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Epistemology and Methodology

Praxeology, Intentional Action and the Methodology of Austrian Economics

Abstract

The concept of Intentional Action is at the core of Praxeology, as developed by the Austrian economist Ludwig von Mises. Under this unique approach, defined as the science of human action and designed to study the field of the social sciences, Mises created an axiomatic-deductive system starting from the “action axiom”: the contention that every acting man is eager to substitute a more satisfactory state of affairs for a less desired one. From this axiom, the Austrian scholar is able to derive the fundamental features and implications of human action; such as value, scale of value, scarcity, abundance, profit, loss, uncertainty and causality, among others. This chapter intends to present the praxeological perspective on intentional action and its epistemological implications; it also attempts to answer objections to this thesis.

Keywords

  • Mises
  • Action
  • Praxeology
  • Logic
  • Austrian economics

“Economics is not about goods and services; it is about human choice and action.”

Ludwig Von Mises (1949, 491).

This chapter is based on our paper Futerman, Alan G. and Block, Walter E. 2017. “A Praxeological Approach to Intentional Action”. Studia Humana, Vol. 6:4, October, pp. 10-33. Available at http://studiahumana.com/pliki/wydania/10443-Volume6_Issue4-02_paper.pdf (last visited April 11, 2021).

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Change history

  • 18 January 2022

    Owing to an oversight on the part of the Springer, Formulas 1.3a, 1.4a and 1.4b of this chapter were initially published with errors. The correct presentation is given here.

Notes

  1. 1.

    For another approach on praxeology, see Kotarbinski (1965).

  2. 2.

    Lemberg, Austria, 09/29/1881 – New York, United States, 10/10/1973.

  3. 3.

    The present authors would include in this regard Murray N. Rothbard, even though he is lesser known that those two. The latter’s perspective can be seen in Rothbard (1951, 1960, 1962, 1971, 1973, 1997a, b, c, d).

  4. 4.

    A “defense of free enterprise” is normative. The action axiom is an aspect of positive economics. Never the twain shall meet? See below.

  5. 5.

    Others include Block (1973, 1980, 1999), Batemarco (1985), Fox (1992), Hoppe (1989, 1991, 1992, 1995), Hulsmann (1999), von Mises (1957, 1998), Polleit (2008, 2011), Rizzo (1978), Rothbard (1951, 1960, 1962, 1971, 1973, 1997a, b, c, d), Selgin (1988). Further, virtually all of these are in effect standing on the intellectual shoulders of Mises.

  6. 6.

    By focusing on human action as such, Mises tried to identify what Sarjanovic (2008, 20) defines as a “pre-scientific metaphysics”. As such, it primarily deals with the nature of human action (and behavior), and only secondarily with economic theorems (catallactics).

  7. 7.

    Although it could be said that there is no such thing as ceteris paribus in any science, it is certainly possible to distinguish among different conditions for the application of the concept: 1. When the exact formal conditions which allow the application of a proposition hold; 2. When the variables not included in the theory are irrelevant or constant; 3. When such variables are neither relevant nor constant but have turned out to be so in a laboratory; and 4. The variables not included in the theory are neither constant nor irrelevant nor established in a laboratory, but we accept the current hypothesis arguendo until we can make a new one which includes them. See Gordon (1993). We can infer that Mises refers here to the fact that formal sciences apply for 1, the natural sciences for 2 and 3, but economics pertains to 4. For a different approach, see as an example Roth (1988).

  8. 8.

    A similar situation pertains with regard to equilibrium, or the evenly rotating economy. States von Mises (1922: 163) in this regard: “To assume stationary economic conditions is a theoretical expedient and not an attempt to describe reality. We cannot dispense with this line of thought if we wish to understand the laws of economic change. In order to study movement we must first imagine a condition where it does not exist. The stationary condition is that point of equilibrium to which we conceive all forms of economic activity to be tending and which would actually be attained if new factors did not, in the meantime, create a new point of equilibrium. In the imaginary state of equilibrium all the units of the factors of production are employed in the most economic way, and there is no reason to contemplate any changes in their number or their disposition.

