When Austrian economist Thomas DiLorenzo recently testified before the House Subcommittee on Domestic Monetary Policy, Congressman William Lacy Clay tried to dismiss the Austrian School of economics as lacking "scientific rigor," because it relies on "deductive reasoning."
There is something dystopian about a member of the government saying to a dissenting intellectual, in essence, "Isn't it true, sir, that you are part of a group of thinkers who uses [cue the scary music] … logic?" Not even the obtuse inquisitors of Socrates, Abelard, and Galileo would have been so bold.
It has become a popular trick among people who are unprepared to grapple with the actual economic arguments of the Austrian School to try to short-circuit the debate by groaning, zombie-like, "unscientific!" with hardly any familiarity, outside of what they were taught in grade school, of even the epistemological issues concerning the natural sciences, let alone the even more neglected epistemological issues concerning the social sciences.
Crude methodological critiques like these against sound economics are old, predating Austrian economics itself. Before Carl Menger had even started the Austrian School, the members of the German Historical School thought they could discredit the classical economists, not by actually grappling with their arguments, but by simply dismissing the whole enterprise of theoretical economics as "bloodless abstractions."
Ludwig von Mises remarked that when faced with such potentially biased methodological attacks on the validity of sound economics, it may seem appropriate to simply "let the dogs bark and pay no heed to their yelping," and to remember the dictum of Baruch Spinoza that "just as light defines itself and darkness, so truth sets the standard for itself and falsity."
However, Mises rejected such an "above it all" approach, insisting,
No scientist is entitled to assume beforehand that a disapprobation of his theories must be unfounded because his critics are imbued by passion and party bias. He is bound to reply to every censure without any regard to its underlying motives or its background.
He considered spelling out the foundational underpinnings of economics to be essential. For this reason, Mises devoted a significant amount of his scientific attention to epistemological and methodological problems.
In what follows, I will endeavor to systematically explain Mises's epistemology and its bearings on his economics, drawing especially on his treatises Human Action, Theory and History, and The Ultimate Foundation of Economic Science.
"A Priori" and "Categories"
Mises characterized economics as an a priori science. By this he means that economic laws are prior to, and independent of, economic experience, and that it makes no sense to try to test economic laws with experiments, observations, statistics, or any other kind of empirical data.
This position tends to immediately set off alarms with people inculcated with a simplistic version of the methods used by the natural sciences. Some even go so far as to malign such an approach as "religious," because anything that isn't based on empirical fact must be "faith based." One wonders if such critics think of geometry as a religion, being that the theorems of geometry are prior to, and not based on, the gathering of topographical data. (More on that comparison later.)
Such critics don't realize that all reasoning (including the reasoning of the natural sciences) has an a priori aspect.
To deny this would be to think of the mind in the way that is, as Mises wrote, "implied in the famous dictum of John Locke according to which the mind is a sheet of white paper upon which the external world writes its own story."
On the contrary, the "human mind is not a tabula rasa on which the external events write their own history."
There is an empiricist doctrine that nothing is in the intellect that has not previously been in the senses. As Mises noted, the philosopher Gottfried Leibniz added the essential proviso: "except the intellect itself." This is because for external events to even become knowledge, they need to be processed by the intellect/mind. And for the mind to meaningfully process events, it must be, as Mises puts it, "equipped with a set of tools for grasping reality."
Mises credited Immanuel Kant for spelling out this key insight: "Experience, [Kant] taught, provides only the raw material out of which the mind forms what is called knowledge."
The "set of tools for grasping reality" are certain inbuilt conceptions that the mind must apply to raw sensations in order for those sensations to be converted into actual knowledge. We must have these conceptions, for all sensation would be meaningless without their application. And these conceptions must be inbuilt, because they cannot be learned, since learning is the acquisition of knowledge (meaningful interpretations of external and internal sensations), and the acquisition of knowledge presupposes the capacity to apply these "reality-grasping" conceptions.
Kant called these inbuilt conceptions "categories" (a term Mises used very frequently). Mises referred to the "categories" as necessary features of the "logical structure of the human mind," and as the mind's "projection into the external world of becoming and change."
All knowledge is conditioned by the categories that precede any data of experience both in time and in logic. The categories are a priori; they are the mental equipment of the individual that enables him to think and — we may add — to act.
A primary example of this "mental equipment" is the laws of logic themselves. Application of the "fundamental logical relations" (for example, the law of noncontradiction) is necessary for all reasoning regarding truth and falsity, but the principles of logic themselves
are not subject to proof or disproof. Every attempt to prove them must presuppose their validity. It is impossible to explain them to a being who would not possess them on his own account. Efforts to define them according to the rules of definition must fail. They are primary propositions antecedent to any nominal or real definition. They are ultimate unanalyzable categories. The human mind is utterly incapable of imagining logical categories at variance with them. No matter how they may appear to superhuman beings, they are for man inescapable and absolutely necessary. They are the indispensable prerequisite of perception, apperception, and experience.
The apriori forms and categories of human thinking and reasoning cannot be traced back to something of which they would appear as the logically necessary conclusion. It is contradictory to expect that logic could be of any service in demonstrating the correctness or validity of the fundamental logical principles. All that can be said about them is that to deny their correctness or validity appears to the human mind nonsensical and that thinking, guided by them, has led to modes of successful acting.
Even the natural sciences must take recourse to a priori categories. Considering observed experiences scientifically useful at all for discovering causal laws itself rests on what Mises called an "aprioristic assumption."
Experience is necessarily of past events. It can be resorted to for the prediction of future events only with the aid of the assumption that an invariable uniformity prevails in the concatenation and succession of natural phenomena.
Only with this aprioristic assumption can one infer "from regularity observed in the past to the same regularity in future events."
