Hoppe’s Ridiculous Attack on the Epistemological Foundation of Moderate Empiricism

I get mercifully few libertarians in the comments sections these days, but I recently got this challenge here.

Patrick asks me to respond to this critique here.

This is a passage from the Hans-Hermann Hoppe (Hoppe 2007: 33–34), and Hoppe is a defender of Kantian synthetic a priori knowledge as the epistemological foundation of epistemology and Misesian praxeology.

The proposition that is the epistemological foundation for classical and modern moderate empiricism, as Hoppe notes, is this:

“This is empiricism’s central claim: Empirical knowledge must be verifiable or falsifiable by experience; and analytical knowledge, which is not so verifiable or falsifiable, thus cannot contain any empirical knowledge. If this is true, then it is fair to ask: What then is the status of this fundamental statement of empiricism? Evidently it must be either analytical or empirical.” (Hoppe 2007: 33).

Hoppe notes that this must be defended and classified as either (1) analytic a priori or (2) synthetic a posteriori.

So which one is it? The answer is that it can be rationally and easily defended as a synthetic a posteriori proposition (that is to say, an empirical proposition).

But, according to Hoppe, this somehow leads to this:

“So perhaps we should choose the other available option and declare the fundamental empiricist distinction between empirical and analytical knowledge an empirical statement. But then the empiricist position would no longer carry any weight whatsoever. For if this were done, it would have to be admitted that the proposition – as an empirical one – might well be wrong and that one would be entitled to hear on the basis of what criterion one would have to decide whether or not it was. More decisively, as an empirical proposition, right or wrong, it could only state a historical fact, something like ‘all heretofore scrutinized propositions fall indeed into the two categories analytical and empirical.’ The statement would be entirely irrelevant for determining whether it would be possible to produce propositions that are true a priori and are still empirical ones. Indeed, if empiricism's central claim were declared an empirical proposition, empiricism would cease altogether to be an epistemology, a logic of science, and would be no more than a completely arbitrary verbal convention of calling certain arbitrary ways of dealing with certain statements certain arbitrary names. Empiricism would be a position void of any justification.” (Hoppe 2007: 34).

Huh? No longer “carry any weight whatsoever”?

If that were true, then all human natural or social science of any kind based on foundational empirical propositions or assumptions would not “carry any weight whatsoever.” This is nonsense.

The standard ideas we presuppose in either the natural sciences or social sciences (or indeed in everyday common sense) can indeed be justified empirically, by experience, inductive argument and inference to the best explanation (which is just another non-deductive, or inductive form of reasoning) by long debates and arguments in philosophy or in the natural and social sciences too.

At the most basic level, there are all sorts of assumptions that are epistemological foundations of our beliefs and scientific theories (including economics), such as the following:

(1) the real existence of other human minds;

(2) the real existence of an external world of matter and energy that is the causal origin of our sensory data (= an indirect realist ontology);

(3) that the past had real existence (and is not some figment of our imagination);

(4) the existence of a set of physical and chemical laws that have been discovered by the natural sciences that account for the order and nature of the universe;

(5) the view that our earth is about 4.54 billion years old;

(6) the view that all livings things on our earth are the product of a Darwinian process of evolution by natural selection (and, if one wants to be technical, also by (i) sexual selection and (ii) artificial selection by humans);

(7) the human mind is the product of the physical activity of the brain, and so on.

And of course we can keep listing such propositions too as we move from natural science to the social sciences.

None of these assumptions can be justified as analytic a priori or as Kantian synthetic a priori knowledge. They are all empirical propositions. Does the admission that they are not 100% certain make science impossible? No.

For example, we have the empirical proposition that:

“the earth and the planets of our solar system revolve around the sun.”

This is an empirical proposition, which is contingent, known a posteriori, and its truth is probabilistic.

That is to say, even though there is an enormous amount of empirical evidence in its favour, it could be that this proposition is wrong, because as a contingent and probabilistic truth, it is not 100% certain and never can be. It’s not impossible that it might be false, though it seems extremely improbable given all we know.

We must always be open to the possibility that new evidence might suddenly emerge that would throw doubt on our belief, even if (again) this seems extremely improbable.

But, at present, we have overwhelming evidence that it is true. The proposition therefore stands as a rational and defensible foundational assumption of any branch of cosmology studying solar systems.

There is no profound epistemological problem with this state of affairs, or with the foundation of the physics of solar systems, because we never said that the empirical propositions were 100% certain, nor do we need them to be, in order to get empirical knowledge whose truth is probabilistic and rationally defensible as true on the current evidence.

We accept the truth of all empirical propositions only as long as the weight of current evidence demonstrates that we have a good or very good case to think they are true. E.g., we have no good reason to doubt that gravity will suddenly stop operating 5 seconds from now, though it’s not impossible that it might for some unknown reason. Is that any reason to jump out of a 100 story building now and expect to float to the ground unharmed?

It is the same, broadly speaking, with the foundational proposition of moderate empiricism.

Our defence of the original epistemological principle is empirical and its truth is only probable or highly probable, but the lack of certainty produces no such epistemological crisis for empiricism, for the reason that it never aimed at absolute necessary truth in the first place, as Hoppe demands. Our best scientific theories do not have apodictic truth, nor does the inductive method yield absolute certainty, yet modern science is incredibly successful.

The rejection of dogmatism and the willingness to regard any scientific theory as capable of revision or falsification are what give modern scientific epistemology its great strength.

But if we adopted the same type of argument used by Hoppe, then we must conclude that modern science must “no longer carry any weight whatsoever” and “would cease altogether to be an epistemology.”

Secondly, the legitimate response of an empiricist to a Rationalist that “all heretofore scrutinized propositions fall indeed into the two categories analytical and empirical” can be defended as true. Hoppe’s point here carries no weight.

We need only look at the way Kant’s original synthetic a priori knowledge, such as Euclidean geometry, necessary and deterministic causation, or certain laws of logic have either been refuted by modern science or seriously questioned.

Hoppe’s next statement that the empiricist’s classification of knowledge “would be entirely irrelevant for determining whether it would be possible to produce propositions that are true a priori and are still empirical ones” is also a non sequitur, since, on the contrary, it is a defensible starting point for analysing all statements and all future statements and determining whether they could possibly provide synthetic truth but be known a priori. If, for example, some Rationalist asserts that statement x is a synthetic a priori truth, but we discover that the real world produces overwhelming empirical evidence against the proposition, then it is the Rationalist who is faced with an epistemological crisis.

In essence, there are very good reasons why most analytic philosophers have rejected Kantian synthetic a priori knowledge, as follows:

(1) The paradigmatic type of synthetic a priori knowledge that was Euclidean geometry, when asserted as a universally true theory of space, has been shown to be severely contradicted by the empirical evidence – and this is not what we would expect to find if this theory really was necessarily true and an irrefutable theory of reality.

(2) We can eliminate the problem of virtually all proposed synthetic a priori knowledge by carefully separating pure maths/pure geometry (which is analytic a priori and necessarily true, but not describing reality) from applied maths/applied geometry (which is asserted as true of reality but is synthetic a posteriori and contingent).

For example, most of mathematics can be clearly explained as an analytic a priori system, as derived from pure logic and set theory (Schwartz 2012: 19), as shown by the work of Frege, Russell, and Whitehead.

(3) From (1) and (2), we can satisfactorily explain proposed synthetic a priori knowledge either as (i) analytic a priori or (ii) synthetic a posteriori, eliminating a complex and unnecessary category.

If any Kantian or libertarian has any further nor new example of an alleged Kantian synthetic a priori statement, then he or she can make it, and we can scrutinise any and all such proposed propositions and see whether the claim is convincing. I’ve not yet seen any such proposed or credible proposition. For example, the idea that the human action axiom is a synthetic a priori truth collapses like a house of cards when seriously scrutinised.

Ultimately, we can reject synthetic a priori knowledge by inference to the best explanation and Ockham’s razor.

