“How may praxeology be applied to forecasting, to the prediction of future historical events? The process is essentially that of the historian, except that the difficulties are greater. Thus, using the above example the forecaster may see a considerable increase in the money supply take place. He asserts B; C he knows as a praxeological truth. In order to forecast the probable future course of purchasing power, he must make an estimate of the probable course of the demand for money in the period under consideration.So praxeological truths can be used to make contingent predictions by means of conditional statements (e.g., if x, then y) about the future, but the Austrian is not a “praxeologist” when doing this, but a “forecaster.”
If, on the basis of his judgement, he decides that the relative change in demand will be negligible, he is in a position to predict that the purchasing power of the money unit will decline in that period. With the help of praxeology, his judgement is the best he can offer, but it is still inexact, dependent on the correctness of his estimate—in this case, of the movement in demand for money. If he wishes to make a quantitative estimate of the change in purchasing power, his estimate is still more inexact, for praxeology can be of no help in this attempt. If his prediction proves erroneous, it is not praxeology that has failed, but his judgment of the future behavior of the elements in the praxeological theorem.
Praxeology is indispensable, but it does not provide omniscience. It furnishes laws in the form of: If X, and if Y remains unchanged, then Z. It is up to the historian, and his counterpart, the forecaster, to determine the specific cases in which the law is applicable.” (Rothbard 2011: 116).
This is a rather important datum, because the internet is filled with vulgar Austrians who (bizarrely) assert that Austrian economics cannot be used to make predictions of any kind whatsoever.
A secondary point is this: why a praxeologist cannot make predictions qua praxeologist remains unclear.
Elsewhere we read that the “forecasting” role that any Austrian must assume when predicting the future involves the Austrian being a “thymologist”:
“Austrian economists, as Austrian economists, or praxeologists, do not predict. They can predict not as formal economists, or praxeologists, but, rather, in their role as thymologists, or economic historians. In praxeology, A causes B, other things remaining the same. But, in the real world, other things cannot be relied upon to always remain constant. Therefore, predictions of the ‘A will necessarily lead to B’ type are strictly prohibited. Instead, praxeologists, but not thymologists, must limit themselves to statements of the if-A then-B variety.”The word “thymology” or “thymologist” does not even appear in the twenty-volume Oxford English Dictionary (2nd edn.), so you know immediately you are dealing with a highly obscure or archaic word.
“Austrian Predictions,” Mises Wiki
It speaks volumes about Austrian methodology that they resort to truly obscure terms, and that the actual praxeological laws are supposed to be universally and necessarily true, but when applied to the real world in prediction suddenly the laws become contingent, as Rothbard says:
“Praxeology is indispensable, but it does not provide omniscience. It furnishes laws in the form of: If X, and if Y remains unchanged, then Z. It is up to the historian, and his counterpart, the forecaster, to determine the specific cases in which the law is applicable.”It is difficult to see how such “laws” based on conditional statements are anything but analytic a priori statements.
For the whole epistemological justification of praxeology is that praxeological laws, on the basis of the action axiom, are synthetic a priori truths, and thereby have necessary truth about the real world: yet suddenly when applied to the real world they become contingent.
These statements by Austrians about the nature of prediction must be judged a severe epistemological problem for Austrian economics.
Mises, Ludwig von. 1978 . The Ultimate Foundation of Economic Science: An Essay on Method (2nd edn), Sheed Andrews & McMeel, Kansas City.
Mises, Ludwig von. 2007 . History and Theory. Ludwig von Mises Institute, Auburn, Ala.
Rothbard, M. N. 2011. Economic Controversies. Ludwig von Mises Institute, Auburn, Ala.