Furthermore, as David Hume pointed out in his famous discussion of the "problem of induction," if you say that we can know that prior regularity predicts subsequent regularity, because it has reliably done so in the past, then that is simply begging the question (committing the logical fallacy of assuming that which is to be proved). That would be assuming that a prior regularity ("prior regularity predicting subsequent regularity in the past") predicts a subsequent regularity ("prior regularity predicting subsequent regularity in the future"), which is exactly what one is trying to prove in the first place.
The "category of causality" is our inbuilt conception that past regularity predicts future regularity. That conception is a prerequisite to all reasoning regarding cause and effect in the natural world. As Mises wrote, agreeing with Hume, there is no deductive proof that past regularity predicts future regularity.
There is no deductive demonstration possible of the principle of causality and of the ampliative inference of imperfect induction; there is only recourse to the no less indemonstrable statement that there is a strict regularity in the conjunction of all natural phenomena. If we were not to refer to this uniformity, all the statements of the natural sciences would appear to be hasty generalizations.
However, there is no other imaginable way of making sense of the material world without assuming that past regularity predicts future regularity. Without taking recourse to the category of causality, the physical universe around us would be a meaningless jumble of sensations.
Not only the natural sciences but everyday life would be impossible without our inbuilt conception that past regularity does indeed predict future regularity. Without it, we would never have developed agriculture, because we would have no reason to infer from past seasonal cycles that similar seasonal cycles might occur in the future. Without it, we would never even avoid contact with flame, because we would have no reason to infer from past contact the pain and damage we would incur from future contact.
In a world without causality and regularity of phenomena there would be no field for human reasoning and human action. Such a world would be a chaos in which man would be at a loss to find any orientation and guidance. Man is not even capable of imagining the conditions of such a chaotic universe.
Teleology and Action
The most important "mental equipment" for thinking about mankind is the "category of teleology/action": our inbuilt conception of purpose and purposeful behavior. Action (purposeful behavior) is the use of means to seek an end (the "end" always being "the relief from a felt uneasiness").
"Should I try to deny the reality of purpose, means and ends, I would find myself caught in the manifest absurdity of trying to deny the reality of trying."
Just as the natural world would be a meaningless jumble of sensations without the category of causality, the social world around us (as well as our understanding of our own states of mind) would be a meaningless jumble of sensations if we were not equipped with the category of teleology/action. The conception of action in general is necessarily prior to the cognition of any particular action.
Gestures and words would be meaningless motions and sounds unless the mind were able to apply the conception of "purpose" to them. And how could you explain "purpose" to someone who did not already have an inbuilt conception of it, when such an explanation would be, to your "student," meaningless motions and sounds?
If I know anything, I know what action is. With every sentence I write with the purpose of communicating to you, the reader, I live it. And if you are looking at these words with the purposeof understanding them, you, too, are living it. Should I try to deny the reality of purpose, means and ends, I would find myself caught in the manifest absurdity of trying to deny the reality of trying.
According to Mises, man's will is not free in the metaphysical sense (that is, free from causation):
The content of human action, i.e., the ends aimed at and the means chosen and applied for the attainment of these ends, is determined by the personal qualities of every acting man. Individual man is the product of a long line of zoological evolution which has shaped his physiological inheritance. He is born the offspring and the heir of his ancestors, and the precipitate and sediment of all that his forefathers experienced are his biological patrimony. When he is born, he does not enter the world in general as such, but a definite environment. The innate and inherited biological qualities and all that life has worked upon him make a man what he is at any instant of his pilgrimage. They are his fate and destiny. His will is not "free" in the metaphysical sense of this term. It is determined by his background and all the influences to which he himself and his ancestors were exposed.
Furthermore, man is not a wholly independent "god" outside of the "machine" of the universe.
Freedom of the will does not mean that the decisions that guide a man's action fall, as it were, from outside into the fabric of the universe and add to it something that had no relation to and was independent of the elements which had formed the universe before. Actions are directed by ideas, and ideas are products of the human mind, which is definitely a part of the universe and of which the power is strictly determined by the whole structure of the universe.
However, according to Mises, man's will is free in the sense that he can suppress his impulses. "Man is not, like the animals, an obsequious puppet of instincts and sensual impulses. Man has the power to suppress instinctive desires, he has a will of his own, he chooses between incompatible ends. In this sense he is a moral person; in this sense he is free."
Yet, the notion of "will" is but a facet of the notion of "action." "Action is will put into operation."
So, for all the reasons listed that action is a necessary reality for man, will also is a necessary reality. Whether it is called "free" or not, man (as far as man himself is concerned) does have a will.
Some philosophers are prepared to explode the notion of man's will as an illusion and self-deception because man must unwittingly behave according to the inevitable laws of causality. They may be right or wrong from the point of view of the prime mover or the cause of itself. However, from the human point of view action is the ultimate thing. We do not assert that man is "free" in choosing and acting. We merely establish the fact that he chooses and acts.
The last two sentences seem consonant with the dictum of Arthur Schopenhauer: "Man can do what he wills, but he cannot will what he wills."
Action, although it is an inbuilt conception, is not as simple a conception as one might first think. There are quite a few subsidiary notions that are "bundled up" (implied) in the notion of action. The "unbundling" of those notions (making explicit that which is implicit about action) is what Mises referred to as the science of praxeology (of which the science of economics is a subdiscipline).
The scope of praxeology is the explication of the category of human action. All that is needed for the deduction of all praxeological theorems is knowledge of the essence of human action. It is a knowledge that is our own because we are men; no being of human descent that pathological conditions have not reduced to a merely vegetative existence lacks it. No special experience is needed in order to comprehend these theorems, and no experience, however rich, could disclose them to a being who did not know a priori what human action is. The only way to a cognition of these theorems is logical analysis of our inherent knowledge of the category of action. We must bethink ourselves and reflect upon the structure of human action. Like logic and mathematics, praxeological knowledge is in us; it does not come from without.
