John Searle on Economics

In a few seconds of partly facetious, partly very serious discussion. He’s not far from the truth either!



And, yes, as Searle says, we can indeed have an epistemologically objective science of economics, even though important things in economic life are subjective in a deeper sense (e.g., expectations, subjective utility) than just being “observer-relative.”

The epistemologically objective science we need is Post Keynesian economics. Everything else is charlatanry, pseudo-science, or, at most, just a pale imitation of Post Keynesian economics.

Steve Keen on Why the Euro is Destroying Europe

Steve Keen speaks below on the catastrophe that is the Eurozone, and this is lecture 7 that is part of Keen’s course at Kingston University in the UK.

Steve Keen Interview on Economics, Austrians, and Debt

Steve Keen is interviewed below by Gordon Long of the Financial Repression website. More details here.



Most interesting are Steve Keen’s comments on Austrians and the EU.

Steve Keen also blogs at Forbes now. See his latest post here, where he analyses what might happen if the anti-austerity Greek party Syriza forms a coalition government in Greece in the coming election.

Shackle on the Emergence of Uncertainty and Expectations in Modern Economics

From G. L. S. Shackle’s fascinating book The Years of High Theory: Invention and Tradition in Economic Thought 1926–1939 (1967):

“At the opening of the 1930s economic theory still rested on the assumption of a basically orderly and tranquil world. At their end it had come to terms with the restless anarchy and disorder of the world of fact. Partly this transformation was effected by the brutal force of events: by a slump without parallel and the unnerving spectacle of the rise of Nazism in a world cheated of the hope of peace. But partly it was the work of a mere handful of great theoreticians. One thing above all divided the new theory from the old: the discarding of the assumption (which had often been quite tacit) of universal perfect knowledge. What sense did it make to assume perfect knowledge in a world where every morning’s newspaper was opened in fear and scanned with foreboding? But the ferment had been working in the world of theory from the beginning of the 1920s. Frank Knight’s Risk Uncertainty and Profit of 1921 puts entrepreneurship in the forefront of a treatise on value theory which largely sets forth the old orthodoxy. But perhaps its title was a portent. It was in Sweden that expectation was first taken seriously as a prime mover in the economic process. (Marshall, as always, was with the angels, but he did not blow this particular trumpet very loud.) Erik Lindahl and, more incisively and with one brilliant and epoch-marking stroke, Gunnar Myrdal, developed the first ‘economics of expectation’. Myrdal’s essay, published in Swedish in 1931, in German in 1933, and in English only in 1939, would have served very well as the launching-pad for a theory of general output and employment, had the General Theory never been written. 1937 was the year of intensive Keynesian critical debate. In February Keynes himself declared in the Quarterly Journal of Economics that the General Theory was concerned with the consequences of our modes of coping with, or of concealing from our conscious selves, our ignorance of the future. Hugh Townshend, his intellectually most radical interpreter, simultaneously expressed the matter (in the Economic Journal for March) in terms, if anything, even more uncompromising. Uncertainty was the new strand placed gleamingly in the skein of economic ideas in the 1930s.” (Shackle 1967: 5–6).

Myrdal’s “essay” that Shackle refers to here was “Om penningteoretisk jämvikt. En studie över den ‘normala räntan’ i Wicksells penninglära” [“On Monetary Equilibrium. A Study of the ‘Normal Rate of Interest’ in Wicksell’s Monetary Theory”] (Ekonomisk Tidskrift 33 [1931]: 191–302), which was translated into English as Monetary Equilibrium (London, 1939). Myrdal had, according to Shackle, opened the debate about expectations before Keynes.

Later Shackle examines the significance of Gunnar Myrdal’s work Monetary Equilibrium (1931, English trans. 1939):

“In Monetary Equilibrium we have chapter IV. That chapter and its sequel are the battlefield where the decisive action occurs. We have examined their contents and effect in detail. But after them come passages of high interest, confirming and extending the conclusion that, had the General Theory never been written, Myrdal’s work would eventually have supplied almost the same theory.” (Shackle 1967: 124).

I am not sure whether this is a fair assessment, but it is high praise indeed coming from Shackle.

In Monetary Equilibrium, Myrdal seems to have criticised Wicksell’s concept of the “natural rate” and other aspects of the monetary equilibrium approach (Skaggs 1997: 473). Myrdal later advocated countercyclical fiscal policy and even had some understanding of the multiplier process (Skaggs 1997: 474).

Addendum
Philip Pilkington has a fascinating post here analysing Myrdal’s monetary equilibrium theory:

Philip Pilkington, “Gunnar Myrdal’s Monetary Equilibrium Theory: A Summarized Version,” Fixing the Economists, August 12, 2013.

Also, there is another post here on Myrdal and the General Theory:

Philip Pilkington, Gunnar Myrdal’s Prescient Criticisms of Keynes’ General Theory,” Fixing the Economists, August 10, 2013.

BIBLIOGRAPHY
Myrdal, Gunnar. 1931. “Om penningteoretisk jämvikt. En studie över den ‘normala räntan’ i Wicksells penninglära,” Ekonomisk Tidskrift 33: 191–302.

Myrdal, Gunnar. 1939 [1931]. Monetary Equilibrium. W. Hodge & Company, London.

Shackle, G. L. S. 1967. The Years of High Theory: Invention and Tradition in Economic Thought 1926–1939. Cambridge University Press, Cambridge.

Skaggs, Neil T. 1997. “Myrdal, Gunnar (1898–1987),” in D. Glasner and T. F. Cooley (eds). Business Cycles and Depressions: An Encyclopedia. Garland Pub., New York. 473–474.

Lars P. Syll on Probability and Economics

I have linked before to Lars P. Syll’s great series of posts on probability theory and probability and economics. I have updated this below:

Lars P. Syll, “The Dilemma of Probability Theory (wonkish),” 27 January, 2014.

Lars P. Syll, “On Uncertainty and Predictions,” 7 January, 2014.

Lars P. Syll, “Non-Ergodicity and the Arrow of Time (wonkish),” 30 December, 2013.

Lars P. Syll, “Post Keynesian Approaches to Uncertainty,” 15 December, 2013.

Lars P. Syll, “Is Econometrics the Pinnacle of Economics? Read my Lips — It isn’t!,” 5 December, 2013.

Lars P. Syll, “New Evidence on the Poverty of Expected Utility Theory,” 22 November, 2013.

Lars P. Syll, “Transmogrification of Truth in Economics Textbooks — Expected Utility Theory,” 16 November, 2013.

Lars P. Syll, “What is Ergodicity?,” 5 November, 2013.

Lars P. Syll, “When Probability Calculus does not Apply,” 20 October, 2013.

Lars P. Syll, “Why I am not a Bayesian,” 9 September, 2013.

Lars P. Syll, “Bayesianism that Harms Social Science,” 9 September, 2013.

Lars P. Syll, “Probabilistic Reductionism,” 8 September, 2013.

Lars P. Syll, “Bayesian Religion,” 9 September, 2013.

Lars P. Syll, “Bayesian Inference in a ‘Large World,’” 11 September, 2013.

Lars P. Syll, “Objections to Bayesian statistics,” 11 September, 2013.

Lars P. Syll, “The Riddle of Induction and why Economists assume Linearity in their Models,” 30 September, 2013.

Lars P. Syll, “von Wright’s critique of Ramsey’s Bayesianism (wonkish),” 31 August, 2012.

Lars P. Syll, “Keynes on Conventions and Managing Uncertainty,” 23 August, 2012.

Lars P. Syll, “Paul Samuelson and the Ergodic Hypothesis,” 7 August, 2012.

Lars P. Syll, “Why Expected Utility Theory is an Ex-Parrot (wonkish),” 14 July, 2013.

Lars P. Syll, “Bayesianism and Noninformative Priors – Lost Causes (wonkish),” 14 July, 2013.

Lars P. Syll, “Statistical Inference in a “Large World,” 12 July, 2013.

Lars P. Syll, “Why assuming Ergodicity makes Economics totally Irrelevant,” 11 July, 2013.

Lars P. Syll, “Parallel Universe and Time in Finance and Economics (wonkish),” 5 July, 2013.

Lars P. Syll, “Non-Ergodicity and Human Ensembles,” 5 July, 2013.

Lars P. Syll, “Causality and the Limits of Statistical Inference,” 2 July, 2013.

Lars P. Syll, “Non-Ergodicity and Time Irreversibility (wonkish),” 30 June, 2013.

Lars P. Syll, “Regression to the Mean – When Causes Trump Statistics,” 30 June, 2013.

Lars P. Syll, “Economics and Probability,” 27 June, 2013.

Lars P. Syll, “Markov’s Inequality,” 12 June, 2013.

Lars P. Syll, “Chebyshev’s Inequality Theorem,” 12 June, 2013.

Lars P. Syll, “What is Randomness?,” 28 May, 2013.

Lars P. Syll, “On the Impossibility of Predicting the Future,” 28 May, 2013.

Lars P. Syll, “Probabilities – From Where do we get Them?,” 8 May, 2013.

Lars P. Syll, “Modern Econometrics – A Critical Realist Critique (wonkish),” 7 May, 2013.

Lars P. Syll, “Probabilistic Reasoning and its Limits (wonkish),” 13 April, 2013.

