Mark Blaug was Right on Mises’ Method

Mark Blaug in his influential book The Methodology of Economics (2nd edn.; 1992) dismissed Ludwig von Mises’ later methodological work and apriorist praxeology as “so idiosyncratic and dogmatically stated that we can only wonder that they have been taken seriously by anyone” (Blaug 1992: 81).

This statement provokes outrage from some Austrians, but Blaug was stating a simple truth.

Praxeology – Mises’ method for economic science – is based on a false and intellectually bankrupt Kantian epistemology requiring synthetic a priori knowledge.

Modern analytic philosophy rejects Kantian epistemology and synthetic a priori knowledge, and for good reason. All alleged examples of synthetic a priori knowledge – such as mathematics or Euclidean geometry – have turned out not to be at all, and the same can be said for Mises’ “human action axiom,” which is supposed to be the basis of praxeology. The “human action axiom” is is quite clearly synthetic a posteriori, and Mises himself made a candid and embarrassing admission to Israel Kirzner that contradicts his earlier views on epistemology.

In fact, there is strong evidence that Mises was a wretched philosopher, and that he was simply confused about the difference between “synthetic” and “analytic” propositions.

The utter failure of Mises’ epistemology can be seen in the challenge that George J. Schuller made to Austrians in 1951 in his review of Human Action. Schuller pointed out that, if the economic theories of Mises’ book Human Action really are derived by painstaking and valid deductive argument, then it should be possible to set the book out in a formal symbolic form in which all axioms, premisses, and deductions are shown formally and proven.

No Austrian has ever done this. Their failure to meet Schuller’s challenge is pretty strong proof that Mises’ praxeology was a house built on sand.

And what of Mises’ wider influence on this subject? Outside the fringe Austrian school, virtually nobody takes Mises’ praxeology seriously.

Mark Blaug was entirely correct.

Further Reading
“No Constants in Human Behaviour?,” March 9, 2014.

“How does an Austrian Praxeologist make Predictions?,” March 11, 2014.

“David Gordon on Praxeology and the Austrian Method: A Critique,” March 13, 2014.

“Why Mises’s Praxeological Theories are not Necessarily True of the Real World,” March 15, 2014.

“Mises versus Ayer on Analytic Propositions and a priori Reasoning,” March 16, 2014.

“Deduction, Necessary Truth and the Real World,” March 16, 2014.

“Mises and Empiricism,” April 17, 2014

BIBLIOGRAPHY
Blaug, Mark. 1992. The Methodology of Economics, or, How Economists Explain (2nd edn.). Cambridge University Press, Cambridge, UK.

King on Post Keynesian Approaches to Microfoundations

John E. King has a new book called The Microfoundations Delusion: Metaphor and Dogma in the History of Macroeconomics (Cheltenham, 2012). J. E. King is also the author of the indispensable A History of post-Keynesian Economics since 1936 (Cheltenham, 2002), one of those books that continue to reward you every time you read it (or even a chapter of it).

His new book should be of some interest, and does not disappoint. I have read only a few chapters as yet, and there is no doubt that the book is required reading: it raises fundamental issues in economics, economic methodology, philosophy of science, social sciences and epistemology.

Its fundamental subjects are: are conventional views on microfoundations justified, and what is the Post Keynesian approach to microfoundations?

King sees four basic viewpoints amongst Post Keynesians on microfoundations:

(1) explicit supporters of microfoundations who think Post Keynesian microfoundations are superior to neoclassical ones (e.g., Paul Davidson, Malcolm Sawyer, Erich Streissler), usually a system of Marshall-Keynes microfoundations or, alternatively, Kaleckian microfoundations;

(2) explicit critics of microfoundations (Joan Robinson);

(3) those who are confused, inconsistent or unclear (e.g., Geoff Harcourt, Sidney Weintraub, John Cornwall, Victoria Chick, and Jesper Jespersen);

(4) those who just ignore the whole issue. (King 2012: 149–150).

One of the most important insights King makes is this: the idea of reducing macroeconomics to neoclassical microeconomics is an instance of the strong reductionist fallacy.