All the concepts and theorems of praxeology are implied in the category of human action. The first task is to extract and to deduce them, to expound their implications and to define the universal conditions of acting as such.
One can "unbundle" the subsidiary notions contained within the conception of action by simply thinking of conditions whose absence would make the existence of action nonsensical. For example, the notion of action without time is clearly nonsensical, and so time is a necessary implication of action.
One potentially confusing aspect of Mises's writings is that he referred to necessary implications of actions as "categories of action." Thus now we have two meanings of "category of action." There is the general inbuilt conception of action itself (which was the first meaning we met with), and now there are subsidiary notions that are bundled up in the conception of action.
These subsidiary notions are also characterized as categories, because they are also inbuilt and prior to experience. Thus we can also say that time is a "category of action." The best way of distinguishing between the two meanings is to keep in mind that "the category of action" refers to the former definition and "a category of action" refers to the latter.
Other subsidiary categories of action include
- the existence of an actor
- the "felt uneasiness" of the actor
- the actor's anticipation of the possible success of action
- "technological ideas" or "recipes": plans for specific arrangements of means to achieve ends
- an environment in which exist possible means (goods) for the attainment of ends
- utility: the perceived causal relevance of various means for the alleviation of felt uneasiness
- a scarcity of means with regard to the ends that could potentially be served
- economization: the allocation of scarce means to various ends
- preference: ranking alternative actions allocating scarce means according to the relative priorities of various ends
- choice: undertaking the highest-ranked action for the sake of the highest priority ends it serves
- opportunity cost: the second-highest ranked action that is forgone when the highest ranked action is chosen
Very importantly, the causality category itself is a category of human action, because, again, as Mises noted, action would be unthinkable without the assumption of regularity in the natural world.
The above are subsidiary categories of all action. But praxeology is not limited to propositions of such great generality as that, else it would not be nearly as useful as it actually is.
Having shown what conditions are required by any action, one must go further and define — of course, in a categorial and formal sense — the less general conditions required for special modes of acting.
For example, one can think about the special mode of action, "indirect exchange" (exchanging for a good only for the purpose of exchanging that good for yet another good), and then think about the conditions that would be required for that special mode. These conditions would include the existence of more than two actors, the existence of at least three goods, etc.
"But the end of science is to know reality," Mises adds. "It is not mental gymnastics or a logical pastime. Therefore praxeology restricts its inquiries to the study of acting under those conditions and presuppositions which are given in reality."
For example, Mises does not consider the "disutility of labor" to be a category of action. He regards the notion of labor having no disutility as being fully consistent with the notion of action. However, it is an easily observed fact that the disutility of labor pervades the real world. So the praxeologist, in order for his studies to be useful in the real world, must assume the disutility of labor in his reasonings. Mises stresses that this does not make praxeology an "empirical" discipline.
However, this reference to experience does not impair the aprioristic character of praxeology and economics. Experience merely directs our curiosity toward certain problems and diverts it from other problems. It tells us what we should explore, but it does not tell us how we could proceed in our search for knowledge.
For example, it is a matter of fact that we live in a society in which actors who produce goods are able to utilize prices consisting of a near-universal and basically commensurable medium of exchange (money) in order to use arithmetic to calculate profit and loss for their business as a whole, and for various subbranches of their business.
Money prices and economic calculation are not categories of all action. Primitive autarkic households (as well as socialist states) have no recourse to monetary calculation. But since we observe that they do exist in our society, our curiosity is directed toward problems concerning them.
Thus, in order for our studies to be useful to us in the real world, we restrict many of our praxeological reasonings to the subdiscipline of praxeology known as economics, or "catallactics," which, as Mises defined it, is the study of the market economy, i.e., "the analysis of those actions which are conducted on the basis of monetary calculation." To engage in economic science, we must, again, define the conditions required for this "special mode of acting" (calculative action), and unbundle the special implications bound up in the notion of a market economy.
The economist can then add further assumptions, based on real-life conditions (though never perfectly modeling them) in order to inquire into the necessary implications of those conditions. For example, not every conceivable market economy is burdened by price controls and restrictions on production. Unfortunately, ours is, and so we assume those conditions and unbundle the implications bound up in that more complicated notion. All the valid laws of economics are simply such implications made explicit.
It is easier to accept broader economic laws as true, as they seem to be "verified" all the time in life, because the conditions they are concerned with are so broad. But as we progressively add assumptions to our thought experiments to produce ever-more specific economic laws, the question arises: cannot such a specific proposition be disproved by events? To understand why this question is spurious, it is useful to consider the analogy of geometry.
"The ancient Greeks pioneered using long chains of deductive inferences to discover geometric principles (fortunately, there was no ancient Greek Congressman Clay at the time to deride this deductive scientific enterprise)."
First let us reflect on the methodology of geometry. In preclassical times, geometry was largely empirical. For example, ancient Egyptian surveyors called "rope stretchers" used to find right angles by stretching out knotted ropes to make a 3-4-5 triangle (a triangle with sides in the ratio of 3 to 4 to 5). The geometric principle that all 3-4-5 triangles form right angles might have been discovered by the Egyptians through experience, by simply noticing that such triangles generally have perpendicular legs by eyeballing multiple instances of them.
However, the ancient Greeks pioneered using long chains of deductive inferences to discover geometric principles (fortunately, there was no ancient Greek Congressman Clay at the time to deride this deductive scientific enterprise). And so the Greeks could discover the same principle (that all 3-4-5 triangles form right angles) by reasoning from the Pythagorean theorem. And the Greeks were able to use deductive geometry to discover a great many geometric principles that would have been too subtle to find with empirical methods.
Nowadays the deductive method for geometry is universally embraced. A good geometry teacher will not demonstrate the Pythagorean theorem with measuring tape and a pile of plastic right triangles, except perhaps as a preliminary exercise. She will teach her students to derive the theorem from prior premises.