    “Even if it is impossible to imagine a living—that is to say a changing—socialist economic order, because economic activity without economic calculation seems inconceivable, it is quite easy to postulate a socialist economic order under stationary conditions. We need only avoid asking how this stationary condition is achieved. If we do this there is no difficulty in examining the statics of a socialist community. All socialist theories and Utopias have always had only the stationary condition in mind.” (emphasis in the original).

  9. 9.

    There are no constants in economics as there are in the natural sciences, such as gravity, or the periodic table of the elements in chemistry. There are, however, particular features of human action as such, identified by praxeology, that can help us make sense of human behavior, but these praxeological laws and theorems are of a formal kind. Hence, regularities do exist in the social sciences, but only in a formal sense, not in a material sense. Hence, events are unique. See below for further clarification on this regard.

  10. 10.

    See Mises on Case Probability and Class Probability (1949 [1998]: 107–113). This fundamental distinction can allow us to understand why certain industries, such as insurance, are both of the utmost importance in a society and at the same time can and do work with certain regularities, i.e. those subject to class probability.

  11. 11.

    This insight by Mises was later adopted by philosopher of science Karl R. Popper (1957 [2002]).

  12. 12.

    Although the conception of axioms as self-evident has been abandoned at the beginning of the XXth century, this in turn works in favor of Mises, since it does not oblige him to justify the action axiom as the only and most fundamental basis for any knowledge, or knowledge as such. Despite of the fact that Mises indeed wants to prove that it is an axiom.

  13. 13.

    “Axiomatic Nature” is to be regarded in the sense of the self-evidency. However, as we have previously said in the previous fn., if axioms need not be self-evident, but chosen for a system, then there is no such a thing as axiomatic nature. Even so, we use the phrase as to follow Mises’s idea on this regard; which does not alter the reasoning. The action axiom is apodictic, since any attempt to deny it is also a human action.

  14. 14.

    “[…] to distinguish precisely, within the broader field of general praxeology, a narrower orbit of specifically economic problems […] All that can be contended is this: Economics is mainly concerned with the analysis of the determination of money prices of goods and services exchanged on the market. In order to accomplish this task it must start from a comprehensive theory of human action […] it must not restrict its investigations to those modes of action which in mundane speech are called ‘economic’ actions, but must deal also with actions which are in a loose manner of speech called ‘noneconomic’” (von Mises 1949 [1998]: 233–235).

  15. 15.

    Although not everything that seems evident is irrefutable nor everything that is irrefutable is evident, we will address possible objections throughout this chapter in order to defend this view with respect to the action axiom.

  16. 16.

    The causes of the ends aimed by every action is studied by the field of psychology.

  17. 17.

    Following Aristotle´s performative contradiction.

  18. 18.

    Despite of the fact that if we are to adopt the analytic/synthetic distinction we may discard the empirical validity of the action axiom as a mere analytic truth (or a tautology), and thus analyze this approach from a strict positivist view, we will deal with this objection by pointing out its contradictions further in the text.

  19. 19.

    Since we are approaching this subject matter from the point of view of methodological dualism, a falsifiability criteria such as Popper’s need not apply to define this approach as scientific or not.

  20. 20.

    See von Mises (1938 [2000]). For a critique see Moorhouse (1993). Other Austrians, too, reject mathematical economics. Austrian economists who object to the hyper-mathematicalization of the dismal science include: Anderson (2002), Barnett (2003, 2004), Barnett and Block (2006a, b, 2010), Brätland (2000), Bylund (2011), Callahan (2001), Hazlitt (1959), Herbener (1996), Hutt (1979), Jablecki (2007), Kirzner (1990), Leoni and Frola (1977), Menger (1973), von Mises (1977, 1998), Murphy (2008), Murphy et al. (2010), Reekie (1984a, 1984b), Rizzo (1978), Ropke (1956), Rothbard (1960, 1962, 1988, 1997b, 2011), Shostak (2002), Spadaro (1956), Wutscher (unpublished). There are even some economists not usually associated with the Austrian School who also oppose this hyper-mathematicalization of economics: Boulding (1971), Champion (2008), Dolan (1976), Ingrao and Israel (1987), Ischboldin (1960), Mirowski (1988).