BIBLIOGRAPHY
Hoppe, Hans-Hermann. 2007. Economic Science and the Austrian Method. Ludwig von Mises Institute, Auburn. Ala.

Schwartz, Stephen P. 2012. A Brief History of Analytic Philosophy: From Russell to Rawls. Wiley-Blackwell, Chichester, UK.

Further Reading
For anyone interested in understanding why Misesian praxeology and Kantian synthetic a priori epistemology is wrong, see my posts here:

“Mises’ Praxeology: A Critique,” October 1, 2010.
“Limits of the Human Action Axiom,” February 28, 2011.
“Hayek on Mises’ Apriorism,” May 23, 2011.
“Mises and Logic,” August 26, 2011.
“Karl Popper’s View of Mises,” October 2, 2012.
“My Post on Praxeology gets some Attention,” March 7, 2012.
“Mises Flunks Evolution 101,” April 2, 2013.
“What is the Epistemological Status of Praxeology and the Action Axiom?,” July 27, 2013.
“Barrotta’s Kantian Critique of Mises’s Epistemology,” July 28, 2013.
“David Friedman versus Robert Murphy,” August 4, 2013.
“Mises Fails Philosophy of Mathematics 101,” August 30, 2013.
“Bob Murphy All At Sea on Geometry and Economic Epistemology,” August 31, 2013.
“Mises’s Non Sequitur on synthetic a priori Knowledge,” September 2, 2013.
“Tokumaru on Mises’s Epistemology,” September 3, 2013.
“Reply to a ‘Red Herring on Praxeology,’” September 6, 2013.
“Mises versus the Vienna Circle,” September 7, 2013.
“Mises’s Flawed Deduction and Praxeology,” September 8, 2013.
“Hoppe’s Caricature of Empiricism,” September 10, 2013.
“Hoppe on Euclidean Geometry,” September 11, 2013.
“Robert Murphy gets Mises’s Epistemology Wrong,” September 13, 2013.
“Hoppe on Euclidean Geometry, Part 2,” September 14, 2013.
“Mises on Kant and Praxeology,” September 15, 2013.
“Mises was Confused about the Analytic–Synthetic Distinction,” September 15, 2013.
“What is the Epistemological Status of the Law of Demand?,” September 19, 2013.
“A Simple Question for Austrian Apriorists,” November 20, 2013.
“Mises, Action and Uncertainty,” December 4, 2013.
“Córdoba on Praxeology and Economics,” December 7, 2013.
“Schuller’s Challenge to Misesian Apriorists has never been answered,” December 7, 2013.
“Mises versus Ayer on Analytic Propositions and a priori Reasoning,” March 16, 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 and Empiricism,” April 17, 2014.
“Mark Blaug was Right on Mises’ Method,” April 30, 2014.
“Why Should we reject the Existence of Synthetic a priori Knowledge?,” May 23, 2014.
“Detlev Schlichter on Mises’ Apriorism,” June 5, 2014.
“Robert Taylor versus David Ramsay Steele on Praxeology,” June 6, 2014.
“John Quiggin on Apriorism in Austrian Economics,” July 28, 2014.
“Hutchison on the History of Hayek’s Views on Economic Methodology,” August 2, 2014.
“Hayek on Prediction in the Social Sciences,” August 6, 2014.
“Are all Facts Theory-Laden?,” December 21, 2014.
“Walter Block’s An Austrian Critique of Mainstream Economics: A Critique on Epistemology,” October 8, 2015.

I’m on Twitter:
Lord Keynes @Lord_Keynes2
https://twitter.com/Lord_Keynes2

Are all Facts Theory-Laden?

If we define “fact” as a synthetic a posteriori proposition, then it would appear that nearly all facts are to some extent “theory-laden,”* but that does not vindicate apriorism or Kant’s synthetic a priori knowledge, nor does it discredit the moderate form of empiricism that is rightly at the heart of modern methodology and epistemology in the natural and social sciences.

When we interpret some data or fact in the natural and social sciences ordinarily we will clearly pre-suppose a number of theories when we make interpretations of the facts.

But the standard theories we presuppose in either the natural sciences and social sciences have already been justified empirically, by experience, inductive argument and inference to the best explanation (which is just another non-deductive, or inductive form of reasoning) by long debates and arguments in philosophy or in the natural and social sciences too.

At the most basic level, there are all sorts of theories we do have about the world in which we exist and we make when we do natural and social sciences (including economics), such as the following:

(1) the real existence of other human minds;

(2) the real existence of an external world of matter and energy that is the causal origin of our sensory data (= an indirect realist ontology);

(3) that the past had real existence (and is not some figment of our imagination);

(4) the existence of a set of physical and chemical laws that have been discovered by the natural sciences that account for the order and nature of the universe;

(5) the view that our earth is about 4.54 billion years old;

(6) the view that all livings things on our earth are the product of a Darwinian process of evolution by natural selection (and, if one wants to be technical, also by (i) sexual selection and (ii) artificial selection by humans);

(7) the human mind is the product of the physical activity of the brain, and so on.

And of course we can keep listing such theories too as we move from natural science to the social sciences. (And note I use the word “theory” in the sense of a hypothesis that has been confirmed or justified by evidence.)

Theories (1) to (3) belong to the philosophical sub-disciplines we call ontology and epistemology. The theory that other human minds really exist and that an external world exists can only be justified empirically by inductive argument by analogy and inference to the best explanation. There are no a priori or deductive arguments that can establish the necessary truth of these ideas. In fact, you cannot prove they are necessarily true at all: they are synthetic a posteriori propositions whose truth is extremely probable at best, and we know this only by experience, induction or inference to the best explanation.

Exactly the same thing can be said of propositions (4) to (7): these are empirical propositions of the natural sciences that are synthetic a posteriori: their truth is extremely probable at best and is confirmed by experience, induction or inference to the best explanation.

We could continue listing “prior” theories that a social scientist like an economist assumes when interpreting some data or facts, but we would also find that these too are nothing but empirical propositions whose truth can be believed because we have good empirical evidence to do so. We will also encounter useful concepts that are formulated to categorise and classify objects and phenomena in the world which are analytic a priori (or true by definition because we define them in such-and-such a way). While this does presuppose a further type of “theory” when looking at data or facts, the ultimate test of whether a system of analytic classifications and definitions is useful and appropriate is how well it can classify and describe the world, so the actual justification for its use is not divorced from empiricism.

At some point of course we will start to encounter bad and false empirical theories or assumptions in some disciplines, such as in neoclassical economics. But even here the only way to know if a theory about the real world is true or false is by experience, induction or inference to the best explanation. You are not going to do it by armchair apriorism.

So what is the substantive point here?

Mises claimed that the German Historical School and the logical positivist empiricists of his time thought that they could take facts without recourse to any theory. Perhaps they did. They were wrong, and modern empiricism has since moved on.

And clearly heterodox economists of the non-neoclassical Institutionalist and Post Keynesian schools seem to accept that facts are theory-laden too (e.g., see Hodgson 1999: 146; Lawson 1997: 295).

But the lazy comment that all facts are “theory-laden” is still used by apriorists like Austrian economists to attack modern empiricism in their attempts to vindicate the intellectually bankrupt method called Mises’ praxeology.

It is an absurd exercise in vain, for the admission that “all facts are theory-laden” does not vindicate epistemological apriorism in either the natural or social sciences and not in economics either, and does not refute a more moderate version of empiricism that accepts that we do indeed have many prior theories but that they are also justified empirically.

The “all facts are theory-laden” mantra does not discredit the modern empirical method. Nor does it refute the observation that we have no good reason to think that all of our knowledge of the real world is anything but empirical and justified empirically: we have no good reason to think epistemological apriorism is a viable or necessary method in our study of the world in all of its complexity, from the natural world to the complex world of human societies.

Any given datum or fact may indeed presuppose a long list of prior theories or propositions. But we will find that these theories or propositions are themselves also empirical and have been justified too by some other social or natural scientist or philosopher who asked the question “how do we know such-and-such is true” and justified its truth convincingly a posteriori by experience, induction or inference to the best explanation.