Lars P. Syll, “Ergodicity – Probabilistic Thinking gone Awry,” 5 April, 2013.

Lars P. Syll, “The Limits to Probabilistic Reasoning,” 19 March, 2013.

Lars P. Syll, “Ergodicity and the Law of Large Numbers (wonkish),” 5 March, 2013.

Lars P. Syll, “What’s Wrong with Bayesianism (II),” 4 March, 2013.

Lars P. Syll, “What’s Wrong with Bayesian Probability?,” 2 March, 2013.

Lars P. Syll, “Bayesian Decision Theory – A Critique,” 26 February, 2013.

Lars P. Syll, “On Bayesianism, Uncertainty and Consistency in ‘Large Worlds’,” 25 February, 2013.

Lars P. Syll, “On Probabilism and Statistics,” 8 February, 2013.

Lars P. Syll, “On the Non-Equivalence of Keynesian and Knightian Uncertainty (wonkish),” 5 February, 2013.

“Keynes on Statistics and Evidential Weight,” 25 January, 2013.

Lars P. Syll, “How do we Attach Probabilities to the World?,” 18 January, 2013.

Lars P. Syll, “Probability and Economics,” 17 January, 2013.

Lars P. Syll, “Markov’s Inequality,” 18 December, 2012.

Lars P. Syll, “The Arrow of Time and the Importance of Time Averages and Non-Ergodicity (wonkish),” 31 October, 2012.

Lars P. Syll, “Keynes vs. Bayes on Information and Uncertainty (wonkish),” 20 October, 2012.

Lars P. Syll, “Did Frank Ramsey really make Keynes change his View on Probability? (wonkish),” 12 September, 2012.

Lars P. Syll, “von Wright’s critique of Ramsey’s Bayesianism (wonkish),” 31 August, 2012.

Lars P. Syll, “Keynes and Knight on Uncertainty – Ontology vs. Epistemology,” 29 July, 2012.

Lars P. Syll, “Dutch Books, Money Pumps and Bayesianism,” 25 June, 2012.

Lars P. Syll, “One of the Reasons I’m a Keynesian and not a Bayesian,” 12 June, 2012.

Lars P. Syll, “Statistical Models and Causal Inference,” 11 June, 2012.

Lars P. Syll, “Bayesian Probability – A Primer,” 10 June, 2012.

Lars P. Syll, “Randomness, Fat Tails and Ergodicity – a Keynesian Perspective on Knightian Uncertainty,” 9 June, 2012.

Lars P. Syll, “So you Think you’re Rational? I bet you’re not!,” 15 May, 2012.

Lars P. Syll, “Risk and Uncertainty,” 8 May, 2012.

Lars P. Syll, “Keynes and Bayes in Paradise,” 5 May, 2012.

Lars P. Syll, “Probabilistic Econometrics – Science without Foundations (part I),” 21 February, 2012.

Joseph Stiglitz on Modern Economics

Joseph E. Stiglitz speaks here on “Macroeconomics in Crisis: An Agenda for Rejuvenating the Discipline,” in a talk given on 4 January, 2013 at the University of Hyderabad, India. Stiglitz gives his “New Keynesian” perspective on what is wrong with modern mainstream economics.

Córdoba on Praxeology and Economics

The paper below attempting to defend Misesian praxeology and show how two of its axioms can be formally written and proved will no doubt excite interest from Misesian apriorists:

Michael Oliva Córdoba, “On the Foundations of Praxeology and Eeconomics,” 28 May 2013.
http://www.philosophie.uni-hamburg.de/Team/Cordoba/Materials/oc_Foundations-PraxEcon-05-final_2013-05-28.pdf

There is also an audio talk here and a forthcoming paper (Cordoba 2014).

But a reading of paper reveals surprises.

It appears to me that about 50% of it is devoted to arguing – against Mises’s original view – that praxeology is not synthetic a priori. Rather, Cordoba seems to think – contrary to Mises – that praxeology is analytic a priori (Cordoba, pp. 1–9).

That is hardly any comfort to the apriorist Misesian apologists who uphold the existence of synthetic a priori knowledge.

The second part of the paper involves defining two Misesian theorems in formal logic as analytic propositions (propositions true by definition), and the claim that they can be proven once defined by using logic.

These two theorems are:

(1) the uneasiness theorem:

“[T]he incentive to act is always uneasiness [...].” (Mises 1949: 13)
(x) (x is satisfied → ¬ x acts).

This can be expressed as “if x such that x is satisfied, then it is not the case that x acts” (Cordoba, p. 12);

(2) the scarcity theorem:

“[A]ction is the manifestation of scarcity [...].” (Mises 1949: 70)
(x) (¬ (∃y) (y is scarce for x) → ¬ x acts. (Cordoba, p. 13).

This can be expressed as “if x such that it is not the case that there exists at least one y such that y is scarce for x, then it is not the case that x acts.”

The proofs of these theorems would most likely constitute less than 1% of Mises’s Human Action, and the author never even progress to economic theories.

But, above all, Cordoba’s arguments appear to require that praxeology is an analytic a priori system. But such a system says nothing that is necessarily true of the real world. The author has not proven that any Misesian theory has applicability to a real world economy.

BIBLIOGRAPHY
Cordoba, Michael Oliva. 2014. “Uneasiness and Scarcity. An Analytic Approach Towards Ludwig von Mises’ Praxeology,” in Gloria Zuñiga y Postigo, (ed.), Austrian Thought at the Turn of the 20th Century. Ontos, Heusenstamm (forthcoming 2014).

Mises, Ludwig von. 1949 [1963]. Human Action. Fox & Wilkes, San Francisco.

Lars P. Syll on Probability and Economics

Lars P. Syll has a great series of posts on his blog on the subject of probability theory and probability and economics, which should be required reading for anyone interested in this subject:

Lars P. Syll, “Why Expected Utility Theory is an Ex-Parrot (wonkish),” 14 July, 2013.

Lars P. Syll, “Bayesianism and Noninformative Priors – Lost Causes (wonkish),” 14 July, 2013.

Lars P. Syll, “Statistical Inference in a “Large World,” 12 July, 2013.

Lars P. Syll, “Why assuming Ergodicity makes Economics totally Irrelevant,” 11 July, 2013.

Lars P. Syll, “Parallel Universe and Time in Finance and Economics (wonkish),” 5 July, 2013.

Lars P. Syll, “Non-Ergodicity and Human Ensembles,” 5 July, 2013.

Lars P. Syll, “Causality and the Limits of Statistical Inference,” 2 July, 2013.

Lars P. Syll, “Non-Ergodicity and Time Irreversibility (wonkish),” 30 June, 2013.

Lars P. Syll, “Regression to the Mean – When Causes Trump Statistics,” 30 June, 2013.

Lars P. Syll, “Economics and Probability,” 27 June, 2013.

Lars P. Syll, “Markov’s Inequality,” 12 June, 2013.

Lars P. Syll, “Chebyshev’s Inequality Theorem,” 12 June, 2013.

Lars P. Syll, “What is Randomness?,” 28 May, 2013.

Lars P. Syll, “On the Impossibility of Predicting the Future,” 28 May, 2013.

Lars P. Syll, “Probabilities – From Where do we get Them?,” 8 May, 2013.

Lars P. Syll, “Modern Econometrics – A Critical Realist Critique (wonkish),” 7 May, 2013.

Lars P. Syll, “Probabilistic Reasoning and its Limits (wonkish),” 13 April, 2013.

Lars P. Syll, “Ergodicity – Probabilistic Thinking gone Awry,” 5 April, 2013.

Lars P. Syll, “The Limits to Probabilistic Reasoning,” 19 March, 2013.

Lars P. Syll, “Ergodicity and the Law of Large Numbers (wonkish),” 5 March, 2013.

Lars P. Syll, “What’s Wrong with Bayesianism (II),” 4 March, 2013.

Lars P. Syll, “What’s Wrong with Bayesian Probability?,” 2 March, 2013.

Lars P. Syll, “Bayesian Decision Theory – A Critique,” 26 February, 2013.

Lars P. Syll, “On Bayesianism, Uncertainty and Consistency in ‘Large Worlds’,” 25 February, 2013.

Lars P. Syll, “On Probabilism and Statistics,” 8 February, 2013.

Lars P. Syll, “On the Non-Equivalence of Keynesian and Knightian Uncertainty (wonkish),” 5 February, 2013.

“Keynes on Statistics and Evidential Weight,” 25 January, 2013.

Lars P. Syll, “How do we Attach Probabilities to the World?,” 18 January, 2013.

Lars P. Syll, “Probability and Economics,” 17 January, 2013.

Lars P. Syll, “Markov’s Inequality,” 18 December, 2012.

Lars P. Syll, “The Arrow of Time and the Importance of Time Averages and Non-Ergodicity (wonkish),” 31 October, 2012.

Lars P. Syll, “Keynes vs. Bayes on Information and Uncertainty (wonkish),” 20 October, 2012.

Lars P. Syll, “Did Frank Ramsey really make Keynes change his View on Probability? (wonkish),” 12 September, 2012.

Lars P. Syll, “von Wright’s critique of Ramsey’s Bayesianism (wonkish),” 31 August, 2012.

Lars P. Syll, “Keynes and Knight on Uncertainty – Ontology vs. Epistemology,” 29 July, 2012.