  21. 21.

    It is possible to formalize the theory with the help of symbolic logic, but functions are useful as well and we pursue that path at present. Why? Garrison (1994, 2001) inverted the triangle of Hayek (1931) and Rothbard (1962 [2009]), placing time on the horizontal, not the vertical axis. Why did he do so? This was done in order to make the triangle, a pillar of Austrian business cycle theory, more amenable to mainstream economists, who are accustomed to that practice and might reject the triangle out of hand for this one characteristic. It is only in like manner that we employ mathematical format; for the same precise reason: to render Austrian economics more palatable to the profession, which is mainly neoclassical, and more than likely to reject praxeology for that reason alone (The popularity of Coase 1960, is an exception to this general rule.). As for the present authors, we join Barnett and Block (2006a, b) in rejecting the triangle holus bolus, and, also, with the economists mentioned, supra, in the present footnote, who reject mathematical notation.

  22. 22.

    If he could do so, we would have achieved post scarcity. Then, there would be no need for human action, nor economics, which is its study.

  23. 23.

    Are we now treading in the direction of illegitimate cardinal utility? Austrianism is only compatible with ordinal utilty. Let us reassure the reader that we are not. That is why we say that the individual orders his ends in a ranking, and he values his means in proportion to how he values the ends he intends to achieve with them; i.e. in relation to them. But we do not say that the value of the means is equal to the value of the ends. We intend to say that, for example, the individual values E1 more than E2 (vE1> vE2); and the unit of means with which he intends to achieve E1 will be valued according to how he values E1 (vE1). Note that the values do not equalize; or that we can somehow measure them. Formalization is offered only for illustrative purposes.

  24. 24.

    Menger [1871 (2007)], by using the word “marginal” meant “additional”.

  25. 25.

    Let us note that the praxeological deduction of diminishing marginal utility is based on the fact that the first unit of means is used for the attainment of the highest ranked end, the second unit for the second ranked end, etc. regardless of the psychological satisfaction (reported utility) that the individual gets at each time. On the other hand, Gossen’s (1854) Law (which is often used by neo-classical economists in order to illustrate this theory) is based on the idea that successive consumption of units of the same commodity will provide less utility each time. However, this depends on the commodity and the individual. For instance, the second unit may provide more satisfaction than the first one, and the third more than the second, etc. It is only eventually that we reach a point of diminishing returns. As such, it cannot be necessarily true, as are the categories of praxeology. In effect, this in turn implies that for praxeology marginal utility theory is not based on psychologism, and as we will see in section V.i., this is relevant for the entire praxeological approach towards human action.

  26. 26.

    With respect to disutility, or discomfort, something similar takes place, e.g. The first scratch in the car bothers the owner more than the second, and so forth.

  27. 27.

    Since there is no continuity in the field of human action (because man only regards discrete quantities as relevant for action), to derivate a function makes no economic sense. However, this formalization is intended to illustrate the postulates of praxeology, not to replace their conceptual truth, which is mainly shown in discursive reasoning.

  28. 28.

    Thus, economic goods are those which are scarce.

  29. 29.

    Let us be clear on this “value scale” business. It is not as if, on the one hand, we have the person, and on the other, his “value scale” that, perhaps, he is clutching in his hand, and consults, from time to time, before he acts. Rather, this value scale is implicit in his behavior. He chooses an apple instead of a banana, when offered both. On his value scale, the former ranks higher than the latter. We discover this, through his choice. However, he had no separate, perhaps printed, value scale, that he consulted. It is entirely possible, very likely even, that he was not thinking about fruit just before the moment he was offered this choice. It is highly plausible the even he did not know, beforehand, which he would partake in; that even he only discovered this ranking as he reached out his hand and grabbed up the apple.