Note
* The only possible exception I can think of is Descartes’s cogito ergo sum (or cogito) argument, but on closer inspection probably many would argue that it is not free from a prior theory/assumption that there is an “I” that must be understood as a discrete conscious entity and perceiving subject that perceives objects of perception.

On a related point if the cogito argument is reformulated to conclude that some perceptions, sensations or thinking exist or are occurring, then it might possibly be considered an ontologically and epistemologically necessary a posteriori truth (but there are also arguments against this), and even if it were it takes you nowhere epistemologically: it is a dead end and cannot be used as a secure foundation for apriorism, nor to deduce any necessary truth in the natural and social sciences.

BIBLIOGRAPHY
Hodgson, Geoffrey M. 1999. Economics and Utopia: Why the Learning Economy is not the End of History. Routledge, London and New York.

Lawson, Tony. 1997. Economics and Reality. Routledge, London and New York.

Hutchison on the History of Hayek’s Views on Economic Methodology

In “Hayek, Mises and the Methodological Contradictions of ‘Modern Austrian’ Economics,” T. W. Hutchison examines Hayek’s developing views on methodology in economics and the split on this issue within the Austrian school.

Hutchison (1994: 213) notes that Hayek’s original views on methodology were apparently derived from those of Friedrich Wieser and a kind of apriorism called “the psychological method.”

Hayek was then influenced by Mises and his circle and, according to Hutchison, held views close to Mises’ (Hutchison 1994: 215), although this does contradict Hayek’s later statements and his claims to have been a follower of Popper’s empiricism even from 1934 (Hutchison 1994: 216).

Hutchison (1994: 215), however, argues that no traces of this Popperian methodology can be found in Hayek’s writings before 1937, but Popper did recollect that Hayek read his book Logik der Forschung around September/October 1935 (Hutchison 1994: 217).

Hutchison (1994: 215–216) speculates that the economic controversies in the mid and late 1930s, especially about the role of expectations, stimulated Hayek to question his earlier views.

The public statement of his new views was in the talk “Economics and Knowledge” given in November 1936 and then published as an article in 1937 (see Hayek 1937; Hutchison 1994: 216).

But unfortunately Hayek’s break with Mises was so timid and weakly expressed that many, especially modern Austrians themselves, have missed the point of “Economics and Knowledge”:

“In the … letter to this writer of 15 May 1983, Hayek also stated that his ‘main intention’ in ‘Economics and Knowledge’ was ‘to explain gently to Mises why I could not accept his a priorism’. Unfortunately, the message to Mises, which it was Hayek’s ‘main intention’ to deliver in this celebrated article, was imparted so ‘gently’ that forty to fifty years later it had still not got through to most ‘Modern Austrians’, who, of course, found the fact of a vital, fundamental division of views between the two great patron saints of their movement difficult to accept.” (Hutchison 1994: 218).

The paper “Economics and Knowledge” also saw Hayek grappling with questions about how an economist could justify real world tendencies to general equilibrium, when this required perfect knowledge and foresight.

Hutchison (1994: 221–22) even contends that in later life Hayek questioned the characteristic Austrian idea of “methodological dualism.”

The break between (1) Hayek and some later Austrians who endorse some form of empiricist method in economics and (2) the Misesian apriorist praxeologists represents a serious division within, and incoherence in, the Austrian school (Hutchison 1994: 229–230).

Hutchison’s verdict on Misesian apriorism is difficult to fault:

“What Misesian, or ‘Modern Austrian’ praxeology succeeds in achieving is a quite unacceptable combination of dogmatic, ‘apodictic certainties’ with total empirical vacuity. Instead of being left with the traditional, full-knowledge ‘theory’, we are provided with the marvellously rich, enlightening and totally uninformative model—or Misesian ‘apodictic certainty’—that people act with whatever tastes, and whatever kind of knowledge and ignorance, which they happen to possess.” (Hutchison 1994: 228).

Addendum
Philip Pilkington has an interesting and critical post here on George A. Akerlof’s famous, but much overblown, paper “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism” (The Quarterly Journal of Economics 84.3: [1970]: 488–500), which can be related to the very issues that Hayek discussed in “Economics and Knowledge” – namely, the unrealistic nature of perfect information and general equilibrium models as related to the functioning of markets:

Philip Pilkington, “The ‘Information Asymmetry’ Paradigm is Vacuous,” Fixing the Economists, August 1, 2014.

BIBLIOGRAPHY
Hayek, F. A. 1937. “Economics and Knowledge,” Economica n.s. 4.13: 33–54.

Hutchison, Terence Wilmot. 1994. “Hayek, Mises and the Methodological Contradictions of ‘Modern Austrian’ Economics,” in T. W. Hutchison, The Uses and Abuses of Economics: Contentious Essays on History and Method. Routledge, London. 212–240.

Hutchison, Terence Wilmot. 1994. The Uses and Abuses of Economics: Contentious Essays on History and Method. Routledge, London.

John Quiggin on Apriorism in Austrian Economics

John Quiggin has an excellent post here on the apriorist method in Austrian economics:

John Quiggin, “Austrian Economics and Flat Earth Geography,” John Quiggin, July 28th, 2014.

Also posted here:
John Quiggin, “Austrian Economics and Flat Earth Geography,” Out of the Crooked Timber, July 27, 2014.

One minor point here is that John Quiggin says that apriorist praxeology was “also endorsed, in a more qualified fashion, by Hayek.”

Actually, Hayek rejected Mises’ apriorism and adopted a – more or less – Popperian method for economics.

We know this because Hayek said so explicitly in a letter to Terence W. Hutchison dated 15 May, 1983. In this, 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).

In fact, in 1937 Hayek had published an article called “Economics and Knowledge” where he criticised Mises’ apriorism; Hayek also appears to have moved closer to Popperian ideas on methodology in later years:

“I became one of the early readers [sc. of Karl Popper’s Logik der Forschung, 1934]. It had just come out a few weeks before …. And to me it was so satisfactory because it confirmed this certain view I had already formed due to an experience very similar to Karl Popper’s. Karl Popper is four or five years my junior; so we did not belong to the same academic generation. But our environment in which we formed our ideas was very much the same. It was very largely dominated by discussion, on the one hand, with Marxists and, on the other hand, with Freudians. Both these groups had one very irritating attribute: they insisted that their theories were, in principle, irrefutable. Their system was so built up that there was no possibility – I remember particularly one occasion when I suddenly began to see how ridiculous it all was when I was arguing with Freudians, and they explained, ‘Oh, well, this is due to the death instinct.’ And I said, ‘But this can’t be due to the [death instinct].’ ‘Oh, then this is due to the life instinct.’ … Well, if you have these two alternatives, of course there’s no way of checking whether the theory is true or not. And that led me, already, to the understanding of what became Popper’s main systematic point: that the test of empirical science was that it could be refuted, and that any system which claimed that it was irrefutable was by definition not scientific. I was not a trained philosopher; I didn’t elaborate this. It was sufficient for me to have recognized this, but when I found this thing explicitly argued and justified in Popper, I just accepted the Popperian philosophy for spelling out what I had always felt. Ever since, I have been moving with Popper.” (Nobel Prize-Winning Economist: Friedrich A. von Hayek, pp. 18–19).

So Hayek lumped in apriorism in economics with Marxism and Freudianism!

It is also clear that Mises disliked Popper and Popper’s approach to epistemology in his seminal book Logik der Forschung (1934; later published in English as The Logic of Scientific Discovery, 1959):

“Popper was familiar with the early [sc. socialist] 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).

So it could not be more clear: Mises saw Popper “as a dangerous opponent”; but Hayek, rejecting apriorism, essentially endorsed Popper’s views on epistemology and method.

Nevertheless, Quiggin’s point that Misesian apriorist praxeology as a method for economics is untenable is right.