What if, when measuring plastic triangles, one of the geometry teacher's students discovers something that does not seem to fit the Pythagorean theorem as it was taught to him by the teacher? There are a few possible explanations for such an occurrence.
Perhaps the teacher, bizarrely, doesn't know the correct Pythagorean theorem herself, or how to derive it. An economic analogy to this situation is when a theoretical economist introduces vicious formulations (as the classical economists did with their value theory) and invalid reasoning (as Keynes did with much of his work) to build a false economic theorem.
Perhaps the student measured the right triangles incorrectly. This would be analogous to an economic statistician gathering faulty data.
Perhaps the student is not even dealing with right triangles in the first place, and so the Pythagorean theorem is not applicable. This would be analogous to an economist trying to explain a rise in a good's price using the quantity theory of money when the quantity of money didn't actually change, and instead the price rose because of an increase in demand.
If economic data do not seem to demonstrate the playing out of a certain market process described by economic theory (assuming the theory is sound and the data are correct), that would indicate that circumstances must have been dominated by another market process (also described by pure economic theory), another set of factors, or the interplay of several market processes/sets of factors.
The economic historian uses data to determine which economic laws are most relevant in any given episode. If, for example, the economic historian discovers trustworthy data that show that after an increase in the supply of a certain good the price for that good increased, instead of falling, that would not testify against the law of supply. That would instead be an indication that other relevant factors are at work, like perhaps a precipitous drop in the supply of another good for which the first good can serve as a substitute.
"No matter how precise your instruments, no matter how powerful your computers, all you will find in the brain are chemical, electrical, subatomic, and other physical patterns and processes. You will never find preferences, purposes, costs, or proceeds."
Whatever the case ultimately proves to be, what should the geometry student do when faced with data that do not harmonize with the theory he is using? Should he proudly announce that he has refuted the "orthodoxy of Pythagoras" and publish a new theorem, based on his measurements? Should he gather a larger sample set of plastic triangles and perform statistical analysis on the data gathered?
Of course not. He should check the soundness of the reasoning used in deriving the theorem, check his measurements, and check the applicability of the theorem to the data.
Insofar as the student derived the Pythagorean theorem using discursive reasoning, he was ageometer. But insofar as he was using geometry along with measurement to study plastic triangles, he was a topographer, not a geometer. While geometry is indispensable for topography, it is completely invalid to try to derive geometric laws from topography.
This is analogous to the crucial distinction between economics and economic history. Insofar as a scholar derives economic theorems using discursive reasoning, he is an economist. But insofar as he uses economics along with data-gathering to study actual events, he is an economic historian, not an economist. While economics is indispensable for economic history, it is completely invalid to try to derive economic laws from history.
This is not to say that either topography or economic history is an unworthy endeavor; far from it, both of these are incredibly important.
Yet the most history can do for an economist is to provide either an example with which to illustrate (but not prove) an economic theorem to help students grasp the concept by giving them a concrete manifestation of it, or a clue that perhaps he has performed fallacious reasoning in deriving the economic theorems he has been operating with. But even in the latter case, he must use discursive reasoning to catch the fallacy, and then to adjust his theory according to the corrected reasoning.
Mises used the fruitful comparison to geometry to refute another popular objection to theoretical economics:
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 [right 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.
Another mistake critics make along these lines, is that they are confused regarding the sense in which the theorems of economics are tautologies. When Mises says that the quantity theory of money, as well as the Pythagorean theorem, is a tautology, he is using the technical definition of "tautology," as it is used in the field of logic: "a statement that is true by necessity or by virtue of its logical form."
He is not using the everyday definition that has arisen for the term: "the saying of the same thing twice in different words," as in "bachelors are unmarried adult males." The latter pleonastic kind of tautology is indeed barren (see my discussion of the "action axiom" in footnote 24), because it does not tell anybody anything they do not already know. But, as Mises explained above, the former kind of tautology is incredibly fruitful in expanding the knowledge of anyone who does not already know all the implications of the premise.
Praxeology Is Nothing New
Since "praxeology" is a neologism, and since Mises's writings are distinctive by their consistent characterization of economics as a priori, it is easy to suppose that Mises was inventing some new way of looking at the world. But that is not the case.
In asserting the a priori character of praxeology we are not drafting a plan for a future new science different from the traditional sciences of human action. We do not maintain that the theoretical science of human action should be aprioristic, but that it is and always has been so. Every attempt to reflect upon the problems raised by human action is necessarily bound to aprioristic reasoning.
In his methodological writings, Mises was not basing economics on some new foundation so much as he was pointing out the foundations upon which sound economics had always been based. Everything that is valid in Gresham's law, Hume's price-specie flow mechanism, Ricardo's law of comparative advantage, and Say's law of markets is valid because it is based on the originator's sound aprioristic understanding of human action and the assumptions introduced in formulating the theorem.
Furthermore, all careful thinkers about human affairs (not only economists) can only ever have had any success to the extent that they engaged in aprioristic, praxeological reasoning.
Every attempt to reflect upon the problems raised by human action is necessarily bound to aprioristic reasoning. It does not make any difference in this regard whether the men discussing a problem are theorists aiming at pure knowledge only or statesmen, politicians, and regular citizens eager to comprehend occurring changes and to discover what kind of public policy or private conduct would best suit their own interests. People may begin arguing about the significance of any concrete experience, but the debate inevitably turns away from the accidental and environmental features of the event concerned to an analysis of fundamental principles, and imperceptibly abandons any reference to the factual happenings which evoked the argument.
In fact, all mankind has always utilized praxeological reasoning. Mises only made clear the distinctions between that everpresent part of human reasoning and other parts. Only after it was made distinct could that part of human reasoning be given a name. If man had not always utilized praxeological reasoning, the most rudimentary understanding of the actions of his fellow man, and thus all of human society, would have been totally impossible.