  30. 30.

    Thus, it would be impossible for anyone to demonstrate that he was indifferent between any two or more options. He could say he was indifferent, but how could he reveal (in the Rothbardian 1977) sense, that he was? He could not.

  31. 31.

    Otherwise, why did he make that choice? Neoclassical indifference analysis is based on the idea that there is such a thing as indifference in human action (as presented in indifference curves and maximization analysis; see Chapter II). Nozick (1977: 369) argues that marginal utility theory requires indifference in order to explain why the agent may choose any of the units he possesses to achieve an end; thus, he avers, the Austrian rejection of the concept of indifference is self-refuting. But if the agent were truly indifferent between the aforementioned apple and banana, why, ever, would he pick one and not the other? For the Austrian critique of the concept of “indifference” in economics, see Barnett (2003), Block (1980, 1999, 2003, 2007, 2009a, 2009b), Block and Barnett (2010), Hoppe (2005, 2009), Hulsmann (1999), Machaj (2007). For a neoclassical rejection of this Austrian view, and thus a defense of the mainstream doctrine of “indifference” see Caplan (undated, 1999, 2001, 2003, 2008), Nozick (1977), O’Neill (2010). See also on this Zanotti [1990 (2004): 22]: “Nozick has objected that from the fact that one person chooses a does not imply that it does not want nor prefer b. It is true. But our contention that every action implies choosing between a and b does not mean deducing that the person does not prefer b, rather that since not every necessity could be satisfied at the same time, then the acting agent must create a value scale and set his priorities, according to which he will option. Perhaps, respect to this observation by Nozick we may say that every action implies to choose between a and non a” (translated by the first of the present authors from the original in Spanish, with permission of the original author).

  32. 32.

    Menger (2007 [1871]) classified economic goods in lower and higher order. Thus, lower order goods (or first order) are consumption goods, and those of higher order (or second, third, …, n orders) are those which are used in the production process of lower order goods, classified as such according to how far they are from the consumption stage. Savings implies economic agents sacrificing present consumption in order to create higher order goods, which in turn can increase future consumption.

  33. 33.

    which takes place before the advent of refrigeration

  34. 34.

    Thus, the metaphysical status of the category of causality is outside the scope of praxeology. This is so because it is irrelevant for the acting agent: Whatever its metaphysical status, it must take it into account for the very nature of intentional action as such.

  35. 35.

    For a full analysis of praxeology see von Mises [1949 (1998)] and Zanotti [1990 (2004)].

  36. 36.

    As presented in the previous section [1.4c]. “Choosing means is a technical problem, as it were, the term ‘technique’ being taken in its broadest sense. Choosing ultimate ends is a personal, subjective, individual affair. Choosing means is a matter of reason choosing ultimate ends a matter of the soul and the will” (von Mises 1957 [2007]: 14–5).

  37. 37.

    The idea of identifying economic principles in human action as such and analyzing different areas of human behavior by using economic tools or concepts is not such a controversial approach within economic science. In effect, for instance, Gary Becker pursued a similar path (only on a different basis). In his words:

    • “My research uses the economic approach to analyze social issues that range beyond those usually considered by economists…

    • “Unlike Marxian analysis, the economic approach I refer to does not assume that individuals are motivated solely by selfishness or material gain. It is a method of analysis, not an assumption about particular motivations. Along with others, I have tried to pry economists away from narrow assumptions about self-interest. Behavior is driven by a much richer set of values and preferences.

    • “The analysis assumes that individuals maximize welfare as they conceive it, whether they be selfish, altruistic, loyal, spiteful, or masochistic. Their behavior is forward-looking, and it is also assumed to be consistent over time. In particular, they try as best they can to anticipate the uncertain consequences of their actions. Forward-looking behavior, however, may still be rooted in the past, for the past can exert a long shadow on attitudes and values.

    • “Actions are constrained by income, time, imperfect memory and calculating capacities, and other limited resources, and also by the opportunities available in the economy and elsewhere. These opportunities are largely determined by the private and collective actions of other individuals and organizations.