Mises needed synthetic a priori knowledge and a type of Kantian epistemology to justify his praxeology, but the arguments for synthetic a priori knowledge are unconvincing and must be rejected. Misesian praxeology does not yield universally and necessarily true empirical statements about economic reality.

Furthermore, not even the human action axiom can be known a priori: it is clearly a synthetic a posteriori proposition.

In addition, the very idea that Mises in Human Action succeeded in deducing all his theories by deductive logic is manifestly untrue, and Misesians and Rothbardians have never answered the challenge of George J. Schuller to set out Human Action in a formal symbolic form in which all axioms, premises, and deductions are shown formally and proven.

Even modern Kantians have rejected Mises’ attempt to ground his praxeology on Kant’s epistemology.

There has also arisen amongst modern Austrians a feeble and ignorant belief that Mises was not really using a synthetic a priori epistemology. This is simply untrue, as I have shown here and here, and even if it were true and praxeology were simply analytic a priori, then it would follow logically that praxeology cannot give necessary truth about the real world.

Further Reading
“Limits of the Human Action Axiom,” February 28, 2011.

“Hayek on Mises’ Apriorism,” May 23, 2011.

“What is the Epistemological Status of Praxeology and the Action Axiom?,” July 27, 2013.

“Barrotta’s Kantian Critique of Mises’s Epistemology,” July 28, 2013.

“David Friedman versus Robert Murphy,” August 4, 2013.

“Mises Fails Philosophy of Mathematics 101,” August 30, 2013.

“Bob Murphy All At Sea on Geometry and Economic Epistemology,” August 31, 2013.

“Mises’s Non Sequitur on synthetic a priori Knowledge,” September 2, 2013.

“Hoppe’s Caricature of Empiricism,” September 10, 2013.

“Hoppe on Euclidean Geometry,” September 11, 2013.

“Robert Murphy gets Mises’s Epistemology Wrong,” September 13, 2013.

“Hoppe on Euclidean Geometry, Part 2,” September 14, 2013.

“Mises on Kant and Praxeology,” September 15, 2013.

“Mises was Confused about the Analytic–Synthetic Distinction,” September 15, 2013.

“Schuller’s Challenge to Misesian Apriorists has never been answered,” December 7, 2013.

“Mises versus Ayer on Analytic Propositions and a priori Reasoning,” March 16, 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 and Empiricism,” April 17, 2014.

“Why Should we reject the Existence of Synthetic a priori Knowledge?,” May 23, 2014.

BIBLIOGRAPHY
Caldwell, B. 2009. “A Skirmish in the Popper Wars: Hutchison versus Caldwell on Hayek, Popper, Mises, and methodology,” Journal of Economic Methodology 16.3: 315–324.

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.

Hayek, F. A. 1937. “Economics and Knowledge,” Economica n.s. 4.13: 33–54.

Nobel Prize-Winning Economist: Friedrich A. von Hayek. Interviewed by Earlene Graver, Axel Leijonhufvud, Leo Rosten, Jack High, James Buchanan, Robert Bork, Thomas Hazlett, Armen A. Alchian, Robert Chitester, Regents of the University of California, 1983.
https://archive.org/details/nobelprizewinnin00haye

Robert Taylor versus David Ramsay Steele on Praxeology

This debate between Robert Taylor and David Ramsay Steele is on praxeology and apriorism.

David Ramsay Steele was a Marxist who converted to libertarianism, and his book analysing Mises’ arguments about economic calculation and socialism is From Marx to Mises: Post-Capitalist Society and the Challenge of Economic Calculation (1992).

This argument is between two people who largely agree with Austrian economics, and often the debate is quite confused, and I should point out that there are plenty of empirical studies showing that a rise in the minimum wage does not cause unemployment, e.g., Card and Krueger (1994 and 1995), Dube and Reich (2010), or the 2006 OECD Employment Outlook report entitled “Boosting Jobs and Incomes” (described here).

However, some of Steele’s comments on empiricism and praxeology are nevertheless interesting.



A further point is that all Steele had to do to deal with Taylor’s mathematics and geometry examples is to explain the difference between (1) pure mathematics and (2) applied mathematics. Just because pure mathematics yields necessary truth, it does not follow that a system like praxeology does, because pure mathematics is analytic a priori and praxeology claims to be synthetic a priori. Aside from the observation that the very existence of synthetic a priori knowledge just is not convincing, pure mathematics is not making necessary statements about reality but about analytic a priori systems.

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.

Mises versus Ayer on Analytic Propositions and a priori Reasoning

Actually, the analysis below reveals that Mises appears to have misunderstood the logical positivist position to some degree, and that Mises does indeed need synthetic a priori knowledge for praxeology.

First, let us look at this crucial passage from Human Action on analytic a priori inference:

“Aprioristic reasoning is purely conceptual and deductive. It cannot produce anything else but tautologies and analytic judgments. All its implications are logically derived from the premises and were already contained in them. Hence, according to a popular objection, it cannot add anything to our knowledge.

All geometrical theorems are already implied in the axioms. The concept of a rectangular triangle already implies the theorem of Pythagoras. This theorem is a tautology, its deduction results in an analytic judgment. Nonetheless nobody would contend that geometry in general and the theorem of Pythagoras in particular do not enlarge our knowledge. Cognition from purely deductive reasoning is also creative and opens for our mind access to previously barred spheres. The significant task of aprioristic reasoning is on the one hand to bring into relief all that is implied in the categories, concepts, and premises and, on the other hand, to show what they do not imply. It is its vocation to render manifest and obvious what was hidden and unknown before. ….

The real thing which is the subject matter of praxeology, human action, stems from the same source as human reasoning. Action and reason are congeneric and homogeneous; they may even be called two different aspects of the same thing. That reason has the power to make clear through pure ratiocination the essential features of action is a consequence of the fact that action is an offshoot of reason. The theorems attained by correct praxeological reasoning are not only perfectly certain and incontestable, like the correct mathematical theorems. They refer, moreover, with the full rigidity of their apodictic certainty and incontestability to the reality of action as it appears in life and history. Praxeology conveys exact and precise knowledge of real things.” (Mises 2008: 38–39).

So Mises, in the first paragraph, is asserting that aprioristic reasoning “cannot add anything to our knowledge,” according to a “popular” objection, which is a reference to the logical positivism that dominated philosophy in the post-1945 era in Europe and America.

But that was not the logical positivist view at all. To see this, we need only look at the crucial passage of A. J. Ayer’s Language, Truth and Logic (1936; 2nd edn. 1946):

“When we say that analytic propositions are devoid of factual, content, and consequently that they say nothing, we are not suggesting that they are senseless in the way that metaphysical utterances are senseless. For, although they give us no information about any empirical situation, they do enlighten us by illustrating the way in which we use certain symbols. Thus if I say, ‘Nothing can be coloured in different ways at the same time with respect to the same part of itself’, I am not saying anything about the properties of any actual thing; but I am not talking nonsense. I am expressing an analytic proposition, which records our determination to call a colour expanse which differs in quality from a neighbouring colour expanse a different part of a given thing. In other words, I am simply calling attention to the implications of a certain linguistic usage. Similarly, in saying that if all Bretons are Frenchmen, and all Frenchmen Europeans, then all Bretons are Europeans, I am not describing any matter of fact. But I am showing that in the statement that all Bretons are Frenchmen, and all Frenchmen Europeans, the further statement that all Bretons are Europeans is implicitly contained. And I am thereby indicating the convention which governs our usage of the words ‘if’ and ‘all’.

We see, then, that there is a sense in which analytic propositions do give us new knowledge. They call attention to linguistic usages, of which we might otherwise not be conscious, and they reveal unsuspected implications in our assertions and beliefs.” (Ayer 1971 [1936]: 73–74).

We see here that the logical positivist view, as held by Ayer, is that analytic a priori propositions are

(1) not meaningless or nonsense as “metaphysical” propositions were presumed to be;

(2) did have real meaning and sense, and

(3) could and do provide human beings with “new knowledge,” such as revealing “unsuspected implications in our assertions and beliefs.”