[A]ll experience concerning human action is conditioned by the praxeological categories and becomes possible only through their application. If we had not in our mind the schemes provided by praxeological reasoning, we should never be in a position to discern and to grasp any action. We would perceive motions, but neither buying nor selling, nor prices, wage rates, interest rates, and so on. It is only through the utilization of the praxeological scheme that we become able to have an experience concerning an act of buying and selling, but then independently of the fact of whether or not our senses concomitantly perceive any motions of men and of nonhuman elements of the external world. Unaided by praxeological knowledge we would never learn anything about media of exchange. If we approach coins without such preexisting knowledge, we would see in them only round plates of metal, nothing more. Experience concerning money requires familiarity with the praxeological category medium of exchange.
Nature and the Human Realm
Of the three types of categories discussed above, one (the fundamental logical relations) is fundamental in all reasoning. The other two (causality and teleology/action) are fundamental in any reasoning about change in the world.
The Mises Wiki
There are for man only two principles available for a mental grasp of reality, namely, those of teleology and causality. What cannot be brought under either of these categories is absolutely hidden to the human mind. An event not open to an interpretation by one of these two principles is for man inconceivable and mysterious. Change can be conceived as the outcome either of the operation of mechanistic causality or of purposeful behavior; for the human mind there is no third way available.
And again, these categories are prior to all experience, because they are prerequisite to the meaningfulness of any experience. For sensation to make sense, it must be refracted through the dual cognitive lenses of "cause" and "purpose."
What differentiates the realm of the natural sciences from that of the sciences of human action is the categorical system resorted to in each in interpreting phenomena and constructing theories. The natural sciences do not know anything about final causes; inquiry and theorizing are entirely guided by the category of causality.
The existence of these dual alternative ways of explaining change (causality and teleology) in the world raises questions: How do we know which one to use regarding any particular change? How do we know when we are dealing with nature and when we are dealing with the realm of human action?
We are with every reflective moment aware of our own status as an acting being. But what about those other beings moving around who happen to look and sound like us? How can we be sure without somehow peering into their minds that they are not mere simulacra? This is obviously an extravagant question. There is no praxeological proof of the existence of any given alter ego. But, as Mises wrote,
it is beyond doubt that the principle according to which an Ego deals with every human being as if the other were a thinking and acting being like himself has evidenced its usefulness both in mundane life and in scientific research. It cannot be denied that it works.
And once we choose to consider others as acting beings, all the general theorems of praxeology must be considered as applicable to those others.
The category of teleology is such a prominent feature of the human mind, that relatively inexperienced minds often paint the whole world in teleological colors.
Both primitive man and the infant, in a naive anthropomorphic attitude, consider it quite plausible that every change and event is the outcome of the action of a being acting in the same way as they themselves do. They believe that animals, plants, mountains, rivers, and fountains, even stones and celestial bodies, are, like themselves, feeling, willing, and acting beings.
Here Mises described animism, a view of the universe in which objects that more experienced minds describe as inanimate are assigned intelligence and will.
As culture develops, a society often moves from animism to theism, in which the objects themselves are considered inanimate, but their motions are determined according to the purposes of willing, acting gods.
Where people did not know how to seek the relation of cause and effect, they looked for a teleological interpretation. They invented deities and devils to whose purposeful action certain phenomena were ascribed. A god emitted lightning and thunder. Another god, angry about some acts of men, killed the offenders by shooting arrows.
However, it should not be supposed that primitive peoples only resorted to the category of teleology, and never to the category of causality.
Both categories were resorted to by primitive man and are resorted to today by everybody in daily thinking and acting. The most simple skills and techniques imply knowledge gathered by rudimentary research into causality.
Just as, in the example given earlier in this paper, a man devoid of the category of causality could never learn to avoid fire, a people devoid of the category of causality could never learn to make fire. Nobody would ever have any reason to suppose that friction generating flame in the past had any bearing on the future.
As culture and technology progresses, the ambit of causality tends to expand at the expense of the ambit of teleology. Thus progressing societies tend, as Mises explains, to substitute causality for animistic teleology: "Only at a later stage of cultural development does man renounce these animistic ideas and substitute the mechanistic world view for them."
And societies eventually substitute causality as well for theistic teleology: "Slowly people came to learn that meteorological events, disease, and the spread of plagues are natural phenomena and that lightning rods and antiseptic agents provide effective protection while magic rites are useless."
This transition in thought was brilliantly exemplified by the ancient Greek doctor Hippocrates, in writing on epilepsy, which had, before his time, been called the "sacred disease."
It is thus with regard to the disease called Sacred: it appears to me to be nowise more divine nor more sacred than other diseases, but has a natural cause from the originates like other affections. Men regard its nature and cause as divine from ignorance and wonder, because it is not at all like to other diseases. And this notion of its divinity is kept up by their inability to comprehend it, and the simplicity of the mode by which it is cured, for men are freed from it by purifications and incantations. But if it is reckoned divine because it is wonderful, instead of one there are many diseases which would be sacred; for, as I will show, there are others no less wonderful and prodigious, which nobody imagines to be sacred.
Abandoning teleology for causality had such satisfactory results in pragmatic affairs that thinkers began to make the same shift even regarding matters far removed from day-to-day life, and over which they had no control.
Carl Sagan described this process eloquently in his book Cosmos.
For thousands of years humans were oppressed — as some of us still are — by the notion that the universe is a marionette whose strings are pulled by a god or gods, unseen and inscrutable. Then, 2,500 years ago, there was a glorious awakening in Ionia: on Samos and the other nearby Greek colonies that grew up among the islands and inlets of the busy eastern Aegean Sea. Suddenly there were people who believed that everything was made of atoms; that human beings and other animals had sprung from simpler forms; that diseases were not caused by demons or the gods; that the Earth was only a planet going around the Sun. And that the stars were very far away.