Lars P. Syll, “Dutch Books, Money Pumps and Bayesianism,” 25 June, 2012.

Lars P. Syll, “One of the Reasons I’m a Keynesian and not a Bayesian,” 12 June, 2012.

Lars P. Syll, “Statistical Models and Causal Inference,” 11 June, 2012.

Lars P. Syll, “Bayesian Probability – A Primer,” 10 June, 2012.

Lars P. Syll, “Randomness, Fat Tails and Ergodicity – a Keynesian Perspective on Knightian Uncertainty,” 9 June, 2012.

Lars P. Syll, “So you Think you’re Rational? I bet you’re not!,” 15 May, 2012.

Lars P. Syll, “Risk and Uncertainty,” 8 May, 2012.

Lars P. Syll, “Keynes and Bayes in Paradise,” 5 May, 2012.

Lars P. Syll, “Probabilistic Econometrics – Science without Foundations (part I),” 21 February, 2012.

The Nature of Time, Science and Economics

This is a post that delves into many non-economic subjects, so skip it if you find science and philosophy tedious!

I. Time and the Future in Economic Life
The future and the nature of time have a fundamental role to play in economics. I will briefly sketch the Post Keynesian view. In a highly complex system that is open like a human economic system, where specific variables are determined by possibly millions of decentralised decisions, where there is both endogenous and exogenous change, and complex negative and positive feedback, it is the case that fundamental uncertainty will be faced about some specific future values of relevant variables.

Fundamental uncertainty means that calculable, objective numeric probabilities are not possible about many specific future values of variables in the system subject to the processes described above (that is, you cannot calculate an objective probability like the a priori probability of rolling a 6 in a fair game of dice for future values of variables).

The future is seen as open and not predetermined (Dunn 2008: 106). Human agents have a role in inventing and creating the future by their actions and decisions (Dunn 2008: 106).

It is obvious that there are both stated concepts and unstated ontological assumptions here, which are as follows:

(1) a real thing called time that passes, or dynamic time;
(2) a moving present and dynamic world;
(3) a future that appears to be (but perhaps not necessarily is) not yet existent;
(4) a future that is not predetermined in an unalterable way, but is created by contingent human action.

The notions of time and the future are fundamental. But what does science say about these things?

II. The Scientific Theories of Time
We have three main theories of the nature of time:

(1) Presentism
This is the view that only the present – that is, the present instantaneous world – exists. Only the present has real existence. The past and future are unreal. Reality is the three dimensional spatial world with its dynamic time element, or (depending on one’s view) the human perception of it.

(2) the Growing block Universe
The Growing block universe theory assumes that only the past and present are real. But the past is “lifeless and inactive” and consciousness and the “flow of time” are only active in the present. To some extent, the Growing block universe appears to be a variant of Presentism. It is also called the “Crystallizing Block Universe” or “Emergent Block Universe” theory.

(3) Eternalism
This is the view that all events, things and objects (including people and living things) in the past and future have real existence. Past, present and future are all equally real. For some reason, human beings have the perception of a “moving present.”

It is obvious that “Presentism” is what seems to be the intuitively correct and commonsensical view of time, although the “Growing block universe” is also compatible, even if somewhat counterintuitive in its belief that the past has a kind of real existence.

Certainly, the view of uncertainty in Post Keynesian economics and of the unknowable future seem consistent with, and perhaps necessitate, a “Presentist” or “Growing block universe” view of time: only the present (and possibly the past) exists, and the future does not. The future is created, as time passes. In economic life, human choice has a causal role in shaping one of many possible futures.

The trouble is that many mainstream physicists think that the Eternalist view is true.

And the issue goes much deeper than just interesting consequences of Einstein’s theories of relativity. Briefly, Einstein showed that the amount of time that elapses for an object is dependent on both its velocity and/or its interaction with gravitational fields. If, for example, one accelerates to close to the speed of light, time slows down (that is, “time dilation” occurs), and one is projected forwards in time relative to other objects travelling at a lower velocity, simply because physical and chemical processes slow down as velocity increases. From this, it follows that absolute Newtonian time is ultimately unreal. Or perhaps what Newton imagined as absolute time can only be strictly limited to spaces and objects with homogenous or near homogenous velocities or gravitational fields.

But the mainstream view of time is more radical than these findings from relativity theory, though certainly partly derived from them. What is asserted is this: the universe is thought to be a four-dimensional block or “block universe,” containing everything from the Big Bang to the end of the universe and all things that have ever existed or will ever exist. The forward direction or “arrow” of time is illusory because the whole universe is ultimately static, and if one could view it from “outside,” there is no point anywhere in the universe that can be objectively called the present.

Perhaps you think I exaggerate? Just observe the respected physicist Paul Davies proclaim that the flow of time is an illusion (Davies 2002). A strident statement of the same ideas can be found in Julian B. Barbour’s The End of Time: The Next Revolution in Our Understanding of the Universe (New York, 2000).

According to these ideas, the universe is ultimately timeless and static.

Pushed to its limit, a consequence of this theory is that the “block universe” is eternal and had no actual beginning in time, no subsequent development or growth, and no end, for that would require that there was in fact once a moving present, and would imply “Presentism” or the “Growing block universe” view.

If it is true that the universe is eternal, what sense is there in talking of the Big Bang as the causal origin of the universe or of subsequent causal developments and evolution of the universe? Or of an end? Such talk is inaccurate and actually appears unjustified and untrue, if the universe was eternal, timeless and not, strictly speaking, the creation of an unfolding present from a beginning at the Big Bang.

III. The Consequences of Eternalism
Under the Eternalist view, the “block universe” just is, always was, and always will be. Like the traditional god of Western theism, the “block universe” is just eternal and (possibly) uncreated.

What does the Eternalist “block universe” theory of reality entail about human consciousness, decision-making and existence?

First, it appears to deny free will. How is our vision of an economic future created by conscious human choice that is real and contingent and that could have been different consistent with the “block universe”? It seems utterly inconsistent. The perception of free will and real choice in action are illusions. The future is written already.

The second question is this: what is a conscious human mind under the Eternalist view? I digress at length on this point.

Our mind appears to be an entity extended in the “block universe.” But the “block universe” is normally thought of as a timeless, static and unchanging entity. How can humans have a conscious perception of a dynamic universe changing in a moving present?

One answer offered is that all moments of conscious life are equally real. The mathematician Rudolf von Bitter Rucker puts it this way:

“What I want to say is that each of us is a certain spacetime pattern in the block universe. Today, or the day of my birth, or the day of my death—all are equally real, all are different pieces of the block universe. I will never stop living this instant. This instant will never cease to exist; this instant has always existed.” (Rucker 1984: 145).

If this were so, then why don’t you have direct access to all past conscious experiences and all future conscious experiences simultaneously in the way you have direct access to the present conscious moment? Or alternatively, why no memories of the future?

Another equally strange interpretation of conscious life and the perception of the present in the Eternalist “block universe” theory is the “eternal return” theory: to put it in simple terms, it is the notion that after death you actually experience your life again, and also exactly as it was before, and yet again after another experience of death, and so on and on, ad infinitum.

To elaborate, there is an infinite “stream” of conscious “yous” following one upon the other, in every instant of the discrete conscious moments of life, and eternally.

As a rough analogy, if each discrete conscious moment of life can be conceived as a frame in a film running in a stream of 1 frames per second, then, if there are 1,000,000 frames to one’s life, it is as if there will always and eternally be 1,000,000 movies playing simultaneously, but each will be running one second out of sync with previous one, with a projection of each and every different frame appearing simultaneously on all screens at any second.

The experience we have now is but one of the movies being projected, and it exists simultaneously with all the other movies running at different points in the sequence of frames: that is, a vast number of conscious “yous” experience a moving present at different points.

That is to say,

(a) You (1) are now reading this sentence;

(b) You (1) have now moved on to reading this sentence, but there is another You (2) who is real and conscious right now reading sentence (a);

(c) You (1) are now reading this, but You (2) is reading (b), and another You (3) is reading (a), and so on ad infinitum.*

*Or are You (1), You (2) and You (3) all just the same person?

Did you read these three sentences? You will now have the conscious experience of reading those same three sentences at this point in your life again and again for eternity, if the “eternal return” theory is true. (Leave my blog immediately if you think you should be doing more important things whose conscious experience will recur cyclically to you in perpetuity!)

If science might confirm – in any sense – the idea of life after death, then this is the only plausible hypothesis ever put forward. If you have a happy and enjoyable life, then you might take solace in such a view. After all, you are eternal!

But if your life is not happy and indeed for anyone whose life is unhappy, unfair and involves suffering, most people will complain that it is a most distressing and disturbing theory of existence.

I have not seen any detailed treatment of the philosophical and ethical implications of the “eternal return” theory (although my reading is limited), because, if it were true, it seems to have extraordinary implications.

But to return to my main point. The problems I identified above do not seem to be resolved by the “eternal return” idea of the perception of one “moving present” amongst an infinitive set of such conscious “presents.” It still does not explain why no one can remember the future or have access to all conscious moments – past, present and future simultaneously. And, above all, how can a dynamic process like an experience of conscious life and moving time be derived from a universe that is timeless and static?