Strong reductionism has already failed, not only in biology, but also (more importantly) in the social sciences (King 2012: 226). There are fundamental emergent properties in macroeconomic systems that make their reduction to microeconomics impossible (King 2012: 226).

For example, a lower-order set of parts in a biological system may interact in ways that cannot be inferred by reductionist analysis (King 2012: 51). The principle of “downward causation” consists in the manner by which a “whole” (a system broadly defined) may affect, constrain or influence its parts.

In economics, we see macroeconomic phenomena that are irreducibly social in nature.

Nor does the strong version of methodological individualism work (King 2012: 60; see also Hodgson 2007). For interactions between individuals may cause “emergent properties” or (that is to say) novel properties not displayed by, or deducible from, the individuals in isolation.

The idea that the economy is more than the sum of its parts can be traced back to (interestingly enough) the 19th century advocate of infant industry protectionism Friedrich List (King 2012: 66).

As an aside, King points out that Richard Dawkins’s “genetic determinism can very easily degenerate into the worst type of Social Darwinism.” A whole section in King provides criticisms of Dawkins’s (alleged) genetic determinism (King 2012: 48ff.), but I think it might be unfair to Dawkins himself for reasons explained by Steven Pinker (2003: 112–114).

King gives two reasons for the continuing attraction of the neoclassical microfoundations delusion: physics envy and politics in the age of neoliberalism (King 2012: 229). Reductionist ontological thinking in economics is nothing less than the attempt to reduce macroeconomics to the aggregate of micro behaviour, and the assumption of individual rationality implies a socially rational outcome (King 2012: 229, quoting Denis 2009: 14). In other words, this method produces the delusion that laissez faire results in the best economic outcomes.

Finally, I just want to note how Steve Keen has argued in much the same terms as King in also pointing out how (1) macroeconomic processes are emergent properties not necessarily reducible to microeconomics, and (2) how neoclassical economics commits the fallacy of strong reductionism: although reductionism does work to a great extent, it also has fundamental limitations.

One can hear Keen talk of these issues in the video below at 15.24 onwards. See also Keen 2011: 205–209.





BIBLIOGRAPHY

Hodgson, G. M. 2007. “Meanings of Methodological Individualism,” Journal of Economic Methodology 14.2: 57–68.

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.

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

Karl Popper’s View of Mises

Occasionally, one reads attempts to argue that the methodology of Austrian economics is compatible with Popperian fasificationism. Now, while that might be true of Hayek’s economic method and approach to epistemology, it is most certainly not true of Misesian praxeology.

What did Popper think of Mises? The following:

“Popper was familiar with the early [sc. socialist – LK] calculation debate – Polanyi’s seminar discussed it – but not much taken by it. He knew of Mises and his circle, but it is unlikely that he read Mises closely. He strongly disliked subjectivism and libertarianism. He ‘first met Mises early in 1935 in Vienna, owing to his interest in my first book. . . . Both he and I were aware of a strong opposition between our views in the field of the theory of knowledge and methodology. Mises saw me as a dangerous opponent.’” (Hacohen 2000: 478).

And this was after Popper had published his seminal book Logik der Forschung (1934; later published in English as The Logic of Scientific Discovery, 1959).

BIBLIOGRAPHY

Hacohen, Malachi Haim. 2000. Karl Popper, The Formative Years, 1902–1945: Politics and Philosophy in Interwar Vienna. Cambridge University Press, Cambridge, UK and New York.

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.

Risk and Uncertainty in Post Keynesian Economics

The distinction between risk and uncertainty is fundamental in Post Keynesian economics, as it was in the economic thinking of John Maynard Keynes. While risk can be quantified, uncertainty simply cannot be quantified.

The notion of future uncertainty is partly related to David Hume’s difficult philosophical problem of induction. According to Hume, we have no basis for believing that induction is rational. Human beings use induction out of habit, but there is no rational justification for this belief in induction. Although a full discussion of the problem of induction is not what I want to do here, a few comments can be made.

In brief, induction is the use of a finite number of specific observations to make a general conclusion. The most common form is the use of past observations of events to infer a general conclusion about how nature will behave in the future (e.g., gravity will continue to operate tomorrow or 10 minutes from now). But we can just as easily appeal to observed events in the recent past or present to make a general conclusion about the past (e.g., miracles do not happen in the past). The conclusion of an inductive argument is only probable and never certain.

