Part Two: Epistemological Foundations of Praxeology. (2/4).

Contents

1: The Nature of Philosophy. 

2: Epistemological Reflections on the Foundations of Economic Science.

(For Part 1, see here. part 3 and part 4 will follow shortly.)

(This post is written especially for the great Undiscovered Jew.)

 

1:The Nature of Philosophy.

To reformulate and paraphrase Lionel Robbins’ definition of economics as the study of the choices and consequences concerning scarce resources when alternative choices exist, then philosophy can be defined as the study of the choices and consequences regarding the fundamental assumptions by which we (qua philosophers) reason with.

All philosophers reason, but some reason more than others.

All philosophers have a natural predilection with what is called armchair reasoning or, more technically, a priori reasoning.

Before getting to the meat, let’s define some basic terminology.

Propositions can be of two kinds:

1: Analytic.

2: Synthetic.

The basic epistemological methods of discovering propositions are also of two kinds:

1: A priori.

2: A posteriori.

The Standard Assumptions:

1: A priori thinking can only discover and justify analytic propositions.

2: Synthetic propositions can only be discovered a posteriori – by experience.

3: All economics propositions are synthetic propositions and can only be discovered a posteriori.

4: All Political and historical propositions are synthetic propositions and can only be discovered a posteriori.

The Misean Assumptions:

1: There are a priori synthetic propositions.

2: There are a priori synthetic economic propositions.

3: There are a priori synthetic propositions about politics and political history. (Hoppe’s apparent innovation. See Democracy: the God that Failed. We discuss Hoppe’s theory in part 3.)

Definitions and Examples of the Terms.

1: A Priori Analytic Propositions.

We define a priori thinking as:

1: Thinking conceptually and logically – without the aid of experience. A priori truths, should such thinking discover them, are not justified via experience.

Alternatively, we can define a priori as:

2: Discovering and justifying a priori propositions by attempting, and failing, to deny the logical necessity or self-evidence of a proposition.

Or:

3: A priori reasoning discovers true propositions via reasoning without the aid of experience. Valid conclusions arrived via reasoning from self-evident axioms to conclusions whose truth cannot be coherently denied on pain of self-contradiction.

Analytic claims are true by definition or they are necessarily true.

The claim that all criminals have broken the law can be understood to be true a priori. The proposition cannot be coherently denied. If you claimed that some criminals have not broken the law you would be making an incoherent claim by definition.

However, the corollary of propositions of this kind is that they tell you absolutely nothing about the natural world.

Thus, you cannot tell a priori if anyone is, in fact, a criminal.

2: A Posteriori Synthetic Propositions.

We define the a posteriori as:

The method of discovering propositions from observation or testimony or by drawing conclusions from probable or plausible reasoning.

Synthetic propositions are firstly, any proposition that is not analytic; secondly, that they are true in virtue of the fact that the entities and causes the proposition refers to exist.

Bernie Madoff is a convicted criminal. This proposition is synthetic. However, establishing if someone – Madoff say – is a criminal requires a posteriori methods (in addition to the concept of crime and criminal).

With this out of the way, let’s look at what both Mises and Hoppe have to say about the epistemological foundations of praxeology. Mises and Hoppe make the surprising, standard denying, claim that a priori synthetic propositions exist.

2: Epistemological Reflections on the Foundations of Economic Science.

For the following, we draw upon two sources: Human Action: A Treatise on Economics by Ludwig Von Mises and Economic Science and the Austrian Method by Hans Hermann Hoppe.

Here are the Austrians in their own words:

The teachings of praxeology and economics are valid for every human action without regard to its underlying motives, causes, and goals.

…

It aims at knowledge valid for all instances in which the conditions exactly correspond to those implied in its assumptions and inferences. Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification or falsification on the ground of experience and facts.

Human Action: A Treatise on Economics. Mises.

A priori propositions are according to Hoppe:

..self-evident because one cannot deny their truth without self-contradiction; that is, in attempting to deny them one would actually, implicitly, admit their truth.

Economic Science and the Austrian Method. Hoppe.