This revolution made Cosmos out of Chaos. The early Greeks had believed that the first being was Chaos, corresponding to the phrase in Genesis in the same context, "without form." Chaos created and then mated with a goddess called Night, and their offspring eventually produced all the gods and men. A universe created from Chaos was in perfect keeping with the Greek belief in an unpredictable Nature run by capricious gods. But in the sixth century B.C., in Ionia, a new concept developed, one of the great ideas of the human species. The universe is knowable, the ancient Ionians argued, because it exhibits an internal order: there are regularities in Nature that permit its secrets to be uncovered. Nature is not entirely unpredictable; there are rules even she must obey. This ordered and admirable character of the universe was called Cosmos.
And in the television series upon which the book Cosmos was based, Sagan said,
The first Ionian scientist was named Thales. He was born over there, in the city of Miletus, across this narrow strait. He had traveled in Egypt and was conversant with the knowledge of Babylon. Like the Babylonians, he believed that the world had once all been water. To explain the dry land, the Babylonians added that their god Marduk had placed a mat on the face of the waters and had piled dirt up on top of it. Thales had a similar view but he left Marduk out. Yes, the world had once been mostly water, but it was a natural process which explained the dry land. Thales thought it was similar to the silting up that he had observed at the delta of the River Nile.
Whether Thales's conclusions were right or wrong is not nearly as important as his approach. The world was not made by the gods, but instead was the result of material forces interacting in nature.
This approach eventually led to the scientific revolution of modern ages.
Mises describes how the track record of the shift from teleology to causality led some thinkers to assume that the complete abolition of teleology from all scientific thought was in order.
The marvelous achievements of the experimental natural sciences prompted the emergence of a materialistic metaphysical doctrine, positivism. Positivism flatly denies that any field of inquiry is open for teleological research. The experimental methods of the natural sciences are the only appropriate methods for any kind of investigation.
Positivists and other radical anti-teleologists even reject teleological investigations into the social sciences. In an instance of "scientism" (the proclivity of aping the physical sciences) these critics of the traditional approaches to the studies of human affairs think of all teleological sciences as the last refuge of animism. B.F. Skinner, the founder of radical behaviorism, typified this attitude when he wrote,
For twenty-five hundred years people have been preoccupied with feelings and mental life, but only recently has any interest been shown in a more precise analysis of the role of the environment. Ignorance of that role lead in the first place to mental fictions, and it has been perpetuated by the explanatory practices to which they gave rise.
Radical anti-teleologists characterize words like "intend," "believe," "desire," and "love" as "mentalese" or "folk psychology." Many do not even believe that these concepts can be reduced to material phenomena (an endeavor many consider to be proved futile by Franz Brentano's theory of intentionality). But rather they regard these teleological notions as complete fictions that should be discarded, just as teleological animism and theism were not "reduced," but simply discarded.
Sidney Morgenbesser is said to have asked a question to B.F. Skinner that succinctly displayed the ridiculousness of adopting this approach to the social sciences: "Let me see if I understand your thesis. You think we shouldn't anthropomorphize people?"
Yet, some people assume radical anti-teleology is a necessary concomitant of materialist monism, and of rejecting Cartesian mind-body dualism. They think that anything less than radical anti-teleology would be, to some extent, accepting the independence of the soul as some kind of "ghost in the shell."
Mises denied this. He argued that what he called "methodological dualism" (applying causality to nature and teleology to human affairs) does not necessarily imply "ghost in the shell" dualism. Furthermore, methodological dualism is still necessary, even if you completely accept materialist monism.
We may fairly assume or believe that they are absolutely dependent upon and conditioned by their causes. But as long as we do not know how external facts — physical and physiological — produce in a human mind definite thoughts and volitions resulting in concrete acts, we have to face an insurmountable methodological dualism.
Methodological dualism is not resorted to because we do not know whether actions are determined. Even if we assume that human behaviors are indeed determined, so long as we do not know which actions will be caused by which factors, we still must resort to methodological dualism.
It is not enough to know that firing neurons lead to behaviors. For a scientist studying human behavior to practice methodological monism, he would need to know which circumstances regarding the firing of neurons would lead to deciding to the bodily motions that "silly folk psychologists" call "composing a symphony," and which circumstances regarding the firing of neurons would instead lead to the bodily motions that "silly folk psychologists" call "reading a book." So long as we can't accomplish such a mind-boggling feat as that, the only way of studying human affairs that makes sense is by considering humans as acting beings with minds, wills, and intentions.
"There is nothing wrong with neurobiology and neurochemistry; indeed these sciences are achieving wonders for us. But the social sciences can never be resolved into these natural sciences."
Some claim that "methodological dualism" is a provisional stance, resorted to only because we do not yet have the technology to fully explain the complexity of the human brain, and that this stance can eventually be dropped once we do achieve that level of technology.
However, to add an argument of my own, complementary to Mises's, humans are not special for science just because they are complex. They are not basically on the same scientific grounds as weather patterns. They are special for science because the very questions we want answered about them are teleological in nature. The reason we study human action in the first place is that we have certain questions that are inextricably bound up with the human purposes that anti-teleologists dismiss as mentalist fictions.
For example, people are vitally interested in economics largely in order to discover the legal and institutional arrangements by which humans can prosper. How can one explain "how humans prosper" when the teleological, "mental fiction" of "prospering" is dismissed as nonsense at the outset? I would challenge any anti-teleological economist to even define (let alone explain) "goods," "money," "profit," "loss," and "income" without using the teleological, "mentalist" language they deride as "folk psychology."