In sense (3), then, not even A. J. Ayer denied that a priori reasoning from analytic statements can yield new knowledge: what Ayer was denying was that analytic a priori reasoning gives us necessarily true knowledge of the real, external world.

So Mises was wrong: his positivist opponents did not claim that a priori inference with analytic statements adds nothing to human knowledge.

What they did claim is that a priori reasoning did not yield necessarily true knowledge of the real world. But here Mises clearly disagrees:

“The real thing which is the subject matter of praxeology, human action, stems from the same source as human reasoning. Action and reason are congeneric and homogeneous; they may even be called two different aspects of the same thing. That reason has the power to make clear through pure ratiocination the essential features of action is a consequence of the fact that action is an offshoot of reason. The theorems attained by correct praxeological reasoning are not only perfectly certain and incontestable, like the correct mathematical theorems. They refer, moreover, with the full rigidity of their apodictic certainty and incontestability to the reality of action as it appears in life and history. Praxeology conveys exact and precise knowledge of real things.” (Mises 2008: 38–39).

According to Mises, praxeological reasoning yields

(1) “apodictic certainty and incontestability to the reality of action as it appears in life and history,” and

(2) praxeology “conveys exact and precise knowledge of real things.”

Epistemologically speaking, the only way it can do this is to either

(1) be Kantian synthetic a priori knowledge, or

(2) be the functional and epistemological equivalent of Kantian synthetic a priori knowledge (even if Mises chose not to use the term synthetic a priori explicitly).

But the idea that Mises never linked his epistemology to Kant is utterly untrue.

Why? The reason is that the very term “category” comes from Kant, and Mises’s idea of a “category of action” was clearly inspired by Kantian a priori categories:

“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.” (Mises 1978: 44).

“Following in the wake of Kant’s analyses, philosophers raised the question: How can the human mind, by aprioristic thinking, deal with the reality of the external world? As far as praxeology is concerned, the answer is obvious. Both, a priori thinking and reasoning on the one hand and human action on the other, are manifestations of the human mind. The logical structure of the human mind creates the reality of action. Reason and action are congeneric and homogeneous, two aspects of the same phenomenon.” (Mises 1978 [1962]: 42).

In the last passage, from Mises’s The Ultimate Foundation of Economic Science: An Essay on Method (1962), he is explicitly linking his “category of action” to Kant’s philosophy.

I see no way around this conclusion.

Further Reading
“Mises on Kant and Praxeology,” September 15, 2013.

“Barrotta’s Kantian Critique of Mises’s Epistemology,” July 28, 2013.

BIBLIOGRAPHY
Ayer, A. J. 1971 [1936]. Language, Truth and Logic. Penguin Books, London.

Mises, Ludwig von. 1978 [1962]. The Ultimate Foundation of Economic Science: An Essay on Method (2nd edn), Sheed Andrews & McMeel, Kansas City.

Mises, Ludwig von. 2008. Human Action: A Treatise on Economics. The Scholar’s Edition. Mises Institute, Auburn, Ala.

Why Mises’s Praxeological Theories are not Necessarily True of the Real World

Take as an example some Austrian who says: it is a praxeological and necessary truth about the real world that, if human beings by their actions drive a monetary market interest rate below the equilibrium rate, then this must necessarily result in excess capital investment causing an Austrian business cycle (ABC). I stress that this is more a “vulgar” Austrian view, and the actual Austrian economists could present more sophisticated defence of their theories.

But such a “vulgar” Austrian statement as above has no necessary truth about the real world.

Why? The reason is that it is contingent on many factors, which range from basic epistemological ones (such as number (1) below) to social, institutional and economic ones, as follows:

(1) the very existence of other acting human minds in the first place. No philosopher has succeeded in proving a priori that other minds exist: the best you can do is an inductive argument from analogy, which only has probabilistic truth at best;

(2) the existence of economies with money;

(3) the existence of economies with loans made in money terms;

(4) the existence of economies with loans made in money and with interest made in money terms;

(5) the truth of loanable funds theory as determined by time preference, which is highly doubtful given that monetary interest rates are better explained by liquidity preference.

(6) the truth of the view that demand for credit will equal some alleged stock of loanable funds, and this can be reduced to a simple and reliable function of interest rates determining the quantity of credit demanded as plotted on a demand curve for loanable funds, when the demand for credit is highly complex and contingent on many factors well beyond interest rates, such as, for example, expectations and uncertainty;

(7) in Mises’s early business cycle theory (ABCT) and the classic ABCT of Hayek the existence of a unique Wicksellian natural rate of interest: something whose probability is close to zero given the empirical evidence that real world economies do not and cannot obtain a general equilibrium state;

(8) The early Hayekian versions of the Austrian business cycle theory assume an economy starting from a general equilibrium state and returning towards one, which is something whose probability is again close to zero given that real world economies do not and cannot obtain general equilibrium states.

And this list is far from exhaustive.

The intellectual fraud of the “necessary” truth of Austrian praxeological theories can be demonstrated quite clearly, since a similar list of contingently true requirements could be provided for any praxeological theory of any kind.

David Gordon on Praxeology and the Austrian Method: A Critique

David Gordon’s talk here is on Mises’s method and the epistemological justification for praxeology.



But the crux of David Gordon’s lecture (from 41.21) is this: that Mises supposedly thought that praxeology is analytic a priori, and explicitly and clearly said so.

The explicit statement of that is here (from 44.37 in the video):

“Now one point here: and this is a point I must confess. I made a mistake many years ago when I wrote that Philosophical Origins of Austrian Economics book … But I made the mistake. I thought Mises says the truth of economics is synthetic a priori truth.

What do we mean by synthetic? Well synthetic a priori truth would be one that is a priori. We can know it’s true just by thinking about it. … But it would not be one we could just discover to be true just by looking at the implications of the concept. It would be one that’s true … about the world, but not one that’s just true from the nature of the concept.

So, at one time, I thought: ‘oh, well, Mises ... thinks the truths of economics are synthetic a priori, but in fact he doesn’t say that in Human Action. He says they’re tautologies, which would be that they’re not synthetic a priori truth. Whether he’s right to hold that view is another question, but that was his view.”

This belief about Mises is untrue, and stems from the fact that Mises was just a third rate philosopher, and here and there made some unclear statements in his writings (as in The Ultimate Foundation of Economic Science: An Essay on Method, as we will see below), even though the main epistemological justification of praxeology in Human Action is synthetic a priori knowledge.

To prove this, we need only quote and look at the meaning of the following passage and its implications, since this is the passage in Human Action from which Gordon seems to derive this argument above:

“Aprioristic reasoning is purely conceptual and deductive. It cannot produce anything else but tautologies and analytic judgments. All its implications are logically derived from the premises and were already contained in them. Hence, according to a popular objection, it cannot add anything to our knowledge.

All geometrical theorems are already implied in the axioms. The concept of a rectangular triangle already implies the theorem of Pythagoras. This theorem is a tautology, its deduction results in an analytic judgment. Nonetheless nobody would contend that geometry in general and the theorem of Pythagoras in particular do not enlarge our knowledge. Cognition from purely deductive reasoning is also creative and opens for our mind access to previously barred spheres. The significant task of aprioristic reasoning is on the one hand to bring into relief all that is implied in the categories, concepts, and premises and, on the other hand, to show what they do not imply. It is its vocation to render manifest and obvious what was hidden and unknown before.

In the concept of money all the theorems of monetary theory are already implied. The quantity theory does not add to our knowledge anything which is not virtually contained in the concept of money. It transforms, develops, and unfolds; it only analyzes and is therefore tautological like the theorem of Pythagoras in relation to the concept of the rectangular triangle. However, nobody would deny the cognitive value of the quantity theory. To a mind not enlightened by economic reasoning it remains unknown. A long line of abortive attempts to solve the problems concerned shows that it was certainly not easy to attain the present state of knowledge.