    • “Different constraints are decisive for different situations, but the most fundamental constraint is limited time. Economic and medical progress have greatly increased length of life, but not the physical flow of time itself, which always restricts everyone to 24 h per day…” Becker (1993, 385–386).

  38. 38.

    One of the characteristics of “Perfect Competition”. See Kirzner (1963a).

  39. 39.

    It is true that, supposing someone’s actions always turned out for the best, nothing would prevent him from having the concept of cost or being aware of alternatives to his actions. It could be (reasonably) claimed that the presupposition of our argument is that in order to have the concept of loss one must be able to experience a loss, and this may not be necessary. Yet, in this scenario, the concept of loss would be, at least, irrelevant. This is a speculation in psychology, not praxeology: it is addressed to how people come to appreciate different concepts such as, in this case, alternative or opportunity costs.

  40. 40.

    See Rizzo (1978: 50).

  41. 41.

    Some disciples of Mises, such as the American economist Murray Rothbard, use an Aristotelian foundation for the action axiom. “All human beings act by virtue of their existence and their nature as human beings. We could not conceive of human beings who do not act purposefully, who have no ends in view that they desire and attempt to attain. Things that did not act, that did not behave purposefully, would no longer be classified as human.” (emphasis in the original); Rothbard (1962 [2009]: 2); this author also cites Aristotle’s Ethica Nicomachea, ch. vii, as the basis for his contention on the nature of action. See also Rothbard (1997b, d).

  42. 42.

    This fact may answer the contention that the a priori nature of mathematics and logic is demonstrable, while praxeology is not (Scarano, 2004: 11). “…axiomatic concepts are only implicit in experience. To identify them explicitly, to conceptualize them, requires a sophisticated development” (emphasis in the original) Binswanger (2014: 168).

  43. 43.

    Perhaps by the influence of Edmund Husserl.

  44. 44.

    While we respect Frege, the present authors do not accept his view that reality is “logical.” We maintain that it just is. See on this Wittgenstein, below.

  45. 45.

    We follow Long’s (2004) presentation; Mises does not present his case specifically in this way.

  46. 46.

    And, as we have seen, Mises also points out that unconscious behavior may be difficult to distinguish from conscious behavior.

  47. 47.

    In Mises’s analysis, Verstehen could be identified with Bergson’s concept of Intuition (Scarano 2004: 6). However, the approach here is not the same. The concept of intuition often responds to subjectivism and thus to relativism, turning it into an invalid source for objective knowledge. The idea here is that experience is interpreted by a priori praxeological concepts, not that there is some kind of revelation that allows the individual to identify reality as it is without a specific means of cognition (in this case, the use of man’s mind aided by praxeological concepts).

  48. 48.

    “Thoughts without content are void; intuitions without conceptions, blind” Kant (1787).

  49. 49.

    “‘Thymology’ is derived from the Greek θυμóς, which Homer and other authors refer to as the seat of the emotions and as the mental faculty of the living body by means of which thinking, willing, and feeling are conducted.” von Mises (1957 [2007]: 265–266).

  50. 50.

    See Quine (1951). Thus, we do not have to respond to the reasons for the rejection of synthetic a priori propositions as presented, for instance, in Scarano (2006: 5).

  51. 51.

    Translated by the first of the present authors from the original in Spanish, with permission of the original author.

  52. 52.

    This may be presented as the reason why Mises seems to avoid distinguishing between primitive and defined terms, as well as axioms and theorems in the strict sense. He also does not specifically state theorems nor constructs nor proves a definite system where praxeological truth belongs to both the axioms and the theorems (such is a part of the critique by Scarano, 2004: 9). The key here is that although the concept of action may be defined only ostensively, it is nevertheless axiomatic.

  53. 53.

