore the universal truth of the axioms which are matter-of-fact, self evident and based, for lack of a better term, upon common sense.

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  35. "praxeology does not require empiricism, when it comes to acquiring any knowledge at all."

    Given that praxeology is a system of deduction, the only way that it would not require empiricism is if ALL of its axioms and ALL hidden and stated premises in ALL arguments were analytic, a priori or (if such a thing exists) synthetic a priori.

    That's what Mises held. Rothbard differed.

    That is not the case - as even some of the foundational axioms are empirical. Rothbard overthrows even the synthetic a priori or a priori status of the human action axiom, undermining the pure aprioristic character of the system even more.

    Not really, because even if we grant Rothbard's contention that human action is empirical, we can still deduce from that.

    A priori axioms are not the only propositions we can deduce from you know. Praxeology is a priori and it is concomitant with empiricism.

    Also, I see there is a sentence in the original post that could be miscontrued, where I say "where they declare that their economics is not an empirical science."

    That was poorly phrased. I have clarified it as

    "this point should be stressed to all and every Austrian pushing the sort of nonsense I have quoted above, where they declare that their economics is somehow completely independent of empiricism."

    Of course that's what you meant to say, it's more vitriolic! The original statement too charitable. LOL

    Mises held that the human action axiom is a proposition that is a priori to all experience, Rothbard held otherwise.

    At any rate, the propositions derived in praxeology are not perpetually hypothetical. They are apodictically true propositions.

    Since empiricism is ultimately based on praxeology, but praxeology is not ultimately based on empiricism, we can say that empiricism depends on praxeology, not the other way around, even if empirical propositions are not answerable by praxeology. The justification is proximately empirical, and the branches going back can be both praxeological and empirically dependent, culminating in a root rationalist foundation.

    The quantity theory of money: "Given an increase in the supply of money, then assuming the demand for money is unchanged, the purchasing power of money will fall." is a proposition that is necessarily true. It follows from the nature of money. It is not only hypothetical, where we can only know if it will hold true in the future by testing it. We can know at the outset prior to testing it.

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  36. I have been reading Bohm-Bawerk recently, and I find it notable that -- despite his "subjectivism" -- he appeals to empirical evidence frequently. Indeed, there are passages where you can find him saying (e.g., about "roundaboutness") that reason alone would never lead us to expect this result, and we know it only from observation. This is similar to the Mises passage you quote about the disutility of labor.

    In short, today's Mises/Rothbard people are not particularly representative of the historical Austrian school. (To be fair, it's also true that modern neoclassicals have precious little in common with the classicals).

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  37. "Since empiricism is ultimately based on praxeology"

    This is burning my eyes.

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  38. "There is never anything offered in your historical anecdotes that refutes that basic analysis."

    Anecdote
    noun, used from Late 17 century

    (1)secret or hitherto unpublished details of history
    (2) A narrative of an amusing of striking incident (originally an item of gossip)
    (3) (Art) the portrayal of a small narrative incident; a painting protraying a small narrtaive incident

    The New Shorter Oxford English Dictionary, Volume 1, A-M, Oxford, 1993.
    p. 76.

    Buy a dictionary, read the definition of "anecdote". Read it again, again and again, until the definition penetrates whatever it is you call your mind.

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  39. Sorry, this is off topic but check out this link. http://www.reddit.com/r/Anarcho_Capitalism/comments/jzkfa/a_thought_experiment/

    It's very similar to the astroid hitting the earth. Very stupid ethics.

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  40. Good text!

    It is perplexing that some people, including I, _actually_ first thought that Austrian Economics had, one way or the other, it's basis in some at least remotely empirical, or at least pragmatical and/or not utterly unrespectable, approach to understanding _this_ reality (vs. some conjured fairy tale world). Imagine the shock when these people learn, as I did, that it has no basis whatsoever except perhaps some vague praxeo-"logical", (read: "rhetorical") argumentation resembling dialectics (maybe), based on "self-evident" (read: "guessed") "a priori axioms" of human action.

    Oh my God, this is probably what we would have gotten if Plato or Descartes would have written extensevily on economics. Well, in fact Plato did, and he produced quite similiar rubbish.

    Why, oh why, should some philosophers dictate how this world in it's true essence (or whatever) happens to be? Why can't we just learn from experience? It takes time, I admit, but every time in recorded history the method of trying, failing, trying, succeeding and finally, learning, has produced far better results than informal vague argumentation with poorly defined terminology based on axioms invented by the "I think this is clear, isn't it? At least it feels so" -methodology... Maybe we just aren't able to learn to learn?

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