It is not a deficiency of the system of aprioristic science that it does not convey to us full cognition of reality. Its concepts and theorems are mental tools opening the approach to a complete grasp of reality; they are, to be sure, not in themselves already the totality of factual knowledge about all things. Theory and the comprehension of living and changing reality are not in opposition to one another. Without theory, the general aprioristic science of human action, there is no comprehension of the reality of human action.

The relation between reason and experience has long been one of the fundamental philosophical problems. Like all other problems of the critique of knowledge, philosophers have approached it only with reference to the natural sciences. They have ignored the sciences of human action. Their contributions have been useless for praxeology.

It is customary in the treatment of the epistemological problems of economics to adopt one of the solutions suggested for the natural sciences. Some authors recommend Poincaré’s conventionalism. They regard the premises of economic reasoning as a matter of linguistic or postulational convention. Others prefer to acquiesce in ideas advanced by Einstein. Einstein raises the question: ‘How can mathematics, a product of human reason that does not depend on any experience, so exquisitely fit the objects of reality? Is human reason able to discover, unaided by experience through pure reasoning the features of real things?’ And his answer is: ‘As far as the theorems of mathematics refer to reality, they are not certain, and as far as they are certain, they do not refer to reality.’

However, the sciences of human action differ radically from the natural sciences. All authors eager to construct an epistemological system of the sciences of human action according to the pattern of the natural sciences err lamentably.

The real thing which is the subject matter of praxeology, human action, stems from the same source as human reasoning. Action and reason are congeneric and homogeneous; they may even be called two different aspects of the same thing. That reason has the power to make clear through pure ratiocination the essential features of action is a consequence of the fact that action is an offshoot of reason. The theorems attained by correct praxeological reasoning are not only perfectly certain and incontestable, like the correct mathematical theorems. They refer, moreover, with the full rigidity of their apodictic certainty and incontestability to the reality of action as it appears in life and history. Praxeology conveys exact and precise knowledge of real things.” (Mises 2008: 38–39).

First, it is quite clear here that Mises is ultimately rejecting the “popular objection” he refers to in paragraph 1: that tautologies cannot “add anything to our knowledge.” So in fact such apparent “tautologies” cannot really be literally tautologies.

When Mises says:

“Nonetheless nobody would contend that geometry in general and the theorem of Pythagoras in particular do not enlarge our knowledge,”

he means more than just that geometrical deduction yields new truths in an analytic a priori system.

What Mises is saying that Euclidean geometry provides real necessary knowledge about the external world, despite being a system of tautologies derived by deduction from the axioms. He is implying that Euclidean geometry is Kantian synthetic a priori knowledge.

Secondly, although it is poorly expressed, Mises appears to be thinking of synthetic a priori knowledge when he says that:

“In the concept of money all the theorems of monetary theory are already implied. The quantity theory does not add to our knowledge anything which is not virtually contained in the concept of money. It transforms, develops, and unfolds; it only analyzes and is therefore tautological like the theorem of Pythagoras in relation to the concept of the rectangular triangle. However, nobody would deny the cognitive value of the quantity theory.”

Mises cannot seriously believe that his monetary theory provides no necessary knowledge of reality, and it seems that he is referring to the synthetic character of these theories by his reference above to “the cognitive value of the quantity theory.”

Next, Mises is very clear in rejecting the analytic a priori character of praxeology when he rejects (1) Poincaré’s conventionalism and (2) Einstein’s view of mathematics as being divided into (a) pure mathematics (which is necessarily true) and (b) applied mathematics (which is only true of the real world contingently).

The final paragraph of Mises clinches my argument:

The theorems attained by correct praxeological reasoning are not only perfectly certain and incontestable, like the correct mathematical theorems. They refer, moreover, with the full rigidity of their apodictic certainty and incontestability to the reality of action as it appears in life and history. Praxeology conveys exact and precise knowledge of real things.” (Mises 2008: 39).

This entails that praxeological theorems are necessarily and absolutely true, and are known a priori, but also yield necessary knowledge of the real world. That is nothing but Kantian synthetic a priori knowledge.

And, finally, if Mises did not think that praxeological theorems were synthetic a priori, why is Mises desperate to defend the existence of synthetic a priori propositions in The Ultimate Foundation of Economic Science: An Essay on Method (1962)?:

“The essence of logical positivism is to deny the cognitive value of a priori knowledge by pointing out that all a priori propositions are merely analytic. They do not provide new information, but are merely verbal or tautological, asserting what has already been implied in the definitions and premises. Only experience can lead to synthetic propositions. There is an obvious objection against this doctrine, viz., that this proposition that there are no synthetic a priori propositions is in itself a — as the present writer thinks, false — synthetic a priori proposition, for it can manifestly not be established by experience.

The whole controversy is, however, meaningless when applied to praxeology. It refers essentially to geometry. Its present state, especially its treatment by logical positivism, has been deeply influenced by the shock that Western philosophy received from the discovery of non-Euclidian geometries. Before Bolyai and Lobachevsky, geometry was, in the eyes of the philosophers, the paragon of perfect science; it was assumed that it provided unshakable certainty forever and for everybody. To proceed also in other branches of knowledge more geometrico was the great ideal of truth-seekers. All traditional epistemological concepts began to totter when the attempts to construct non-Euclidian geometries succeeded.

Yet praxeology is not geometry. It is the worst of all superstitions to assume that the epistemological characteristics of one branch of knowledge must necessarily be applicable to any other branch. In dealing with the epistemology of the sciences of human action, one must not take one’s cue from geometry, mechanics, or any other science.

The assumptions of Euclid were once considered as self-evidently true. Present-day epistemology looks upon them as freely chosen postulates, the starting point of a hypothetical chain of reasoning. Whatever this may mean, it has no reference at all to the problems of praxeology.” (Mises 1962: 5).

In the first paragraph, Mises was still concerned to defend the existence of synthetic a priori knowledge.

However, he was driven, at the same time, to the extreme position that the collapse of Euclidean geometry as synthetic a priori knowledge does not present any epistemological challenge to the synthetic a priori status of praxeology.

This, if nothing else, is breathtaking in its pig-headed unwillingness to reconsider the epistemological status of praxeology given the fall of Euclidean geometry as the paradigmatic case of synthetic a priori knowledge.

But to return to the original point: David Gordon has misinterpreted Mises’s epistemological position, because he has failed to read the relevant passage from Human Action in its entirety and in context.

Finally, it is true that Mises was sometimes confused, and quite lazy in his treatment of the analytic versus synthetic distinction.

The evidence is here in Mises’s The Ultimate Foundation of Economic Science: An Essay on Method (1962):

“Praxeology is a priori. All its theorems are products of deductive reasoning that starts from the category of action. The questions whether the judgments of praxeology are to be called analytic or synthetic and whether or not its procedure is to be qualified as ‘merely’ tautological are of verbal interest only.

What praxeology asserts with regard to human action in general is strictly valid without any exception for every action. There is action and there is the absence of action, but there is nothing in between. Every action is an attempt to exchange one state of affairs for another, and everything that praxeology affirms with regard to exchange refers strictly to it. In dealing with every action we encounter the fundamental concepts end and means, success or failure, profit or loss, costs. An exchange can be either direct or indirect, i.e., effected through the interposition of an intermediary stage. Whether a definite action was indirect exchange has to be determined by experience. But if it was indirect exchange, then all that praxeology says about indirect exchange in general strictly applies to it.

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 1962: 44–45).

Mises’s main epistemological concern is to maintain the a priori status of praxeology.

But his remarkable statement is here:

“The questions whether the judgments of praxeology are to be called analytic or synthetic and whether or not its procedure is to be qualified as ‘merely’ tautological are of verbal interest only.”

According to Mises, whether praxeological theorems or derived theories are “synthetic” or “analytic” is of “verbal interest only.” That is an incredibly ignorant statement, because if praxeological theorems say anything necessarily true of the real world, as Mises says in many other passages (Mises 2008: 39), then they must be synthetic, not analytic.