    It might be argued that many of the theorems of praxeology are not apodictic since they are not necessarily true in every possible state of the world. For instance, there could be backward bending supply curves (as recognized by Rothbard (1962 [2009]), the equalization of profits as a tendency could not be attained if all entrepreneurs are stupid, the law of one price could not take place if pricing is done by senile people, and minimum wage laws could theoretically increase employment in the monopsony model (Block and Caplan 2015). Even if this were true, it would not mean that the concepts of praxeology are useless. They would still be a model for thought and, especially, action. This implies that it is not necessary for Mises’ principle of human action to be necessarily regarded as axiomatic to be useful. However, none of these contentions are valid criticisms of Austrian economics. First there is nothing in all of praxeology that excludes the possibility of a backward bending supply curve of labor for an individual. After all, no one wants to work 24 h per day, even if it were humanly possible. If this is possible for one person, it is also possible for more. Second, profit equalization as a tendency would still operate no matter how unwise the entrepreneurs; losses would still more heavily impact those who failed to “buy low and sell high” to the greatest degree. Third the law of one price would still tend to obtain, since profits could thereby be made, even by the most ignorant people on the planet. On these last two points, see the Becker-Kirzner debate: Becker (1962, 1963), Kirzner (1962, 1963b). As to the fourth point, on “monopsony,” this is a mainstream concept recognized as invalid from the praxeological point of view (Block and Barnett 2009).

  54. 54.

    A ↔ B

  55. 55.

    We discussed this problem in section V.i.

  56. 56.

    Or, as a form of psychologism.

  57. 57.

    As we have said in section V.i.

  58. 58.

    The concept of reflex is only used to identify such behavior that cannot be said to be an action, i.e. purposeful behavior. But it is not nor cannot be used primarily as an approach to human behavior in general.

  59. 59.

    Nevertheless, this pertains to evaluations, not mere descriptions of action as such. That is, their actions will be purposive, and rational in the ex ante sense. But they are of course not always so ex post. That is people make mistakes, but do not intend to do so.

  60. 60.

    It could be contended that there are certain events where the individual expects the other parties to behave irrationally, such as in war. But here also the action axiom is valid, since even when human beings act to destroy each other, they choose what they regard the best means in order to achieve that end. Rational here refers only to ‘instrumental’ rationality.

  61. 61.

    Examples include the spontaneous order creation of language and money. No one intended that they be created, but they came about as a result of human action.

  62. 62.

    Austrian economics, especially of the Hayek (1945, 1968 [2002]; 1973, 1974 [2008]) variant, explain that the economy is a complex system where institutions appear as an emergent property, not due to design but because of spontaneous orders. This in turn explains why central planning fails: it does not take into account that emergent properties of certain systems, such as social organization, cannot be emulated by a central authority. There is, fundamentally, a knowledge problem that the price system (in part) tends to solve under a free market.

  63. 63.

    In fact, the term catallactics already involves the idea of society as a spontaneous order, and the economic order as a process. In the words of Hayek (1988 [1992], 112): “Whately suggested ‘catallactics’ as a name for the theoretical science explaining the market order, and his suggestion has been revived from time to time, most recently by Ludwig von Mises. The adjective `catallactic’ is readily derived from Whately’s coinage, and has already been used fairly widely. These terms are particularly attractive because the classical Greek word from which they stem, katalattein or katalassein, meant not only ‘to exchange’ but also ‘to receive into the community’ and ‘to turn from enemy into friend’, further evidence of the profound insight of the ancient Greeks in such matters (Liddell and Scott 1940, s.v. katallasso). This led me to suggest that we form the term catallaxy to describe the object of the science we generally call economics, which then, following Whately, itself ought to be called catallactics.”

  64. 64.

    This fact, (as we have seen in section III) is also recognized by praxeology, which in turn is the basis for the uncertainty of the future as well as for the existence of both profit and loss (section IV).

  65. 65.

    We presented several objections to this methodology and their possible answers throughout this work.

  66. 66.

    For an analysis of Human Action in the light of Experimental Economics, see Smith (1999).

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Futerman, A.G., Block, W.E. (2021). Epistemology and Methodology. In: The Austro-Libertarian Point of View. Springer, Singapore. https://doi.org/10.1007/978-981-16-4691-1_1

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