IV. Conclusion
An Eternalist “block universe” theory of time seems incompatible with many conceptions of time and the future assumed by economics, and even (curiously) explanations about the origins of physical and biological phenomena and the direction of causality assumed in science itself.

I return to the question of how the assumptions of economics and social sciences (and common sense), which appear to assume “Presentism,” are to be reconciled with the “Eternalism” of the natural sciences.

There are possible explanations, as follows:

(1) Eternalism is true, and an explanation of its difficulties does exist, but has not been found. This would necessitate radical rethinking of aspects of social sciences, philosophy and even causal explanations in science itself;

(2) the current Eternalist “block universe” theory is wrong. Empirical sciences only ever produce theories that are provisionally true, so perhaps with further future evidence it will emerge that “Presentism” or the “Growing block Universe” theory is true. I will just note that I personally suspect that the “Growing block Universe” theory is the true description of reality.

(3) there is of course another most curious escape hatch. If the static universe is unchanging (by definition) and there is no flow of time, then our mental life cannot be caused by evolving physical events in, or emergent properties of, the brain and its processes. In other words, a materialistic/physicalist explanation of the mind as dependent on changing brain states is impossible. Therefore the human mind – and all its mental life including the perception of a flow of time – is explained by some other process, possibly only explicable in terms of dualism or idealism. Matter and mind are separate. Whatever reality we exist in is all in the mind and not causally related to the material world. So all the findings of modern sciences on time are irrelevant.

I suppose this might appeal to you, if you are a theist or partial to idealism! Alternatively, if our mental life is caused by dynamic physical events in and emergent properties of the brain and its parts, this suggests that a static, timeless universe is not a true description of reality.

At this point, one might be tempted to throw up one’s arms, and admit that one needs a degree in physics and years of research to have anything worthwhile and informed to say about such problems.

If one wants to defend a “Growing block Universe” view, then perhaps a satisfactory resolution can be found in this theory, because it assumes a real flow of time and a future that does not yet exist.

Finally, I post a video below with a talk by the cosmologist George Ellis defending the “Crystallizing Block Universe” theory (his version of the “Growing block Universe” or “Emergent Block Universe” view of time).

I will just note how from 4.30 he describes something that strikes me as remarkably consistent with the Post Keynesian vision of the economic and social world.

George Ellis asserts that at the macro level of the universe with its complex systems (that is, neither quantum nor micro levels of reality) it is remarkable how limited precise scientific prediction is: even the natural sciences cannot precisely predict the past or future from present and past data for many complex macro level phenomena.

From 11.25 onwards, we get a most interesting example of this: the structure and disposition of current galaxies was causally dependent on quantum fluctuations after the Big Bang. But even if one knew everything about those quantum fluctuations, science could not predict the details of the current structure of the universe. See also Ellis and Rothman (2010) for a defense of the “Crystallizing Block Universe” theory.




Addendum
I add another video below by the Cambridge philosopher Huw Price on the block universe.





BIBLIOGRAPHY

Barbour, Julian B. 2000. The End of Time: The Next Revolution in Our Understanding of the Universe. Oxford University Press, New York.

Callender, Craig. 2010. “Is Time an Illusion?,” Scientific American 302.6: 58–65.

Carroll, Sean. “Ten Things Everyone Should Know About Time,” September 1, 2011
http://blogs.discovermagazine.com/cosmicvariance/2011/09/01/#.UWwecUpXuPA

Davies, Paul. 2002. “That Mysterious Flow,” Scientific American 287.3: 40–47.

Dunn, Stephen P. 2008. The ‘Uncertain’ Foundations of Post Keynesian economics: Essays in Exploration. Routledge, London and New York.

Ellis, George F. R. and Tony Rothman. 2010. “Time and Spacetime: The Crystallizing Block Universe,” International Journal of Theoretical Physics 49.5: 988-1003.

Lynds, P. 2003. “Subjective Perception of Time and a Progressive Present Moment: The Neurobiological Key to Unlocking Consciousness,” http://cogprints.org/3125/

Maudlin, Tim. 2009. The Metaphysics within Physics. Oxford University Press, Oxford.

Maudlin, Tim. 2012. Philosophy of Physics: Space and Time. Princeton University Press, Princeton, N.J.

Rucker, Rudy von Bitter. 1984. The Fourth Dimension: A Guided Tour of the Higher Universes. Houghton Mifflin, Boston, Ma.

Sukys, Paul. 1999. Lifting the Scientific Veil: Science Appreciation for the Nonscientist. Rowman & Littlefield, Lanham, MD.

Greedy Reductionism, Science and Economics

John E. King’s new book The Microfoundations Delusion: Metaphor and Dogma in the History of Macroeconomics (Cheltenham, 2012) charges neoclassical economics with the delusion that macroeconomic processes must just be explained in terms of microeconomics, and indeed that microeconomics is the proper foundation for all macroeconomic phenomena.

These ideas can be called “strong reductionism” and, curiously enough, the neoclassical delusion is a perfect example of what philosophers call “greedy reductionism.” The philosopher Daniel Dennett usefully calls “strong reductionism” the error of “greedy reductionism”: the belief that higher-level principles and traits of complex systems of all sciences (including social sciences) should be abandoned or simply explained in terms of lower-level terms (Dennett 1995: 80–81).

So what is the influence of this idea in the natural sciences and social sciences?

I. Reductionism in the Natural Sciences
King, citing the work of others, charges certain scientists with the “strong reductionism” fallacy, such as Richard Dawkins.

The objection is described by Lewontin, Rose, and Kamin in the following terms:

“Broadly, reductionists try to explain the properties of complex wholes—molecules, say, or societies—in terms of the units of which those molecules or societies are composed. They would argue, for example, that the properties of a protein molecule could be uniquely determined and predicted in terms of the properties of the electrons, protons, etc., of which its atoms are composed. And they would also argue that the properties of a human society are similarly no more than the sums of the individual behaviors and tendencies of the individual humans of which that society is composed. Societies are ‘aggressive’ because the individuals who compose them are ‘aggressive,’ for instance. In formal language, reductionism is the claim that the compositional units of a whole are ontologically prior to the whole that the units comprise. That is, the units and their properties exist before the whole, and there is a chain of causation that runs from the units to the whole.” (Lewontin, Rose, and Kamin 1984: 5).

But in my view the scientists or philosophers who are sometimes accused of being guilty of crude reductionism do not in fact hold that “strong reductionist” viewpoint.

Dawkins, for example, repudiates the type of “strong reductionism” or “precipice reductionism” that seeks to “explain complicated things directly in terms of the smallest parts, even, in some extreme versions of the myth, as the sum of the parts!” (Dawkins 1991: 13; emphasis in original). Instead, Dawkins endorses a “hierarchical reductionism” which recognises that the type of explanations suitable at a lower level are not the same as at higher levels (Dawkins 1991: 13; see also Dawkins 1986; Weinberg 1994).

Steven Pinker elaborates:

“Reductionism, like cholesterol, comes in good and bad forms. Bad reductionism—also called ‘greedy reductionism’ or ‘destructive reductionism’—consists of trying to explain a phenomenon in terms of its smallest or simplest constituents. Greedy reductionism is not a straw man. I know several scientists who believe (or at least say to granting agencies) that we will make breakthroughs in education, conflict resolution, and other social concerns by studying the biophysics of neural membranes or the molecular structure of the synapse. But greedy reductionism is far from the majority view, and it is easy to show why it is wrong. As the philosopher Hilary Putnam has pointed out, even the simple fact that a square peg won’t fit into a round hole cannot be explained in terms of molecules and atoms but only at a higher level of analysis involving rigidity (regardless of what makes the peg rigid) and geometry. And if anyone really thought that sociology or literature or history could be replaced by biology, why stop there? Biology could in turn be ground up into chemistry, and chemistry into physics, leaving one struggling to explain the causes of World War I in terms of electrons and quarks. Even if World War I consisted of nothing but a very, very large number of quarks in a very, very complicated pattern of motion, no insight is gained by describing it that way.

Good reductionism (also called hierarchical reductionism) consists not of replacing one field of knowledge with another but of connecting or unifying them. The building blocks used by one field are put under a microscope by another.” (Pinker 2003: 70).

But the point is that roughly hierarchical processes at each higher level might be understood at different levels of analysis and the lowest one is not necessarily of any use outside its restricted domain, and the higher-level analysis may well be the most important one.

In general, I would argue that, when properly limited to its correct place, “hierarchical reductionism” is no threat to science, the social sciences, and certainly not economics.

In a nice discussion in Debunking Economics (2011), Steve Keen notes how “strong reductionists” in the natural sciences thought that all the sciences could ultimately be reduced to physics (Keen 2011: 206), but this project has failed.

As Keen says,

“Strong reductionism implies that the behaviour of any complex system can be entirely understood by considering the behavior of its constituents, and then summing their effects: ‘the whole is the sum of its parts.’” (Keen 2011: 206).

But when complex systems have multiple nonlinear relations between variables the reality is that properties at the aggregate level can emerge which cannot be found at the lower level of individual components (Keen 2011: 207). The aggregate level phenomena are called “emergent properties” (Keen 2011: 207). Each higher-level science is not just an applied version of the science below it. The rough hierarchy of sciences exists, but

“‘at each higher stage entirely new laws, concepts and generalizations are necessary, requiring inspiration and creativity to just as great a degree as in the previous one. Psychology is not applied biology, nor is biology applied chemistry’” (Keen 2011: 208).