Mises is logically committed to defending the synthetic a priori status of praxeology, but was so confused that he dismissed the first of these concepts as merely of “verbal interest,” when the synthetic nature of any praxeological theorem ought to be a straightforward consequence of his epistemology.

This confusion, or lack of interest in the analytic versus synthetic distinction, mostly likely explains his potentially misleading discussion of Euclidean geometry in Human Action, as we have seen in the passage above (Mises 2008: 38).

BIBLIOGRAPHY
Gordon, David. 1996. The Philosophical Origins of Austrian Economics. Ludwig von Mises Institute, Auburn, Ala.

Mises, Ludwig von. 1962. The Ultimate Foundation of Economic Science: An Essay on Method. Van Nostrand, Princeton, N.J.

Mises, Ludwig von. 2008. Human Action: A Treatise on Economics. The Scholar’s Edition. Ludwig von Mises Institute, Mises Institute, Auburn, Ala.

How does an Austrian Praxeologist make Predictions?

According to Rothbard, not as a praxeologist qua praxeologist, but as a “forecaster,” a process which is essentially like that “of the historian”:

“How may praxeology be applied to forecasting, to the prediction of future historical events? The process is essentially that of the historian, except that the difficulties are greater. Thus, using the above example the forecaster may see a considerable increase in the money supply take place. He asserts B; C he knows as a praxeological truth. In order to forecast the probable future course of purchasing power, he must make an estimate of the probable course of the demand for money in the period under consideration.

If, on the basis of his judgement, he decides that the relative change in demand will be negligible, he is in a position to predict that the purchasing power of the money unit will decline in that period. With the help of praxeology, his judgement is the best he can offer, but it is still inexact, dependent on the correctness of his estimate—in this case, of the movement in demand for money. If he wishes to make a quantitative estimate of the change in purchasing power, his estimate is still more inexact, for praxeology can be of no help in this attempt. If his prediction proves erroneous, it is not praxeology that has failed, but his judgment of the future behavior of the elements in the praxeological theorem.

Praxeology is indispensable, but it does not provide omniscience. It furnishes laws in the form of: If X, and if Y remains unchanged, then Z. It is up to the historian, and his counterpart, the forecaster, to determine the specific cases in which the law is applicable.” (Rothbard 2011: 116).

So praxeological truths can be used to make contingent predictions by means of conditional statements (e.g., if x, then y) about the future, but the Austrian is not a “praxeologist” when doing this, but a “forecaster.”

This is a rather important datum, because the internet is filled with vulgar Austrians who (bizarrely) assert that Austrian economics cannot be used to make predictions of any kind whatsoever.

A secondary point is this: why a praxeologist cannot make predictions qua praxeologist remains unclear.

Elsewhere we read that the “forecasting” role that any Austrian must assume when predicting the future involves the Austrian being a “thymologist”:

“Austrian economists, as Austrian economists, or praxeologists, do not predict. They can predict not as formal economists, or praxeologists, but, rather, in their role as thymologists, or economic historians. In praxeology, A causes B, other things remaining the same. But, in the real world, other things cannot be relied upon to always remain constant. Therefore, predictions of the ‘A will necessarily lead to B’ type are strictly prohibited. Instead, praxeologists, but not thymologists, must limit themselves to statements of the if-A then-B variety.”
“Austrian Predictions,” Mises Wiki
http://wiki.mises.org/wiki/Austrian_predictions

The word “thymology” or “thymologist” does not even appear in the twenty-volume Oxford English Dictionary (2nd edn.), so you know immediately you are dealing with a highly obscure or archaic word.

It speaks volumes about Austrian methodology that they resort to truly obscure terms, and that the actual praxeological laws are supposed to be universally and necessarily true, but when applied to the real world in prediction suddenly the laws become contingent, as Rothbard says:

“Praxeology is indispensable, but it does not provide omniscience. It furnishes laws in the form of: If X, and if Y remains unchanged, then Z. It is up to the historian, and his counterpart, the forecaster, to determine the specific cases in which the law is applicable.”

It is difficult to see how such “laws” based on conditional statements are anything but analytic a priori statements.

For the whole epistemological justification of praxeology is that praxeological laws, on the basis of the action axiom, are synthetic a priori truths, and thereby have necessary truth about the real world: yet suddenly when applied to the real world they become contingent.

These statements by Austrians about the nature of prediction must be judged a severe epistemological problem for Austrian economics.

BIBLIOGRAPHY
Mises, Ludwig von. 1978 [1962]. The Ultimate Foundation of Economic Science: An Essay on Method (2nd edn), Sheed Andrews & McMeel, Kansas City.

Mises, Ludwig von. 2007 [1957]. History and Theory. Ludwig von Mises Institute, Auburn, Ala.

Rothbard, M. N. 2011. Economic Controversies. Ludwig von Mises Institute, Auburn, Ala.

Schuller’s Challenge to Misesian Apriorists has never been answered

Many years ago, George J. Schuller reviewed the first edition of Mises’s Human Action (1949). Murray Rothbard (1951) wrote a reply to this review, and in turn Schuller (1951) answered Rothbard’s criticisms.

In his reply, George Schuller provided a devastating epistemological critique of Human Action, and then a challenge to Austrian praxeologists that has never been answered:

“2. Mises uses the methods of introspection, deduction, and (incidentally) reference to fact. He fails to distinguish between the ideal use of these, which perhaps would result in a perfect praxeology consisting of incontrovertible truths, and the use of them by a fallible mortal like himself. Introspection is a valuable scientific tool, but its very immediacy, which enables the user to avoid errors of more roundabout methods, may lead him to subjective bias, inaccurate generalization from himself to all others, and overconfidence in the soundness of his conclusions. The conclusions should be checked carefully by other methods, such as observation of the behavior of persons unlike one’s self and questioning of them concerning their motives. ….

In Mises’ uncritical usage introspection becomes not a scientific method but the basis of a creed. The words which he attributes to the worshippers of collectivism may with equal appropriateness be attributed to the worshippers of introspectivism: ‘We are right because an inner voice tells us that we are right and you are wrong’ (p. 152).

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. From the rules of logic alone no substantive propositions can be deduced. Idealists and materialists, atheists and Thomists, capitalists and communists all may use the rules of logic with equal facility to arrive at or support their opposed positions.

But Mises attempts to deduce substantive propositions from his laws—e.g., that governmental curbs on the drug traffic, or alcoholic ‘prohibition,’ lead to socialism (pp. 728–29). That Mises’ use of logic as a scientific instrument falls short of perfect rigor may be readily demonstrated. (a) After telling us that ‘it is nonsensical to reckon national income or wealth’ or other aggregates (pp. 218-29), he insists that the free market ‘raised the average standard of living to an unprecedented height’ whereas intervention’s ‘inexorable final consequences’ include a ‘drop in the quantity of goods produced’ (pp. 741–51).1 (b) His example of choice on page 201 (operas) does not lead to his inferences.

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.

So far as empiricism is concerned, Mises tells us his axioms are logically prior to fact and therefore cannot be tested by fact. Yet he often (and Rothbard: e.g. 6, d) cites facts as if they provided support for his conclusions and for the axioms, postulates, and logical procedures from which the conclusions have been derived. Mises thus disarms his critics of a weapon which he renounces in principle but uses in practice. And such phrases as Rothbard’s ‘universally recognized’ (points 2 and 4) or ‘everyone will consider’ (point 5) surely are not meant as empirical assertions, since ‘the vast majority’ cannot ‘grasp complex chains of abstract reasoning’ (point 6, e).” (Schuller 1951: 186–187).

“6. 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 or, closer home, Von Neumann’s Theory of Games as a model.” (Schuller 1951: 188).

If the economic theories of Mises’s 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, and anyone who has read the first few chapters critically will quickly discover the reason why: there is no formal deduction going on by which Mises’s inferences are carefully and painstakingly deduced from the human action axiom.