Mises, epistemology, economic propositions and the axiom of action:

Mises not only recognizes that epistemology indirectly rests on our reflective knowledge of action and can thereby claim to state something a priori true about reality but that economics does so too and does so in a much more direct way. Economic propositions flow directly from our reflectively gained knowledge of action; and the status of these propositions as a priori true statements about something real is derived from our understanding of what Mises terms “the axiom of action.”

…

This axiom, the proposition that humans act, fulfills the requirements precisely for a true synthetic a priori proposition. It cannot be denied that this proposition is true, since the denial would have to be categorized as an action—and so the truth of the statement literally cannot be undone. And the axiom is also not derived from observation—there are only bodily movements to be observed but no such things as actions—but stems instead from reflective understanding.

…

Mises’s great insight was that economic reasoning has its foundation in just this understanding of action; and that the status of economics as a sort of applied logic derives from the status of the action-axiom as an a priori-true synthetic proposition.

This places Mises in the Rationalist tradition of Western philosophy:

With such a refutation of empiricism and historicism, Mises notices, the claims of rationalist philosophy are successfully reestablished, and the case is made for the possibility of a priori true statements, as those of economics seem to be. Indeed, Mises explicitly regards his own epistemological investigations as the continuation of the work of western rationalist philosophy. With Leibniz and Kant he stands opposite the tradition of Locke and Hume. He sides with Leibniz when he answers Locke’s famous dictum “nothing is in the intellect that has not previously been in the senses” with his equally famous one “except the intellect itself.” And he recognizes his task as a philosopher of economics as strictly analogous to that of Kant’s as a philosopher of pure reason, i.e., of epistemology. Like Kant, Mises wants to demonstrate the existence of true a priori synthetic propositions, or propositions whose truth values can be definitely established, even though in order to do so the means of formal logic are insufficient and observations are unnecessary.

Hoppe claims that Mises, reasoning from the action axiom, is able to establish the causal principle as a necessary, constituent feature of thought itself as manifested in economic propositions. In other words, the causal or uniformity of nature principle (that there exist time-invariant, necessarily connected cause and effects) is not established empirically.

Here is Hoppe setting up the argument:

The characteristic mark of Kantian philosophy is the claim that true a priori synthetic propositions exist—and it is because Mises subscribes to this claim that he can be called a Kantian. Synthetic a priori propositions are those whose truth-value can be definitely established, even though in order to do so the means of formal logic are not sufficient (while, of course, necessary) and observations are unnecessary.

According to Kant, mathematics and geometry provide examples of true a priori synthetic propositions. Yet he also thinks that a proposition such as the general principle of causality—i.e., the statement that there are time-invariantly operating causes, and every event is embedded into a network of such causes—is a true synthetic a priori proposition.

…

Yet it is Mises who brings this insight to the foreground: Causality, he realizes, is a category of action. To act means to interfere at some earlier point in time in order to produce some later result, and thus every actor must presuppose the existence of constantly operating causes.

(Thus, if one engages in means-end reasoning, one has already pre-supposed the existence of causes and effects. Again, to assume the contrary would mean that any possible “means” selected would have no possible connection with ends and this would mean that acting is impossible. Since the opposite is the case (the axiom of action) then causes must, necessarily exist. This type of argumentation is known as a transcendental argument.)
…

On the distinction between reasons and causes or casual phenomena and teleological phenomena:

In contrast, everything that is an action must be categorized teleologically. This realm of phenomena is constrained by the laws of logic and arithmetic, too. But it is not constrained by the laws of geometry as incorporated in our instruments of measuring spatially extending objects, because actions do not exist apart from subjective interpretations of observable things; and so they must be identified by reflective understanding rather than spatial measurements. Nor are actions causally connected events, but events that are connected meaningfully within a categorical framework of means and ends.

Economic Science and the Austrian Method. Hoppe.

Hoppe lists the following as examples of a priori true synthetic propositions:

The laws of exchange,

the law of diminishing marginal utility,

the Ricardian law of association,

the law of price controls, and the quantity theory of money—all the examples of economic propositions which I have mentioned—can be logically derived from this axiom.

Economic Science and the Austrian Method. Hoppe.

The epistemological foundations of praxeology:

All of these categories—values, ends, means, choice, preference, cost, profit and loss, as well as time and causality—are implied in the axiom of action.