Inquiries into the causes and nature of the wealth of nations are fundamentally different from inquiries into the causes and nature of the humidity of trade winds. If we had precise enough instruments and powerful enough computers, we could explain every single thing about the most complex weather pattern. But no matter how precise your instruments, no matter how powerful your computers, all you will find in the brain are chemical, electrical, subatomic, and other physical patterns and processes. You will never find preferences, purposes, costs, or proceeds.
This is not to say that the former does not cause the latter. It is rather that the terms in which our minds grasp causality and teleology are fundamentally different and simply do not translate into each other.
The most thoroughgoing, radical anti-teleologists are actually right insofar as, in the language of causality, there is no such thing as teleology. That is why they do not want to explain teleology in terms of causality; instead they want to abandon teleology altogether. Their position is ridiculous, because it would involve the abandonment of all economic, sociological, ethnographic, and historical questions, but at least it is more logical than that of people who think they can answer teleological questions with causality answers.
We have many causality-related questions about our bodies (including our brains), because our bodies are useful to us. But we also have many teleological questions about choice, success, failure, prosperity, and poverty. Once you abandon teleological language, you have effectively changed the question. So, as long as we are still asking teleological questions, we need to continue providing teleological answers.
There is nothing wrong with neurobiology and neurochemistry; indeed these sciences are achieving wonders for us. But the social sciences can never be resolved into these natural sciences, because the human mind can never resolve teleology into causality without abandoning teleology altogether, and to study human affairs without considering purposive action is not to study human affairs at all.
Most social scientists who aim to emulate the natural sciences do not take things so far as to deny teleology altogether. Most consider humans as acting beings. However, in their "scientistic" striving, they end up vitiating all their efforts with faulty approaches. One aspect of the natural sciences they try to emulate is the latter's empirical methods.
Yet, all data, no matter how numerous and carefully gathered, are always information about past events: historical experience. And as Mises wrote,
The experience with which the sciences of human action have to deal is always an experience of complex phenomena. No laboratory experiments can be performed with regard to human action. We are never in a position to observe the change in one element only, all other conditions of the event remaining unchanged. Historical experience as an experience of complex phenomena does not provide us with facts in the sense in which the natural sciences employ this term to signify isolated events tested in experiments. The information conveyed by historical experience cannot be used as building material for the construction of theories and the prediction of future events. Every historical experience is open to various interpretations, and is in fact interpreted in different ways. …
Complex phenomena in the production of which various causal chains are interlaced cannot test any theory. Such phenomena, on the contrary, become intelligible only through an interpretation in terms of theories previously developed from other sources. In the case of natural phenomena the interpretation of an event must not be at variance with the theories satisfactorily verified by experiments. In the case of historical events there is no such restriction. Commentators would be free to resort to quite arbitrary explanations. Where there is something to explain, the human mind has never been at a loss to invent ad hoc some imaginary theories, lacking any logical justification.
Moreover, the empirical approach to the natural sciences is only fruitful because of its regularity, and our ability to use the category of causation to infer use carefully observed past regularity to infer such regularities in general (in other places and times). But, as Mises argued, there is simply no such regularity in the realm of human action:
Epistemologically the distinctive mark of what we call nature is to be seen in the ascertainable and inevitable regularity in the concatenation and sequence of phenomena. On the other hand the distinctive mark of what we call the human sphere or history or, better, the realm of human action is the absence of such a universally prevailing regularity. Under identical conditions stones always react to the same stimuli in the same way; we can learn something about these regular patterns of reacting, and we can make use of this knowledge in directing our actions toward definite goals. Our classification of natural objects and our assigning names to these classes is an outcome of this cognition. A stone is a thing that reacts in a definite way. Men react to the same stimuli in different ways, and the same man at different instants of time may react in ways different from his previous or later conduct. It is impossible to group men into classes whose members always react in the same way.
Nonregularity in the realm of human action also makes hopeless the other way in which many economists try to ape the physical sciences: their "quantophrenia" (an irrational haste to introduce mathematical analyses to their work).
First of all, measurements require constant relations. So, in contrast to the natural realm, the utter lack of constant relations in the realm of human action precludes any useful measurements.
In the realm of physical and chemical events there exist (or, at least, it is generally assumed that there exist) constant relations between magnitudes, and man is capable of discovering these constants with a reasonable degree of precision by means of laboratory experiments. No such constant relations exist in the field of human action outside of physical and chemical technology and therapeutics. …
Those economists who want to substitute "quantitative economics" for what they call "qualitative economics" are utterly mistaken. There are, in the field of economics, no constant relations, and consequently no measurement is possible.
Secondly, equations also require constant relations. So, again in contrast to the natural realm, the utter lack of constant relations in the realm of human action precludes the formulation of any meaningful equations.
[I]n mechanics the equation can render very important practical services. As there exist constant relations between various mechanical elements and as these relations can be ascertained by experiments, it becomes possible to use equations for the solution of definite technological problems. Our modern industrial civilization is mainly an accomplishment of this utilization of the differential equations of physics. No such constant relations exist, however, between economic elements. The equations formulated by mathematical economics remain a useless piece of mental gymnastics and would remain so even it they were to express much more than they really do.
Besides these more basic epistemological errors, mathematical economists also torture economic concepts like utility and equilibrium into vicious formulations so as to make them mathematically manipulable, at the cost of truth and meaningfulness. As this is a paper on epistemology, and not economics proper, I will not present all of Mises's arguments against the fallacies of mathematical economics, except only to direct the reader to my study guide of Mises's Theory of Money and Credit, chapter 2, and Human Action, chapter 9, section 5.
Ludwig von Mises did the social sciences (and humanity itself) an inestimable service by not only using his crystal clear understanding of the true character of the sciences of human action to systematize and advance economic science, but also by illuminating that true character for posterity.
Mises demonstrated once and for all that (and in what way) economics is indeed an exact, certain, a priori, and (yes) deductive science.