The trouble is that observation of a finite number of events in the past does not seem to justify the belief that events will continue to happen in this way in the future. One solution to the problem is to assume the uniformity of nature. But even here the assumption that nature is uniform requires an inductive argument, so the reasoning is circular (and note that the radical sense of uncertainty that emerges in the absence of a justification for induction and the uniformity of nature is rather different from Keynesian uncertainty, which relates to future events for which no measurable probability can be given, as we will see below). Various philosophers have tried to solve the problem of induction (Will 1953; Edwards 1965; Strawson 1952; BonJour 1998; Salmon 1974), but many believe there is no satisfactory justification. Hume concluded that we use induction out of habit but with no legitimate basis, and modern evolutionary psychologists might argue that our ability to instinctively reason inductively is an innate property of the brain (like language or moral sentiments), which we have acquired by evolution, even though there is no rational justification for it.

Probably the best solution to the problem of induction (for both the natural and social sciences) is the use of Karl Popper’s critical rationalism (even though Popper’s critical rationalism seems to be widely criticised in modern analytic philosophy [Musgrave 2004: 16–17], and another complaint is that, while many working scientists claim to be Popperians in method, in practice they behave like good Bayesian inductivists [Evans 2007: 33]).

Popper adopts the hypothetico-deductive method, with falsification (not verification) of hypotheses by empirical evidence the key. In hypothetico-deduction, we use the method of forming a hypothesis, deducing predictions or conclusions from it, then empirically testing the predictions or conclusions, and thereby attempting to falsify the hypothesis. Popper comes to an astonishing conclusion:

“I go further than Hume: I hold that inductive procedures simply do not exist (not even low-level ones) and that the story of their existence is a myth” (Popper 1983: 118; see also Musgrave 2004: 18).

Induction is also unnecessary: we simply do not need it. In the natural sciences and other scientific inquiry, what really happens is that we use deduction, especially by means of the modus tollens and the elimination of erroneous hypotheses by empirical evidence, in a process of trial and error (more on this below).

John Maynard Keynes’ Treatise on Probability (1921) was an attempt to answer Hume on the problem of induction. Keynes took the view that induction was justified by a relation of probability which was objective (although later he conceded that probability was not an objective relation). But Keynes also came to argue that there must be a distinction between risk and uncertainty.

Risk is something where a measurable probability can be given to outcomes, e.g., the probability of rolling a 3 when throwing a dice is 1 in 6 (Glickman 2003: 366). In contrast, we face fundamental uncertainty about many other events, and no measurable probabilities can be assigned (e.g., what the interest rate will be in 10 years time). This distinction between risk and uncertainty was also made by Frank Knight.

Keynes’s conception of uncertainty applies to what is technically called a nonergodic stochastic system (Davidson 2002: 187). Our economies are such complex systems, as are many other economic phenomena (e.g., stock markets and financial markets).

We face fundamental ontological or metaphysical uncertainty about many events in the future, a state of affairs which – when applied to economics – can be called “Keynesian uncertainty” (or uncertainty in the sense of Frank Knight, Keynes, George L. S. Shackle and Ludwig Lachmann).

Since there is fundamental uncertainty about many economic variables in the future (particularly in the long-term future), investment decisions cannot be based on a firm calculation of probabilities of future earnings. Since subjective preferences can change in the future, not all investment decisions today will be profitable in the future. The process involved in decision-making about investment and the action of investment itself is not rational calculation.

There is a time difference between production of commodities and the successful sale of those commodities at a profit, and so even the production of commodities has a speculative element, in which decisions to invest in production involve habits of minds, instincts, and conventions.

Thus the investment decisions of a firm are based on expectations of future earnings, which are not necessarily rational at all. When investment decisions are made, they are done under conditions of subjective expectations by business, and the expectations depend on what Keynes called “animal spirits” (for the original concept, see Gerrard 1994). Keynes discussed the factors influencing long-run expectations in Chapter 12 of the General Theory. Because of uncertainty about the future, expectations in investment decisions is not a matter of mathematical calculation. Decisions to invest are taken

“as a result of animal spirits – of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities” (Keynes 2008 [1936]: 144).