Yet, that one is able to interpret observations in such categories requires that one already knows what it means to act.

No one who is not an actor could ever understand them. They are not “given,” ready to be observed, but observational experience is cast in these terms as it is construed by an actor. Nor is their reflective reconstruction a simple, psychologically self-evident intellectual task, as proved by a long line of abortive attempts along the way to the just-outlined insights into the nature of action.

…

The attempt to disprove the action-axiom would itself be an action aimed at a goal, requiring means, excluding other courses of action, incurring costs, subjecting the actor to the possibility of achieving or not achieving the desired goal and so leading to a profit or a loss.

Economic Science and the Austrian Method. Hoppe.

How economic propositions are justified:

Praxeology says that all economic propositions which claim to be true must be shown to be deducible by means of formal logic from the incontestably true material knowledge regarding the meaning of action.

Specifically, all economic reasoning consists of the following:

(1) an understanding of the categories of action and the meaning of a change occurring in such things as values, preferences, knowledge, means, costs, etc;

(2) a description of a world in which the categories of action assume concrete meaning, where definite people are identified as actors with definite objects specified as their means of action, with some definite goals identified as values and definite things specified as costs.

Such description could be one of a Robinson Crusoe world, or a world with more than one actor in which interpersonal relationships are possible; of a world of barter exchange or of money and exchanges that make use of money as a common medium of exchange; of a world of only land, labor, and time as factors of production, or a world with capital products; of a world with perfectly divisible or indivisible, specific or unspecific factors of production; or of a world with diverse social institutions, treating diverse “social institutions, treating diverse actions as aggression and threatening them with physical punishment, etc; and

(3) a logical deduction of the consequences which result from the performance of some specified action within this world, or of the consequences which result for a specific actor if this situation is changed in a specified way.

Provided there is no flaw in the process of deduction, the conclusions that such reasoning yield must be valid a priori because their validity would ultimately go back to nothing but the indisputable axiom of action.

Economic Science and the Austrian Method. Hoppe.

In what follows, Hoppe discusses some typical economic propositions that can be justified in the above manner:

Now let us turn to some typical economic propositions. Consider the validation process of a proposition such as the following: Whenever two people A and B engage in a voluntary exchange, they must both expect to profit from it. And they must have reverse preference orders for the goods and services exchanged so that A values what he receives from B more highly than what he gives to him, and B must evaluate the same things the other way around.

Or consider this: Whenever an exchange is not voluntary but coerced, one party profits at the expense of the other.

Or the law of marginal utility: Whenever the supply of a good increases by one additional unit, provided each unit is regarded as of equal serviceability by a person, the value attached to this unit must decrease. For this additional unit can only be employed as a means for the attainment of a goal that is considered less valuable than the least valued goal satisfied by a unit of such good if the supply were one unit shorter.

…

Or as another example: Whenever minimum wage laws are enforced that require wages to be higher than existing market wages, involuntary unemployment will result.

Or as a final example: Whenever the quantity of money is increased while the demand for money to be held as cash reserve on hand is unchanged, the purchasing power of money will fall.

In our view, it is not surprising that the Grand Master would proclaim, as we saw in part 1, Mises a “titan” and Rothbard to be one of the “top five philosophers” of the 20th century. In part 3, we will look at three political theories of history and in part 4, we will explore the praxeology of power.

Further Reading.

1: More on propositions.

2: Rothbard on praxeology.

3: If you have no time to read Hoppe’s book on Method then you can read this review which will provide you with much of what you need to know.

4: Reactionary Future makes some good criticisms of Mises and his political preferences here, but nothing refutes praxeology; furthermore, Mises, as shown above, is more Kantian than Humean.

5: More on a priori synthetic economics from an economics blogger.

6: Resources on praxeology.

7: An non-Austrian critical appraisal of praxeology.

8: Bryan Caplan and why he is not an Austrian.

9: Caplan’s criticism of the Austrian theory of the the business cycle. 

10: Mark Thornton responds to Caplan.

11: Caplan’s critical piece on Austrian methodology and the nature of the A priori synthetic proposition.