Even after inspecting Mises’s own informal method of “verbal deduction” does not help in identifying how inferences are formally “deduced” from the action axiom either.

It seems impossible that the conclusions and theories even of the first few chapters can be deduced from the action axiom and the few others Mises starts with.

Even by Chapter XI (on “Uncertainty”), I am willing to bet that Mises’s whole apriorist project has collapsed, as I show here.

Just to establish the existence of a world where humans face an uncertain future in the sense of (1) being unable to perfectly predict the future, and (2) being unable to provide objective probability scores for future outcomes or events in certain processes requires many inductive arguments and a great deal of empirical evidence, from the natural and social sciences and the relative frequency theory of probability.

The only attempt I am aware of to write out some of Mises’s arguments formally is the paper I discussed in the last post. But the paper deals with but two of Mises’s axioms and no derived economic theory whatsoever, and, fundamentally, rejects Mises’s use of synthetic a priori knowledge and argues that praxeology is only analytic a priori.

But this means that even if you write out the arguments of Human Action formally, you have proven nothing necessarily true of the real world, because the instant analytic a priori theories are applied to the real world, they would be given an empirical hearing and tested by experience.

And that leaves Mises’s claims about praxeology – that no experience can ever refute his economic laws – in utter ruins.


BIBLIOGRAPHY
Mises, L. von. 2008. Human Action: A Treatise on Economics. The Scholar’s Edition. Mises Institute, Auburn, Ala.

Rothbard, Murray N. 1951. “Mises’ ‘Human Action’: Comment,” The American Economic Review 41.1: 181–185.

Schuller, George J. 1950. Review of Human Action: A Treatise on Economics, by Ludwig von Mises, The American Economic Review 40.3: 418–422.

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

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.

My Posts Refuting Misesian Apriorism and Praxeology

My posts below explain why Misesian apriorist praxeology is untenable and requires non-existent synthetic a priori knowledge. In particular, Misesians have a badly flawed understanding of the philosophy of mathematics and geometry, which they use to defend their apriorism:

“Mises was Confused about the Analytic–Synthetic Distinction,” September 15, 2013.

“Mises on Kant and Praxeology,” September 15, 2013.

“Hoppe on Euclidean Geometry, Part 2,” September 14, 2013.

“Robert Murphy gets Mises’s Epistemology Wrong,” September 13, 2013.

“Hoppe on Euclidean Geometry,” September 11, 2013.

“Hoppe’s Caricature of Empiricism,” September 10, 2013.

“Mises’s Flawed Deduction and Praxeology,” September 8, 2013.

“Mises versus the Vienna Circle,” September 7, 2013.

“Reply to a ‘Red Herring on Praxeology,’” September 6, 2013.

“Tokumaru on Mises’s Epistemology,” September 3, 2013.

“Mises’s Non Sequitur on synthetic a priori Knowledge,” September 2, 2013.

“Bob Murphy All At Sea on Geometry and Economic Epistemology,” August 31, 2013.

“Mises Fails Philosophy of Mathematics 101,” August 30, 2013.

“Barrotta’s Kantian Critique of Mises’s Epistemology,” July 28, 2013.

“What is the Epistemological Status of Praxeology and the Action Axiom?,” July 27, 2013.

When Austrians Throw Reality to the Wind

I am sternly lectured here by an internet Austrian commenting on my last post that my empirical evidence supporting the statement that many businesses use administered prices is all for naught, because, well, empirical reality does not matter:

“First, there is the role of empirical evidence in economic theorising. A chronicler like you will never get that part. Second, there is the important point that what people say is irrelevant to an economic theorist. It may be to an accountant (which you seem to be) but not to a person dabbling in Economics.”
http://socialdemocracy21stcentury.blogspot.com/2013/10/lavoie-on-administered-prices.html?showComment=1381482208666#c8603208885956595634

The words highlighted in yellow say it all: vulgar Austrians do not care about empirical reality. If an Austrian economic theory is contradicted by reality, then reality is irrelevant.

For example, if one wants to create a theory about how prices are actually set in the real world, then obviously surveys of how business people actually do set prices must be “irrelevant to an economic theorist.”

Thus the findings of the Oxford Economists’ Research Group (OERG) in the 1930s, on real world price setting, confirmed by numerous studies since then (Andrews 1964; Means 1972; Okun 1981; Blinder et al. 1998, with Downward and Lee 2001; Fabiani et al. 2006), must be totally irrelevant to how prices are set:

“For several years a group of economists in Oxford have been studying problems connected with the trade cycle. Among the methods adopted is that of discussion with business men, a number of whom have been kind enough to submit to questioning on their procedure in various circumstances: and among other matters in the questionnaire were inquiries about the policy adopted in fixing the prices and the output of products.” (Hall and Hitch 1939: 12).

“The most striking feature of the answers was the number of firms which apparently do not aim, in their pricing policy, at what appeared to us to be the maximization of profits by the equation of marginal revenue and marginal cost. In a few cases this can be explained by the fact that the entrepreneurs are thinking of long-run profits, and in terms of long-run demand and cost curves, even in the short run, rather than of immediate profits. This is expressed to some extent by the phrase commonly used in describing their policy – ‘taking goodwill into account’. But the larger part of the explanation, we think, is that they are thinking in altogether different terms; that in pricing they try to apply a rule of thumb which we shall call ‘full cost’, and that maximum profits, if they result at all from the application of this rule, do so as an accidental (or possibly evolutionary) by-product.

An overwhelming majority of the entrepreneurs thought that a price based on full average cost (including a conventional allowance for profit) was the ‘right’ price, the one which ‘ought’ to be charged. In some cases this meant computing the full cost of a ‘given’ commodity, and charging a price equal to cost. In others it meant working from some traditional or convenient price, which had been proved acceptable to consumers, and adjusting the quality of the article until its full cost equalled the ‘given’ price. A large majority of the entrepreneurs explained that they did actually charge the ‘full cost’ price, a few admitting that they might charge more in periods of exceptionally high demand, and a greater number that they might charge less in periods of exceptionally depressed demand. What, then, was the effect of ‘competition’? In the main it seemed to be to induce firms to modify the margin for profits which could be added to direct costs and overheads so that approximately the same prices for similar products would rule within the ‘group’ of competing producers. One common procedure was the setting of a price by a strong firm at its own full cost level, and the acceptance of this price by other firms in the ‘group’; another was the reaching of a price by what was in effect an agreement, though an unconscious one, in which all the firms in the group, acting on the same principle of ‘full cost’, sought independently to reach a similar result.” (Hall and Hitch 1939: 18–19).

However, for those of us not blinded by Mises’s crazy methodology, empirical reality must ground all economic theories.


BIBLIOGRAPHY
Andrews, P. W. S. 1964. On Competition in Economic Theory. Macmillan, London.

Blinder, A. S. et al. 1998. Asking about Prices: A New Approach to Understanding Price Stickiness. Russell Sage foundation, New York.

Downward, Paul and Frederic Lee. 2001. “Post Keynesian Pricing Theory ‘Reconfirmed’? A Critical Review of Asking about Prices,” Journal of Post Keynesian Economics 23.3: 465–483.

Fabiani, S., M. Druant, I. Hernando, C. Kwapil, B. Landau, C. Loupias, F. Martins, T. Mathä, R. Sabbatini, H. Stahl and A. Stokman. 2006. “What Firms’ Surveys tell us about Price-Setting Behavior in the Euro Area,” International Journal of Central Banking 2.3: 3–47.

Hall, R. L. and C. J. Hitch. 1939. “Price Theory and Business Behaviour,” Oxford Economic Papers 2 (May): 12–45.

Means, G. C. 1972. “The Administered Price Thesis Reconfirmed,” American Economic Review 62: 292–306.

Okun, A. 1981. Prices and Quantities: A Macroeconomic Analysis. Blackwell. Oxford.