Mises, Menger, and Keiser cont.

In August I wrote a rather long post on Austrian methodology responding to John Aziz of Azizonomics.  It all started with the Max Keiser ‘attack’ on Mises.  Then Tom Woods came to Mises’ defence and then Aziz weighed in with a post that garnered a HUGE comment thread.

Daniel J. Sanchez writing for The Circle Bastiat this week added to the ‘Mises corner’ case with this very useful post titled ‘Menger’s Proto-Misesian Methodology.’

The debate on Austrian methodology wages on!

I’ve just got 2 short things to add/reiterate:

  1. I can’t get away from the fact that Aziz and those who support his ‘anti-pure deductionism’ views are conflating theory and practice in the most egregious way.  Those who used the deductive-axiomatic logical approach to build their economic theory NEVER claimed that this approach was singularly appropriate in economic forecasting.  Nor do I know of any serious Austrian economic pracitioner who solely uses deductivism to make predictions.  Some Austrians make bad predictions, but I don’t see at all how this invalidates Mises’ and Rothbard’s deductive approach to theory.  Since logically deductive theorising places enormous emphasis on the ceterus paribus condition, and therefore on building theory by isolating verbal, logical cause and effect, it is highly useful, indeed even singularly useful, in understanding the basic building blocks of how the economic world works.  If money supply increases, we can say without fear of contradiction that prices will be higher THAN THEY OTHERWISE WOULD HAVE BEEN CETERUS PARIBUS.  It is a COMPLETELY different task to forecast the direction of prices, which any good Austrian practitioner knows requires special knowledge of the data including money supply as well as money demand, goods supply, and goods demand.  And then, even once armed with this data (which is often very difficult to obtain in the real world), the practitioner often fails in his forecasts, since he usually cannot know how this data will change in the future.  But the basic point is that theorising CAN be done successfully by deductive logic (as the unrefuted work of Mises and Rothbard shows), while forecasting is an excercise, even an art, in meshing theory and data (and sometimes even gut feels) in skillfull ways that few truly master since economic data is always changing both quantitatively and qualitatively.  The only thing that remains constant is the axiomatic deductive anchors of the theoretical masters.
  2. Rothbard sums up the absurdity of the ‘empiricism fetish’ beautifully when he asks [my emphasis],

“But what if we subject the vaunted “evidence” of modern positivists and empiricists to analysis? What is it? We find that there are two types of such evidence to either confirm or refute a proposition: (1) if it violates the laws of logic, for example, implies that A = -A; or (2) if it is confirmed by empirical facts (as in a laboratory) that can be checked by many persons. But what is the nature of such “evidence” but the bringing, by various means, of propositions hitherto cloudy and obscure into clear and evident view, that is, evident to the scientific observers?In short, logical or laboratory processes serve to make it evident to the “selves” of the various observers that the propositions are either confirmed or refuted, or, to use unfashionable terminology, either true or false. But in that case propositions that are immediately evident to the selves of the observers have at least as good scientific status as the other and currently more acceptable forms of evidence.

In other words, if something is ALREADY evident, then why bother trying to DISCOVER it?  It is ALREADY DISCOVERED!  Regarding the praxeological approach to economics for example, the fact that humans use means to achieve desired ends ordered on a psychologically subjective value scale is self-evident through basic observation of reality.  No additional ‘lab testing’ is required.

As Rothbard makes clear [my emphasis],

Without delving too deeply into the murky waters of epistemology, I would deny, as an Aristotelian and neo-Thomist, any such alleged “laws of logical structure” that the human mind necessarily imposes on the chaotic structure of reality. Instead, I would call all such laws “laws of reality, ” which the mind apprehends from investigating and collating the facts of the real world. My view is that the fundamental axiom and subsidiary axioms are derived from the experience of reality and are therefore in the broadest sense empirical.

If, in the broad sense, the axioms of praxeology are radically empirical, they are far from the post-Humean empiricism that pervades the modern methodology of social science. In addition to the foregoing considerations, (1) they are so broadly based in common human experience that once enunciated they become self-evident and hence do not meet the fashionable criterion of “falsifiability”; (2) they rest, particularly the action axiom, on universal inner experience, as well as on external experience, that is, the evidence is reflective rather than purely physical; and (3) they are therefore a priori to the complex historical events to which modern empiricism confines the concept of “experience.”

But hey, the anti-praxeologists are welcome to pony up the cash to go run an empirical survey of 10,000 people asking them to answer YES or NO to the question: do you use means to achieve your most urgently desired ends at any given point in time?

That’s all from me.  Now I’m going to use my legs, arms, hands, brain, a kettle, a spoon, a cup, some water, milk, and instant coffee powder to go make myself a cup of coffee that I plan to drink.


About Russell Lamberti

Russell Lamberti is a regular contributor to Mises SA. He is Chief Strategist at ETM Analytics, an Austrian-influenced economic research firm based in Johannesburg. Although he wrties about many topics, you'll most often find him slaying patent and copyright law and exposing the biggest bubble in history: fractional reserve banking.
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  • http://azizonomics.wordpress.com Aziz

    Well, I think any discussion on empirical methodology in economic theory needs to begin with the point that the current crop of “empiricists” aren’t really very empirical. Throwing a load of math together to create a model that requires that its user assumes away reality is — by my reckoning — just as deductionist as praxeology, and philosophically more problematic, because at least the praxeologists are aware of their own true philosophical basis. Even if such models’ outputs are tested by falsification, such methods can only show us what is not true rather than what is true. At any point, the empirical data might permit any number of separate contradictory theories, all of which might be falsified in the immediate future. Reality is a bitch. Personally, I do not accept the possibility of a priori knowledge , which makes praxeology incompatible with my approach to economic theory. But the praxeologists — while claiming not to engage in empiricism — are subject to the exact same standard of acceptance (as in whether current empirical data tallies with their theories) as anyone else, which leads me to the conclusion that the methodology that goes into a theory is less important than the theory itself. If your theory works, it matters little how you reached it, and there is no doubt Mises reached plenty of good theory even if I disdain his stated methodology.

    I approach this in a radically different way to everyone else. When I talk about my yearning for empirical economics I am talking about free markets. Historical data shows that freer markets produce more technology, and longer-lasting prosperity. My theory (reached deductively, but falsifiable) is that free markets are truly empirical systems, because they encode the freedom to experiment with different systems of organisation, different means of commerce, different currencies, different business models, etc — different ways of satisfying individual human needs and wants. This allows societies and individuals to build what works. Central planning is (according to my theory) largely anti-empirical, because it retards the level of autonomous experimentation in the wider economy.