II. Strong Reductionism in Economics
In economics, the same “strong reductionist” method manifests itself in the desire to directly derive the properties of the macroeconomy from microeconomics (Keen 2011: 206). Under the neoclassical view, the whole economy or macroeconomy is just the sum of individual behaviour.

But this is just another instance of the “strong reductionist” fallacy. Macroeconomics is not applied microeconomics.

A case in point:

“despite its adherence to strong reductionism, neoclassical economics provides one of the best examples of emergent phenomena ever: the ‘Sonnenschein-Mantel-Debreu conditions’ … . This research proved that a market demand curve derived from the preferences of individual consumers who in isolation obeyed the Law of Demand – i.e., they had ‘downward-sloping demand curves’ – will not obey the Law of Demand: a market demand curve can have any shape at all.” (Keen 2011: 208).

While I will leave the question of how Austrian economics commits the “strong reductionist” fallacy for another post, one can certainly see it in the patron saint of modern Austrian economics, Ludwig von Mises:

“Society is concerted action, cooperation. Society is the outcome of conscious and purposeful behavior. … The total complex of the mutual relations created by such concerted actions is called society. … But society is nothing but the combination of individuals for cooperative effort. It exists nowhere else than in the actions of individual men. It is a delusion to search for it outside the actions of individuals. To speak of a society’s autonomous and independent existence, of its life, its soul, and its actions is a metaphor which can easily lead to crass errors.” (Mises 1998: 143).

In other words, Mises is just a crude “strong reductionist,” and for him society is just the “sum of its parts”: the “total complex of the mutual relations created by ... concerted actions is called society.” He has no understanding of emergent properties or downward causation.

Curiously, some few Austrians might have grasped the unsoundness of “strong reductionism,” despite (sometimes) protestations to the contrary. Hayek’s “spontaneous order” captures some elements of why greedy reductionism is wrong and how “emergent properties” or “emergent order” can occur in human society.

III. Conclusion
I would conclude that moderate reductionism or “hierarchical reductionism” is not a threat to good social science, nor to heterodox economics. It is “strong reductionism” that is the fallacy and bad science.

Certain scientists accused of “bad reductionism” (as far as I can see) are probably not guilty of it.

And finally the neoclassical attempt to derive macro from microfoundations is bad science.


BIBLIOGRAPHY

Dawkins, Richard. 1986. “Sociobiology: The New Storm in a Teacup,” in S. Rose and L. Appignanesi (eds.), Science and Beyond. Blackwell, Oxford. 61–78.

Dawkins, Richard. 1991. The Blind Watchmaker. Penguin Books, London.

Dennett, Daniel C. 1995. Darwin’s Dangerous Idea: Evolution and the Meanings of Life. Penguin Books, London.

Keen, S. 2011. Debunking Economics: The Naked Emperor of the Social Sciences (rev edn.). Zed Books, New York and London.

King, J. E. 2012. The Microfoundations Delusion: Metaphor and Dogma in the History of Macroeconomics. Edward Elgar, Cheltenham.

Lewontin, Richard C., Rose, Steven and Leon J. Kamin. 1984. Not in Our Genes: Biology, Ideology, and Human Nature. Pantheon Books, New York.

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

Pinker, Steven 2003. The Blank Slate: The Modern Denial of Human Nature. Penguin Books, London.

Weinberg, Steven. 1994. Dreams of a Final Theory. Vintage Books, New York.

Links for Economics

I have assembled a list of links here of online newspapers, magazines, blogs and staff pages relevant for economics.


I. Online Newspapers, Journals, Magazines
Businessweek.com
http://www.businessweek.com/

Economist.com
http://www.economist.com/

Wall Street Journal
http://online.wsj.com/

Forbes.com
http://www.forbes.com/

Barrons
http://online.barrons.com/home-page

Financial Times
http://www.ft.com/

BBC News Business
http://www.bbc.co.uk/news/business

Leftbusinessobserver.com
http://www.leftbusinessobserver.com

Dollars and Sense, Real World Economics
http://www.dollarsandsense.org/


II. Mainstream Blogs
New Keynesian
Paul Krugman Blog
http://krugman.blogs.nytimes.com/

Facts and Other Stubborn Things, Daniel Kuehn
http://factsandotherstubbornthings.blogspot.com/

Greg Mankiw’s Blog
http://gregmankiw.blogspot.com/

Economics One, A Blog by John B. Taylor
http://johnbtaylorsblog.blogspot.com

Brad DeLong, Grasping Reality with the Invisible Hand
http://delong.typepad.com

Monetarist
Market Monetarist
http://marketmonetarist.com/

Scott Sumner
http://www.themoneyillusion.com

Macro and Other Market Musings, David Beckworth
http://macromarketmusings.blogspot.com

Stephen Williamson: New Monetarist Economics
http://newmonetarism.blogspot.com

MacroMania, David Andolfatto
http://andolfatto.blogspot.com

Uneasymoney.com, David Glasner
http://uneasymoney.com/

New Classical
John H. Cochrane, The Grumpy Economist
http://johnhcochrane.blogspot.com

Other
Dani Rodrik’s Weblog
http://rodrik.typepad.com/dani_rodriks_weblog/

Matthew Yglesias
http://www.slate.com/blogs/moneybox.html

Hjeconomics: The Blog, Henrik Jensen
http://blog.hjeconomics.dk

Marginalrevolution.com
http://marginalrevolution.com

Nakedcapitalism.com
http://www.nakedcapitalism.com/


III. Post Keynesian and Heterodox Keynesian
Post Keynesian Economics Study Group
http://www.postkeynesian.net/

Naked Keynesianism
http://nakedkeynesianism.blogspot.com/

Debt Deflation, Steve Keen
http://www.debtdeflation.com/blogs/

Mark Hayes, Robinson College, Cambridge
http://people.pwf.cam.ac.uk/mgh37/

Dr. Thomas Palley, PhD. in Economics (Yale University)
http://www.thomaspalley.com/

Marc Lavoie, Professor in the Department of Economics at the University of Ottawa
http://www.socialsciences.uottawa.ca/eco/eng/profdetails.asp?id=64

Dr. J. Barkley Rosser, Jr., Professor of Economics, James Madison University
http://cob.jmu.edu/rosserjb/

Philip Arestis
http://www.levyinstitute.org/scholars/?auth=5

http://www.landecon.cam.ac.uk/staff/profiles/parestis.htm

Robert Pollin, Professor of economics at the University of Massachusetts-Amherst
http://www.peri.umass.edu/staff/#c128

Professor Malcolm Sawyer, Leeds University Business School
http://business.leeds.ac.uk/about-us/faculty-staff/member/profile/malcolm-sawyer/

http://lubswww.leeds.ac.uk/MKB/MalcolmSawyer/

Professor Sheila Dow, University of Stirling
http://www.economics.stir.ac.uk/People/staff/Dow/dow.htm

Debtonation.org, Ann Pettifor blog
http://www.debtonation.org/

Michael Hudson
http://michael-hudson.com/

Richard P.F. Holt’s Web Site
http://www.richolt.net/Ric_Holt/Welcome.html

Ric Holt, “What is Post Keynesian Economics?”

Barkley Rosser’s Home Page
http://cob.jmu.edu/rosserjb/

Mark Hayes’s Staff Page
http://people.pwf.cam.ac.uk/mgh37/

Malcolm Sawyer’s Web Page
http://lubswww.leeds.ac.uk/MKB/MalcolmSawyer/

Modern Monetary Theory (MMT)/Neochartalism
New Economic Perspectives
http://neweconomicperspectives.org/

L. Randall Wray, Professor of Economics at the University of Missouri-Kansas City
http://www.cfeps.org/people/wraylr

Billy Blog, Bill Mitchell
http://bilbo.economicoutlook.net/blog/

Warren Mosler, The Center of the Universe
http://moslereconomics.com/

Centre of Full Employment and Equity (CofFEE)
http://e1.newcastle.edu.au/coffee/

Mike Norman Economics Blog
http://mikenormaneconomics.blogspot.com/

Modern Money Mechanics
http://modernmoney.wordpress.com/

Other Heterodox Resources
Prime, Policy Research in Macroeconomics
http://www.primeeconomics.org/

New Economics Foundation
http://www.neweconomics.org/

Unlearningeconomics Blog
http://unlearningeconomics.wordpress.com/

Heteconomist.com
http://heteconomist.com/

Real-World Economics Review Blog
http://rwer.wordpress.com/

Econospeak Blog
http://econospeak.blogspot.com/

James Galbraith
http://utip.gov.utexas.edu/JG/publications.html

Robert Skidelsky’s Official Website
http://www.skidelskyr.com/

The Other Canon
http://www.othercanon.org/

Tony Lawson, Staff Page, University of Cambridge
http://www.econ.cam.ac.uk/faculty/person.html?id=lawson&group=faculty

Thoughts on Economics, Robert Vienneau
http://robertvienneau.blogspot.com/

Post-Keynesian Observations
http://rommeldak.wordpress.com/

Lars P. Syll’s Blog, Docendo discimus
http://larspsyll.wordpress.com/

Levy Economics Institute of Bard College
http://www.levyinstitute.org/

Multiplier Effect, Levy Economics Institute Blog
http://www.multiplier-effect.org/