The term “animal spirits” was borrowed by Keynes from Descartes (Gerrard 1994: 15), and whether or not modern psychology provides support for Keynes’ idea that we have a “spontaneous urge to action rather than inaction” is really irrelevant. The fundamental point here is that, because of uncertainty about the future and changing subjective preferences of consumers and other exogenous factors driving supply and demand, there can be no genuine rationality in expectations. Expectations are subjective, and the investment decision is essentially non-rational.

There has been a resurgence of interest in subjective expectations since the great recession of 2008/2009, and most notably the New Keynesians George A. Akerlof and Robert J. Shiller have published a book studying this subject (Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, 2009).

Neoclassical economics in its various forms (e.g., general equilibrium analysis, the efficient market hypothesis, and New Classical economics) assumes the ergodic axiom, the belief that the future can be known or events in the future given objective probabilities. But recognition of the ontological uncertainty of events in the future and changing subjective preferences means that events cannot be quantified in terms of probabilities. This destroys the basis of rational expectations and other neoclassical theories.

In the face of the shock of the financial crisis in 2008, the severe global recession in 2008–2009, and debt deflation, business expectations across the world plummeted. The destruction of optimistic expectations is undoubtedly an important factor that will mire many economies around the world in periods of stagnation with low growth and high unemployment in years to come. The Keynesian resurgence and stimulus packages in many countries in 2008–2009 prevented a depression, but much more stimulus is needed in the major economies to restore better growth and to bring unemployment down (there are of course other problems too, such as poorly regulated financial markets and loss of manufacturing in countries like the US that will have to be fixed). Government spending and fiscal stimulus can help to overcome the poor business expectations in many countries.

To return to an earlier point above, how can we justify government intervention in the face of uncertainty? If one accepts that induction can be justified (perhaps along the lines of Will 1953 or Strawson 1952), then obviously one could use an inductive argument for government intervention.

But, if we argue that induction has severe philosophical problems and cannot be justified, how in fact do we justify the hypothesis that government stimulus packages should be used and will work? My answer is that we do not need inductive arguments. We can use Karl Popper’s hypothetico-deductive method to test Keynesian hypotheses about stimulus. Our Keynesian models of stimulus will make predictions about what will happen to an economy, and, if they are not falsified by the empirical evidence, they will have passed the test of falsification, just as they have many times in the past. Popper argued that the hypothetico-deductive method was fundamental to both the natural sciences and social sciences, and he makes a good case for this (Popper 1976: 130–143; Milonakis and Fine 2009: 262–263). In short, induction is unnecessary, and economic methodology can be hypothetico-deductive with falsification of hypotheses by empirical evidence, as M. Blaug (1992) has also argued.

The issue of how Popper’s critical rationalism should be properly applied to economics is not my purpose, and the issue is a difficult one.

Of course, there are numerous economists who do not think that a strict Popperian methodology of economics is workable (Caldwell 1985: 126), and on this subject one can consult as a starting point the critical essays in N. De Marchi (ed.). The Popperian Legacy in Economics: Papers Presented at a Symposium in Amsterdam, December 1985 (Cambridge and New York, 1988), with a response by L. A. Boland (1990–1992).

Lawrence A. Boland contends that economists promoting a Popperian methodology for economics have not fully understood Popper’s critical rationalism, and have been misled by Imre Lakatos’s alleged distortion of Popper’s thought by overemphasizing the role of falsificationism (Boland 2006: 222–223). Boland (2006: 223–224) believes that an Imre Lakatos-inspired and pseudo-Popperian method has been adopted by some proponents of a Popperian methodology for economics.