In these dark days, in which unmoored methodology has led to fallacious economics, which in turn has led to disastrous policies, the epistemological works of Mises shine like a beacon of hope: hope that someday the social sciences will right themselves at the fundamental methodological level, and thus will be clear-eyed enough to guide humanity back toward sanity, peace, and prosperity.
 Ludwig von Mises, Human Action (HA), Introduction, § 2.
 Mises, The Ultimate Foundation of Economic Science (UFES), ch. 1, § 1.
 Mises, HA, ch. 2, § 2.
 UFES, ch. 1, § 1
 My use of the term "inbuilt" refers to Mises's characterization of the mind being already "equipped" with these conceptions prior to their use in grasping reality. It should not be taken as implying "innate," in the sense that they are present at birth. It may however be that our genetic constitution (which itself is present at birth) is such that we have the biological capacity to develop these conceptions. "Man acquired these tools, i.e., the logical structure of his mind, in the course of his evolution from an amoeba to his present state." HA,ch. 2, § 2. For a meeting of Kant and Darwin in the expansive mind of Mises, see "Hypothesis about the Origin of A Priori Categories" in UFES, ch. 1, § 2. However, regardless of how these conceptions do form, the point is, again, that they cannot be formed from the acquisition of knowledge (meaningful interpretations of external and internal sensations), because the capacity to apply these conceptions is a prerequisite of knowledge.
 UFES, ch. 1, § 1.
 HA, ch. 2, § 2.
 UFES, ch. 1, § 1.
 Mises, Theory and History (TH), Introduction.
 TH, ch. 14.
 David Hume, An Enquiry Concerning Human Understanding, Section IV. "For all inferences from experience suppose, as their foundation, that the future will resemble the past, and that similar powers will be conjoined with similar sensible qualities. If there be any suspicion that the course of nature may change, and that the past may be no rule for the future, all experience becomes useless, and can give rise to no inference or conclusion. It is impossible, therefore, that any arguments from experience can prove this resemblance of the past to the future; since all these arguments are founded on the supposition of that resemblance."
 TH, Introduction.
 HA, ch. 1, § 5.
 HA, ch. 4, § 1.
 HA, ch. 2, § 6.
 UFES, ch. 3, § 4.
 Although I would argue that all acts of suppressing certain impulses are themselves impelled by still other impulses, and that "impulse" is, praxeologically speaking, identical with "felt uneasiness" that brings about all action.
 UFES, ch. 3, § 4.
 HA, ch. 1, § 1.
 HA, ch. 6, § 1.
 Arthur Schopenhauer, Prize Essay On The Freedom Of The Will.
 Many followers of Mises have characterized praxeology as deductions from an "action axiom." And some say that this "action axiom" is "humans act" or "action is purposeful behavior." It is important to note that Mises never used the term "action axiom." Mises used "human" basically as a synonym for "actor." Thus saying "humans act" is tantamount to saying "acting beings are acting beings." Furthermore, "purposeful behavior" means nothing more and nothing less than "action." Therefore, saying "action is purposeful behavior" is tantamount to saying "action is action." Thus both "axioms" are pleonastic, and nothing useful can be deduced from them. Praxeology is the unbundling of the implications of a conception, not of a proposition. Praxeology stems from the conception we think of when we hear the single word"action" (or any of its translations or synonyms), not from the proposition "action is purposeful behavior." When Mises wrote "action is purposeful behavior," he introduced "purposeful behavior" as a clarifying substitute for "action," just in case readers are thinking of another meaning of the word "action," not as the second half of non-pleonastic proposition from which to derive theorems. Mises derived praxeology from the a priori category of action, not the "action axiom." The propositions immediately implied by the category of action might be considered axioms (e.g., "Action always involves the passing of time."), because they are actually propositions, and thus can be used for edifying deductions. But nouns ("action") and pleonasms ("action is action") cannot be so used.
 HA, ch. 2, § 10.
 David Hume himself seemed to imply that causality was a necessary implication of action when he wrote that without the presumption of regularity, "we should never have been able to adjust means to end, or employ our natural powers, either to the producing of good, or avoiding of evil." An Enquiry Concerning Human Understanding, Section V. In fact, far from being the "prepositivist" as he is often portrayed, Hume posited that our very notion of cause-and-effect is derived from our understanding of will and action: "An act of volition produces motion in our limbs, or raises a new idea in our imagination. This influence of the will we know by consciousness. Hence we acquire the idea of power or energy; and are certain, that we ourselves and all other beings are possessed of power. This idea, then, is an idea of reflection, since it arises from reflecting on the operations of our own mind, and on the command which is exercised by will, both over the organs of the body and faculties of the soul." Ibid., Section VII.
 HA, ch. 2, § 10.
 HA, ch. 14, § 1.
 While the similarities between geometry and economics are instructive, there are important differences between the a priori natures of the two, discussed by Mises in UFES, "Some Preliminary Observations Concerning Praxeology Instead of an Introduction," Section 4. Another important discussion of the apriorism of geometry is in UFES, Ch 1. § 1.
 HA, ch. 2, § 3.
 HA, ch. 1, § 6.
 TH, ch. 11.
 HA, ch. 1, § 6.
 TH, ch. 11.
 HA, ch. 1, § 6.
 TH, ch. 11.
 Hippocrates, On the Sacred Disease.
 TH, ch. 11.
 B.F. Skinner, About Behaviorism, ch. 1.
 In fact, Mises provides a good reason why it is natural to reject "ghost in the shell" dualism when he points out that "our impotence to ascertain an absolute beginning out of nothing forces us to assume that also this invisible and intangible something — the human mind —is an inherent part of the universe, a product of its whole history." UFES, ch. 3, § 4.
 HA, ch. 1, § 3.
 HA, ch. 2, § 1.
 TH, Introduction.
 HA, ch. 2, § 8.
 HA, ch. 16, § 5.
Originally posted at Mises.org.