New Deal 2.0
http://www.newdeal20.org/

Triplecrisis.com
http://triplecrisis.com/

Unsettling Economics, Michael Perelman
http://michaelperelman.wordpress.com/

The Progressive Economics Forum
http://www.progressive-economics.ca/

John Quiggin
http://johnquiggin.com/

Ambrose Evans-Pritchard Columns, The Telegraph
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/

IV. Libertarian and Austrian
ThinkMarkets, A blog of the NYU Colloquium on Market Institutions and Economic Processes
http://thinkmarkets.wordpress.com/

Radicalsubjectivist Blog
http://radicalsubjectivist.wordpress.com/

Free Advice, The Personal Blog of Robert P. Murphy
http://consultingbyrpm.com/blog

Coordination Problem
http://www.coordinationproblem.org/

Economic Thought.net, Jonathan Finegold Catalán
http://www.economicthought.net/blog/?author=1

Krugman in Wonderland, William L. Anderson
http://krugman-in-wonderland.blogspot.com/

Ludwig von Mises Institute
http://mises.org/

Mises Economic Blog
http://blog.mises.org/

Cafehayek.com
http://cafehayek.com/

Taking Hayek Serioulsly, Greg Ransom
http://hayekcenter.org/

Mskousen.com
http://www.mskousen.com/

Roger W. Garrison, Professor of Economics, Auburn University
http://www.auburn.edu/~garriro/

Libertarianpapers.org
http://www.libertarianpapers.org/

The Free Man Online
http://www.thefreemanonline.org/

The Independent Institute
http://www.independent.org/

Foundation for Economic Education (FEE)
http://fee.org/

Library of Economics and Liberty
http://www.econlib.org/index.html

Rothbardiana
http://www.rothbard.it/

The Daily Bell.com
http://www.thedailybell.com/index.asp

Hanshoppe.com
http://www.hanshoppe.com/

Walterblock.com
http://www.walterblock.com/

George Selgin
http://www.terry.uga.edu/~selgin/

Selected Works of Mario Rizzo
http://works.bepress.com/mario_rizzo/

Guido Hülsmann
http://guidohulsmann.com/

Free Association, Sheldon Richman
http://sheldonfreeassociation.blogspot.com/

Marginalrevolution.com
http://www.marginalrevolution.com/marginalrevolution/

Catallaxyfiles.com, Australia’s leading libertarian and centre-right blog
http://catallaxyfiles.com/

The Cobden Centre
http://www.cobdencentre.org/

Adamsmith.org Blog
http://www.adamsmith.org/blog/

Adamsmith.org
http://www.adamsmith.org/

Quarterly Journal of Austrian Economics
http://mises.org/periodical.aspx?Id=4/

Stefan Karlsson Blog
http://stefanmikarlsson.blogspot.com/

Soundmoneyproject.org
http://www.soundmoneyproject.org/

Ideas Matter
http://ideasmatter.typepad.com/ideas-matter/

Charles Rowley’s Blog
http://charlesrowley.wordpress.com

Other Libertarian/Free Market Resources
Cato Institute
http://www.cato.org/

Miscellaneous
Crash Landing, blog of Gene Callahan
http://gene-callahan.blogspot.com/

Nassim Nicholas Taleb is No Progressive on Economics

Nassim Nicholas Taleb is the author of The Black Swan (2007) and Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (2001), works about unpredictable events. The latter book also invoked the writings of George L. S. Shackle, and both of his books caused something of a stir.

But here we can see how far this man is from any progressive economic agenda. His assertions that America needs to eliminate deficits, and has been risking hyperinflation are, quite frankly, just utter rubbish. He even says he is afraid of hyperinflation (8.25), putting him in company with some of the most laughable Austrian ideologues.

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.

Uncertainty and Non-Ergodic Stochastic Systems

The concept of uncertainty in economic life was used by Keynes in the General Theory (1936) and also in an article defending his new theory the next year (see Keynes, “The General Theory of Employment,” Quarterly Journal of Economics 51 [1937]: 209–223).

Paul Davidson notes the nature of uncertainty in the Keynesian/Knightian sense:

“Keynes’s description of uncertainty matches technically what mathematical statisticians call a nonergodic stochastic system. In a nonergodic system, one can never expect whatever data set exists today to provide a reliable guide to future outcomes. In such a world, markets cannot be efficient” (Davidson 2002: 187).

“Keynes … rejected this view that past information from economic time-series realizations provides reliable, useful data which permit stochastic predictions of the economic future. In a world where observations are drawn from a non-ergodic stochastic environment, past data cannot provide any reliable information about future probability distributions. Agents in a non-ergodic environment ‘know’ they cannot reliably know future outcomes. In an economy operating in a non-ergodic environment, therefore – our economic world – liquidity matters, money is never neutral, and neither Say’s Law nor Walras’s Law is relevant. In such a world, Keynes’s revolutionary logical analysis is relevant” (Davidson 2006: 150).

Certain types of phenomena in our universe are what mathematicians call non-ergodic stochastic systems. The concept of radical uncertainty applies to such systems, like medium term weather events, financial markets, and economies, and other natural systems studied in physics.

In these systems, past data is not a useful tool from which one can derive an objective probability score for some specific, future state of a quantitative variable in the system. Of course, such a system can still have trends, cycles and oscillations, both in the past and future. For example, stock markets certainly have cycles of bull and bear phases, but trying to predict the specific value of some stock x, say, two years from now with an objective probability score is not possible.

But the fundamental point is that it is still possible for a powerful agency or entity to reduce uncertainty in these systems, or at least in theory in some of them. It is entirely possible that in the future – with a far more advanced human civilization – we could use technology to control local, regional or perhaps even global weather.

And even today a powerful entity like the government can intervene to reduce uncertainty in the non-ergodic stochastic system we call the economy.


Is Climate a Non-Ergodic Stochastic System?

Does the earth’s climate system have the property of non-ergodicity? This question has occurred to me more than once, but I am actually unsure of the answer.

Some quick research suggests that climate models appear to make an ergodicity assumption about climate systems:

“Thus, it is perfectly valid to consider our climate a realization of a continuous stochastic process even though the time-evolution of any particular path is governed by physical laws. In order to apply this fact to our diagnostics of the observed and simulated climate we have to assume that the climate is ergodic. That is, we have to assume that every trajectory will eventually visit all parts of phase space and that sampling in time is equivalent to sampling different paths through phase space. Without this assumption about the operation of our physical system the study of the climate would be all but impossible.

The assumption of ergodicity is well founded, at least on shorter time scales, in the atmosphere and the ocean. In both media, the laws of physics describe turbulent fluids with limited predictability (ie, small perturbations grow quickly, so two paths through phase space diverge quickly) (von Storch and Zwiers 1999: 29–30).

But then what about longer time scales? If “the laws of physics describe turbulent fluids with limited predictability” on short time scales, what sort of predictability can they provide on medium or long term time scales?

Let’s assume, for the sake of argument, that long term climate is non-ergodic, in the way that a free market economy is. Does that mean all intervention would be useless and ineffective in such a system to affect the state of it? Does it mean that we are all doomed to (in a manner of speaking) live in a “free market” climate forever?

In fact, that does not follow at all. It is probably very likely that our future technology, when it becomes sophisticated and powerful enough, will be used by humans to intervene and control climate, e.g., by preventing ice ages.


BIBLIOGRAPHY

David, P. A. 2007. “Path Dependence, its Critics and the Quest for ‘Historical Economics,’” in G. M. Hodgson, The Evolution of Economic Institutions: A Critical Reader, Edward Elgar, Cheltenham. 120–144.

Davidson, P. 2002. Financial Markets, Money, and the Real World, Edward Elgar, Cheltenham.

Davidson, P. 2004. “Uncertainty and Monetary Policy,” in P. Mooslechner, H. Schuberth, and M. Schürz (eds), Economic Policy under Uncertainty: The Role of Truth and Accountability in Policy Advice, Edward Elgar, Cheltenham. 233–260.

Davidson, P. 2006. “Keynes and Money,” in P. Arestis and M. Sawyer (eds), A Handbook of Alternative Monetary Economics, Edward Elgar, Cheltenham, UK and Northampton, Mass. 139–153.

Keynes, J. M. 1937. “The General Theory of Employment,” Quarterly Journal of Economics 51 (February): 209–223.

Storch, H. von and F. W. Zwiers, 1999. Statistical Analysis in Climate Research, Cambridge University Press, Cambridge, UK and New York.

Mises’ Praxeology: A Critique

The praxeological system of Ludwig von Mises (1881–1973) continues to be popular in the Austrian school of economics, and Hans-Hermann Hoppe is a recent advocate of praxeology as a methodology for economic science (see Hoppe 2007).