Although this question requires a post in its own right, there is no doubt that Popper argued for the unity of method and the importance of hypothetico-deduction in the The Poverty of Historicism:

“I … propose a doctrine of the unity of method; that is to say, the view that all theoretical or generalizing sciences make use of the same method, whether they are natural sciences or social sciences …. I do not intend to assert that there are no differences whatever between the methods of the theoretical sciences of nature and of society …. But I agree with Comte and Mill—and with many others, such as C. Menger—that the methods in the two fields are fundamentally the same (though what I understand by them may not be what they had in mind). The methods always amount to deductive causal explanation, prediction, and testing, as sketched in the foregoing section. This has sometimes been called the hypothetico-deductive method, or more often the method of hypothesis, for it does not achieve absolute certainty for any of the scientific statements which it tests; rather, these statements always retain the character of tentative hypotheses, even though their character of tentativeness may cease to be obvious after they have passed a great number of severe tests” (Popper 1976: 130–131).

I will note in conclusion that a Critical Realist methodology is often proposed for Post Keynesianism (King 2002: 197–200; Jespersen 2009), and that this position might be compatible with the core elements of a Popperian methodology too (King 2002: 253–254; Jespersen 2009: 57–62), and that in his later work Popper appears to have moved closer to Critical Realism (Lawson 1999: 8–9).

APPENDIX 1: THE PARADOX OF INDUCTION?

I noted above that an intuitive ability to reason inductively is probably an innate trait of the human mind, given to us by evolution by natural selection. Animals, for example, appear to use rudimentary induction in probability calculations when they forage for food (Real 1991).

Even though there is no rational justification for it, why then has induction been so successful and obviously selected for as a survival trait? Even if Popper and Hume are right, we are faced with the paradox that we appear use induction very frequently and that it is a successful form of reasoning, by and large (the fact that induction is of limited use in non-ergodic stochastic systems and that we can err in our inductive arguments does not change this fact [for a list of common fallacies in defective inductive reasoning, see Copi and Cohen 2005: 140–145]).

That inductive reasoning has been highly successful and useful in increasing our chances of survival (and was thus selected by evolution) does not necessarily mean that is it rationally justified, of course.

For example, the belief in life after death might very well help some human beings overcome the trauma and stress of losing a loved one or even contemplating their own death (perhaps it might even make them healthier and better able to survive?), but it is still an irrational, unjustified idea.

But the success of induction is presumably explained by the uniformity of nature which has persisted since the first living things with rudimentary inductive reasoning evolved (for example, if the law of gravity had stopped working 1 million years ago, then all land animals would simply have floated off the planet into space and been killed, and there would be no human beings today; the fact that we are here strongly suggests that basic natural laws have remained uniform).

Human beings have also evolved to use induction. I am aware that this is somewhat similar to Willard Van Orman Quine’s (1908–2000) naturalized epistemology and his explanation of why induction is successful. Quine argues that, while Darwinian evolution does not justify induction, it must explain why it is so effective (Derksen 2000: 27–28; Quine 1975; as an aside, Quine also argues that there is no synthetic/analytic distinction. Thus analytic propositions are just firmly-held synthetic propositions, and there are no real a priori propositions. Quine agrees with Popper that the essence of science is the falsificationist hypothetico-deductive method). And, if the uniformity of nature continues to hold in the future, then presumably inductive reasoning will continue to be successful in those areas where it works well.


BIBLIOGRAPHY

Akerlof, G. A. and R. J. Shiller, 2009. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, Princeton University Press, Princeton.

Barkley Rosser, J. 2001. “Uncertainty and Expectations,” in R. P. F. Holt and S. Pressman (eds), 2001. A New Guide to Post Keynesian Economics, Routledge, London and New York. 52–64.

Blaug, M. 1992. The Methodology of Economics, or, How Economists Explain, Cambridge University Press, Cambridge and New York, NY.

Boland, L. A. 2003. “Dealing with Popper in Economic Methodology,” Philosophy of the Social Sciences 33: 477–498.

Boland, L. A. 2006. “Seven Decades of Economic Methodology: A Popperian Perspective,” in I. Jarvie, K. Milford, and D. Miller (eds), 2006. Karl Popper: A Centenary Assessment. Volume III. Science, Ashgate Publishing Ltd., Aldershot, Hants, England. 219–227.

BonJour, L. 1998. In Defense of Pure Reason, Cambridge University Press, Cambridge.

Caldwell, B. J. 1985. Beyond Positivism: Economic Methodology in the Twentieth Century, G. Allen and Unwin, London and Boston.

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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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