In this post, I present a critique of Mises’ praxeology. First, we should note two important caveats: (1) even historically, praxeology was not accepted by all Austrians: Schumpeter used a positivist methodology for Austrian economics (Allen 1991: 42), and it appears that Hayek never really accepted Mises’ apriorism at all (see Appendix 2 below); and (2) a number of self-described Austrian economists today do not follow Mises’ praxeology in its pure form, and some are even critical of praxeology and offer different methodologies for Austrian economic analysis (Caldwell 1984: 118 and 137, n. 45; Egger 1978). For example, Israel Kirzner appears to have taken a more pragmatic approach to Austrian methodology (Caldwell 1984: 137, n. 45) and D. Lavoie (1986) criticised rigid Misesian praxeology from the perspective of modern hermeneutics.⁽¹⁾ In particular, Gerald P. O’Driscoll and Mario J. Rizzo have offered a reconstructed Austrian methodology in their book The Economics of Time and Ignorance (1985; rev. edn 1996), which appears to allow some role for empirical testing of interpretive theories to see whether they apply to the real world (see also Rizzo 1982 for a proposed Lakatosian reform of Austrian economics). O’Driscoll and Rizzo’s modified Austrian methodology drew fire from older Misesians. ⁽²⁾ I note that other libertarians such as James M. Buchanan (1987: 74–74) and Robert Nozick (1977) have offered critiques of Mises’ praxeology as well (cf. Block 1980 for a response to Nozick).

What is Mises’ praxeology?

Mises regarded economics as the study of human choice under conditions of scarcity. He thought that the correct methodology for the study of economics was praxeology. Praxeology, the study of human action, was also the method to be used in all other social sciences, and not just in economics. Mises thus rejected as invalid any empirically-based methodology for economics. He believed that the foundational idea for his system of praxeology was the human action axiom. This proposition is that all human action is rational because all action is by definition purposeful (the word rational is here defined as “purposeful”). Mises argued that the human action axiom was a synthetic a priori proposition. Synthetic a priori propositions were a type of proposition proposed by Kant. As Ludwig M. Lachmann has argued,

“Mises drew his inspiration from … the Neo-Kantian philosophy that dominated academic Germany in the first decade of … [the 20th century]” (Lachmann 1976: 56).

But it can also be noted that there is some dispute about Mises’ view of the logical status of his starting axioms. D. Gordon (1996) argues that Mises uses the expression “synthetic a priori” to refer to a necessarily true proposition that is not a tautology. Hans Albert (1999: 131) argues that Mises’ statements about aprioristic reasoning are confused. Some have even detected an influence on Mises from Husserl’s phenomenology (Addleson 1995: 100).

As in any a priori argument, in Misesian theory the inferences drawn from starting axioms by deductive logic are necessarily true or apodictically certain. No empirical evidence is necessary to demonstrate the truth of Mises’ theories, as the truth of the inferences is necessarily known in advance of experience. Even when the real world provides significant countervailing empirical evidence contradicting an inference in Mises’ system, it is irrelevant and can be explained away (Barry 1986: 60). Mises called for methodological dualism, which is the idea that the methodology of the natural sciences is fundamentally different from that of the social sciences (note that some scholars claim that Hayek apparently abandoned this idea of methodological dualism after 1952). As Mises says,

[sc. praxeology] aims at knowledge valid for all instances in which the conditions exactly correspond to those implied in its assumptions and inferences. Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification and falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts. They are a necessary requirement of any intellectual grasp of historical events (Mises 1998 [1949]: 32).

A reading of Human Action shows that Mises firmly held that empirical evidence can never verify or falsify the inferences of praxeology:

“Praxeology is a theoretical and systematic, not a historical, science. Its scope is human action as such, irrespective of all environmental, accidental, and individual circumstances of the concrete acts. Its cognition is purely formal and general without reference to the material content and the particular features of the actual case. It aims at knowledge valid for all instances in which the conditions exactly correspond to those implied in its assumptions and inferences. Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification or falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts” (Mises 1949: 32).

“Even the most faithful examination of a chapter of economic history, though it be the history of the most recent period of the past, is no substitute for economic thinking. Economics, like logic and mathematics, is a display of abstract reasoning. Economics can never be experimental and empirical. The economist does not need an expensive apparatus for the conduct of his studies. What he needs is the power to think clearly and to discern in the wilderness of events what is essential from what is merely accidental” (Mises 1949: 864).

“What assigns economics its peculiar and unique position in the orbit both of pure knowledge and of the practical utilization of knowledge is the fact that
its particular theorems are not open to any verification or falsification on the ground of experience. Of course, a measure suggested by sound economic reasoning results in producing the effects aimed at, and a measure suggested by faulty economic reasoning fails to produce the ends sought. But such experience is always still historical experience, i.e., the experience of complex phenomena. It can never, as has been pointed out, prove or disprove any particular theorem. The application of spurious economic theorems results in undesired consequences. But these effects never have that undisputable power of conviction which the experimental facts in the field of the natural sciences provide. The ultimate yardstick of an economic theorem’s correctness or incorrectness is solely reason unaided by experience” (Mises 1949: 858).

As Rothbard said, “Mises indeed held not only that economic theory does not need to be ‘tested’ by historical fact but also that it cannot be so tested” (Rothbard 1997: 72). Despite Mises’ view that empirical data can never verify praxeological theories, we find modern Austrians frequently invoking empirical evidence as if it verifies Austrian theories. But, as Mises argued, empirical data, even if they appear to support the inferences of praxeology, do not in any sense verify praxeological inferences. This means that any Austrian who invokes empirical evidence that appears to confirm the inferences of praxeology, or who implies that such evidence supports Misesian theory, has in fact not verified those inferences in any way. Consequently, there seems to be little point in the use of empirical data by Misesians.

Is Misesian praxeology defensible? Are there flaws in it? I argue below that there are fatal flaws in praxeology.

Mises thought that only criticisms of the verbal chain of logic in his arguments could refute the theorems of praxeology. Thus empirical evidence is irrelevant. Another way to put this is that Mises’ theories are not falsifiable empirically, and Misesian praxeology is radically different from Karl Popper’s falsificationist methodology for scientific knowledge (for the view that economics should embrace Popperian methodology, see Blaug 1980). Many economists who think that Popper’s falsificationism provides the best methodology for discovering genuine, new knowledge about the real world look upon Mises’ praxeology as a deeply flawed system (Blaug 1992: 80–82), and this is a view I am sympathetic to. Certainly Austrian economics has been accused of intellectual stagnation for failing to take empirical research seriously (Paqué 1985: 426).

Mises’ praxeology is a system that is a perfect example of apriorism. There is no reason to believe that apriorism provides a consistent and reliable method for obtaining true theories about the real world. Praxeology has obvious affinities with the theories of the great rationalist system-builders of the early modern period, like Descartes, Spinoza and Leibniz, whose systems, as we now know, were utterly false (Bunge 1998: 209). For example, Leibniz’s monadology was an elaborate theory arrived at by aprioristic argument – but completely refuted by modern science. There is, then, no reason in principle why aprioristic systems must always be considered as consistently reliable and true ways of obtaining knowledge about the real world: many such systems have turned out to be false, and Mises’ praxeology could possibly be another such failed system, if we can show this convincingly by external and internal criticism.

B. J. Caldwell (1984) has pointed out that the best refutation of praxeology is by internal criticism. Mises himself recognised that such internal criticism of praxeology’s “chain of deductions” and “assumptions” was a valid way of refuting its inferences:

“From the unshakable foundation of the category of human action praxeology and economics proceed step by step by means of discursive reasoning. Precisely defining assumptions and conditions, they construct a system of concepts and draw all the inferences implied by logically unassailable ratiocination. With regard to the results thus obtained only two attitudes are possible; either one can unmask logical errors in the chain of the deductions which produced these results, or one must acknowledge their correctness and validity” (Mises 1949: 67).

“Man … can never be absolutely certain that his inquiries were not misled and that what he considers as certain truth is not error. All that man can do is to submit all his theories again and again to the most critical reexamination. This means for the economist to trace back all theorems to their unquestionable and certain ultimate basis, the category of human action, and to test by the most careful scrutiny all assumptions and inferences leading from this basis to the theorem under examination. It cannot be contended that this procedure is a guarantee against error. But it is undoubtedly the most effective method of avoiding error” (Mises 1949: 68).

“Every theorem of praxeology is deduced by logical reasoning from the category of action. It partakes of the apodictic certainty provided by logical reasoning that starts from an a priori category. Into the chain of praxeological reasoning the praxeologist introduces certain assumptions concerning the conditions of the environment in which an action takes place. Then he tries to find out how these special conditions affect the result to which his reasoning must lead. The question whether or not the real conditions of the external world correspond to these assumptions is to be answered by experience. But if the answer is in the affirmative, all the conclusions drawn by logically correct praxeological reasoning strictly describe what is going on in reality” (Mises 1978: 44).

Cleary even Mises himself admitted that synthetic propositions as auxiliary hypotheses entered into his praxeological deductive reasoning. If such assumptions do not correspond to the “real conditions of the external world,” then his inferences are unsound and untrue.

In Human Action (Mises 1949: 65–68) and The Ultimate Foundation of Economic Science (Mises 1978 [1962]: 44), Mises thus concedes that praxeology’s deductive reasoning will sometimes rely on some empirical assumptions, although these are (allegedly) generally accepted or obvious (Rizzo 1982: 64).

But synthetic propositions as premises in deductive arguments must be sufficiently justified (see Appendix 3 below for a simple example of a valid but unsound syllogism), and this is precisely what can make Mises’ arguments unsound and threaten the truth of his inferences. And there are of course numerous specific critiques of Mises’ praxeology from such an internal perspective. My discussion below is based in part on Caldwell 1984 and 1985.

There are four main ways in which praxeology can be criticised:

(1) questioning the truth of Mises’ axioms;
(2) showing flaws in the verbal chain of logic used to draw the inferences arrived at in praxeology.
(3) demonstrating unjustified subsidiary propositions or hidden assumptions in Mises’ reasoning that invalidate his conclusions, and
(4) the question of how to choose between competing praxeological systems derived by a priori deduction from (allegedly) certain starting axioms.

I want to focus on points (2), (3) and (4) in my discussion below.

I. (2) and (3): Unjustified subsidiary and hidden assumptions in Mises’ Praxeology The deductive method in Mises’ Human Action (1949) uses subsidiary propositions and hidden assumptions, which must be true for the deductive argument to work and apply to the real world. Already in 1951, G. J. Schuller had pointed out that the deductive arguments in Mises’ Human Action used many unstated/hidden assumptions:

“Are the praxeological axioms universally and incontestably true in the same sense as the laws of logic? The denial of the laws (or rules) of logic results in absurdity. The denial of Mises’ laws does not … The higher a deductive edifice is built, the more numerous are the syllogistic steps required in its construction and the more numerous are the assumptions (stated or implied) on which the structure rests. The probability of error (except for supermen) increases with both” (Schuller 1951: 186).

“Acceptance of Mises’ stated axioms does not necessarily imply acceptance of the “principles” or “applications to reality” which he has drawn from them even though his logic may be impeccable. When a logical chain grows beyond the limits set by stated assumptions, it uses unstated assumptions. The number of unstated assumptions (axioms, postulates, or other) in Human Action is enormous. If Mises denies this, let him try to rewrite his book as a set of numbered axioms, postulates, and syllogistic inferences using, say, Russell’s Principia” (Schuller 1951: 188).

More recently, M. Blaug has criticised Mises’ system by giving specific examples of these hidden assumptions:

“[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.).

W. Meyer has also shown how Mises does not even follow his own methodology consistently, and how Mises assumed various unproven hypotheses about expectations and information in free market economies, hypotheses which cannot be derived deductively from the axiom of human action (Meyer 1987; see also Albert 1999: 133 and Meyer 1980: 82–91; Albert 1980, which offers a critique of Mises, appears to be unpublished; see also Gutiérrez 1971 for a critique for Rothbard’s praxeology; on problems with Mises’ theory of money, see Meyer 1987; Albert 1999: 132). Meyer proposes a completely reformed Austrian methodology that uses Popperian falsificationism (Meyer 2002: 278).

Bruce J. Caldwell also notes that Mises requires subsidiary hypotheses to apply his praxeological system to the real world. These hypotheses appear to be synthetic, and subject to empirical confirmation or falsification. One such hypothesis is the “disutility of labor for all humans” (Caldwell 1984: 376), and even Mises himself admitted that the disutility of labour was not an a priori 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 1949: 65).

A specific and important praxeological argument that can be refuted by false hidden assumptions is Mises’ argument for free trade by comparative advantage (or the “Ricardian law of association”), given in Human Action: A Treatise on Economics (4th edn, 1996), pp. 159–164. On this, see my separate post “Mises on the Ricardian Law of Association: The Flaws of Praxeology” (January 25, 2011).

It is clear from all this that Mises’ praxeology does have severe flaws in its verbal chain of logic and argumentation. When unreal or false subsidiary hypotheses are used in an a priori argument, the resulting inferences do not describe the world in which we actually live. That is, any conclusions that are necessarily drawn by deduction will only be true of the imaginary world where one’s subsidiary hypotheses are hypothetically true. But that imaginary world is not the real world we know and live in. It is a fantasy world.

II. (4): What about other a priori systems? Another problem for Misesian economics is that it is not the only praxeological system. The fact is that there are a number of other systems of thought that are (allegedly) derived by deduction from universally true axioms. How do we choose between such systems? (Prychitko 1998: 81). For example, Marxists like M. Hollis and E. J. Nell have propounded a system using deduction from (allegedly) universally true axioms in their book Rational Economic Man (1975). Their system is the antithesis of Mises’ Austrian economics, but supposedly arrives at laws which are universally true. In other words, when competing praxeological systems are encountered, what method is available to the Austrian praxeologist to choose between them?

Conclusion For all these reasons, it is clear that Mises’ praxeology has fatal flaws. The alleged apodictic certainty that is claimed for the laws and inferences of Misesian praxeology actually vanish under closer inspection. The most devastating problem is that, when Mises’ arguments are examined, it can be seen that his a priori reasoning often relies on assumed synthetic propositions that are probably false. In this case, the inferences of praxeology simply do not apply to the real world in which we live. Instead, when Austrian economists make unrealistic assumptions and then use a priori reasoning to draw inferences using these false propositions, their conclusions might well have necessary truth, but only when applied to the imaginary, fantasy world where those assumptions might hypothetically hold. In other words, the inferences of praxeology describe a world which is as imaginary and non-existent as the merry old land of Oz.

Those who advocate the use of an empirical or Popperian methodology for economics have solid and independent reasons for rejecting the praxeology of Mises as well.
Moreover, it appears that some modern academic Austrians have moved beyond Mises, and have argued that Austrian economics needs to formulate hypotheses allowing prediction and subject to empirical testing. If this trend continues, Austrian method will converge with mainstream methodology, and it is quite possible that the Misesians might one day become a minority even in their own school.


APPENDIX 1: MISES’ ETHICS

I note that Mises has a subjectivist view of ethics and rejected natural law ethics:

“There is, however, no such thing as natural law and a perennial standard of what is just and what is unjust. Nature is alien to the idea of right and wrong. “Thou shalt not kill” is certainly not part of natural law. “Thou shalt not kill” is certainly not part of natural law. The characteristic feature of natural conditions is that one animal is intent upon killing other animals and that many species cannot preserve their own life except by killing others. The notion of right and wrong is a human device, a utilitarian precept designed to make social cooperation under the division of labor possible. All moral rules and human laws are means for the realization of definite ends. There is no method available for the appreciation of their goodness or badness other than to scrutinize their usefulness for the attainment of the ends chosen and aimed at” (Mises 1998 [1949]: 716).

Mises did not believe that his system of praxeology was derived from any ethical theory. In fact, praxeology was independent of ethics, and its alleged “objectivity” was the result of its being “value-free’ (or wertfrei, in German). Nevertheless, in ethics, Mises was a utilitarian (Yeager 1998: 328).


APPENDIX 2: DID HAYEK EVER ACCEPT MISES’ APRIORISM?

It appears that in an article called “Economics and Knowledge” (1937) Hayek criticised Mises’ apriorism. But there is debate about whether Hayek ever accepted an aprioristic methodology, and to what extent he was influenced by Popperian methodology.

Terence W. Hutchison divided Hayek’s thought on economic methodology into two periods that might be called Hayek I (before 1937) in which Hayek adopted the a priori/apodictic view of Mises’ praxeology, and Hayek II (post-1937) where he was more open to empirical evidence and was influenced by Popperian falsificationism (Ebenstein 2001: 158). J. Gray (1998: 17–18) argues that Hayek never accepted Mises’ pure praxeological method. In a letter that Hayek wrote to Terence W. Hutchison dated 15 May, 1983, Hayek stated:

“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).

APPENDIX 3

In any a priori argument, one must be aware of the difference between validity, soundness and truth. For example, consider the following argument:

Major premise: All elephants are pink.
Minor premise: Nellie is an elephant.
Conclusion: Therefore, Nellie is pink.

This is a formally valid syllogism. Validity concerns the form of the argument. The argument is valid because it is a correct form of the modus ponens. If one accepts the truth of the major and minor premise, then a priori/deductive reasoning will yield a conclusion that follows with apodictic certainty.

However, the trouble with the syllogism is that it is unsound. Soundness in argument depends not just on validity but also on the truth of premises. This syllogism has a major premise that is false. The major premise is a synthetic proposition, which must be justified by empirical evidence. A false premise yields a false conclusion and, while the argument is still formally valid, the inference is untrue and does not apply to the real world.

FOOTNOTES

⁽¹⁾ There appears to be a “hermeneutic” tradition of Austrian economics. Koppl (2005: 8–9 and 2008 107–111) argues that the Austrian economist Lavoie adopts “universal hermeneutics” in the tradition of Heidegger, Gadamer and Ricoeur, and contends that “classical hermeneutics” (in the tradition of Dilthey and Max Weber) is to be distinguished from this later, more extreme tradition of hermeneutics.

⁽²⁾ I will quote Murray N. Rothbard’s view of the methodology of O’Driscoll and Rizzo: “The Economics of Time and Ignorance was a fortunately short-lived attempt to replace the Misesian paradigm with Bergsonian irrationalism … In the course of writing that work, Professor Rizzo, the philosophical leader of the duo, was moving visibly away from the Misesian paradigm. In a Mises centennial volume edited by Israel Kirzner, Rizzo first flirted with the then-fashionable philosophy of science of Imre Lakatos as a replacement for praxeology; in a postscript written a mere six months after the text, Rizzo announced another radical change of mind even further away from Mises. The final result in 1985 was the Bergsonian dead-end.”

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