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June 20, 2013 / Adam Knott

Sanchez on Praxeology

Sanchez on Praxeology, Word Doc.

Daniel Sanchez has posted his views on praxeology on his website DJSF.org.  I read through the first two parts of the series and here are my comments and insights.

Praxeology and Economics

For what follows, it will be useful to distinguish between economics (what Mises called catallactics) and praxeology.  The focus of economics is market phenomena.  As Mises writes:

“There have never been any doubts and uncertainties about the scope of economic science. Ever since people have been eager for a systematic study of economics or political economy, all have agreed that it is the task of this branch of knowledge to investigate the market phenomena, that is, the determination of the mutual exchange ratios of the goods and services negotiated on markets, their origin in human action and their effects upon later action. The intricacy of a precise definition of the scope of economics does not stem from uncertainty with regard to the orbit of the phenomena to be investigated. It is due to the fact that the attempts to elucidate the phenomena concerned must go beyond the range of the market and of market transactions.” (Human Action, 3rd rev. p. 232)

As is well established, the central concept in the Misesian system is the concept of action.  What is action?  “Any conscious behavior counts as action–an action is anything that you do on purpose.” (An Introduction to Economic Reasoning, David Gordon)  An action is a means and an end taken as a unified or singular entity.  In other words, when the end at which I aim is taken together with the means I utilize toward reaching that end, and considered as a single entity, this entity is an action.  This action and its formal structure (its structure without regard to specific content) is the focus of praxeology.

HA-32 “Praxeology is a theoretical and systematic, not a historical, science.  Its scope is human action as such, irrespective of all environmental, accidental, and individual circumstances of the concrete acts.  Its cognition is purely formal and general without reference to the material content and the particular features of the actual case.”

HA-51 “The cognition of praxeology is conceptual cognition.  It refers to what is necessary in human action.  It is cognition of universals and categories.”

HA-47 “Praxeology is not concerned with the changing content of acting, but with its pure form and its categorical structure.”

HA-44 “[praxeology] does not concern itself with the accidental and environmental features of this action and with what distinguishes it from all other actions, but only with what is necessary and universal in its performance.”

We may define those features of action that may be present in some actions but not in other actions the concrete or empirical content of action.  It follows immediately that when we study the content of action as distinct from the universal features of action, we are in this respect not involved in praxeological study, but rather in thymological study (Mises’s general term for distinguishing two fundamental approaches to social phenomena).  In the sciences of human action, when we study a related group of phenomena that are present in some actions but not in others, we study the “contentual” aspect of action thus initiating a thymological investigation.  By definition, the results of a thymological analysis of action do not apply to all conceivable actions because a thymological investigation draws conclusions from facts that are not present in all actions.

The focus of economics is that subset of human activity surrounding market exchange, money prices, and monetary calculation:

“Not logical or epistemological rigor, but considerations of expediency and traditional convention make us declare that the field of catallactics or of economics in the narrower sense is the analysis of the market phenomena. This is tantamount to the statement: Catallactics is the analysis of those actions which are conducted on the basis of monetary calculation. Market exchange and monetary calculation are inseparably linked together.” (HA, p. 234)

Obviously, the realm of market exchange is not identical to the realm of “direct” interpersonal human action.  We need only consider these two groups of social phenomena:

1. Production, consumption, goods, services, products, prices, interest, capital, savings, selling, buying.  2. Love, hate, respect, betrayal, jealousy, trust, affection, dishonesty, coercion.

Nor are these two realms identical to the realm of isolated actions or mental actions (actions done in isolation, without regard to market exchange or direct interpersonal exchange).  Consider the following group of phenomena: 3. Contemplating, thinking, observing, looking, whistling, sneezing, resting, walking.

When we study the realm of market exchange, we have isolated a related group of content from other possible groups of content.  In so doing, we study a particular and contentual aspect of human action, not human action in general (not those aspects that all actions have in common).

In Sanchez’s conception, the line between praxeology (the general science of human action) and economics (the study of market phenomena) is not clearly drawn or explained.  His analysis entitled “Praxeology Restated” is written using terms such as production, production good, products, stock, capital, capital good, labor, consumption, etc.  These are clearly “economic” terms which have been constructed by economists for the specific purpose of analyzing market phenomena.  Are we to consider these terms now to be pure praxeological action categories, free of any reference to market-related content, and just as easily applied to the actions of loving or thinking as to the actions of buying and selling?  Is the goal to reinterpret economic concepts as praxeological concepts?   This is not clear in Sanchez’s treatment.

Scarcity

In the last decade, much has been made about the notion of scarcity.  Rothbardians such as Stephan Kinsella have tried to use the notion of scarcity as the centerpiece of their normative argument against intellectual property laws.  However, with few exceptions, all the works that attempt to make scarcity central to their argument overlook a very simple question.  Should we consider scarcity to be an objective feature of nature in the same way we consider stones to be an objective feature of nature?  Or should we consider scarcity to be a subjective phenomenon in the same way Austrian theory considers value to be subjective?  One rarely sees this issue explicitly raised.  In 2009, Bob Schaefer called our attention to the distinction between an objective versus a subjective conception of scarcity:

Kinsella, on the other hand, is intent on objectifying scarcity, i.e., linking the concept (and its supposed omnipotent qualities) to the objective and given qualities of nature. He writes:

“Nature, then, contains things that are economically scarce.”  He adds: “Ideas are not naturally scarce.”

http://praxeology.net/schaefer-molinarisoc09.htm

But no one paid attention, and the idea of a subjective conception of scarcity fell back into obscurity.  Sanchez appears to be utilizing an objective conception of scarcity since he provides a relatively extensive classification of the different kinds of scarcity we may encounter (e.g. subractable, rivalrous, depletable, degradable, super-abundant, etc.).  There is no mention of or reference to the idea that scarcity may depend on how the individual actor regards the object in question.  As opposed to the objective conception of scarcity that Austrian writers continue to utilize, there is a much more simple theoretical account of scarcity, an account consistent with the Austrian concept of subjective value.

If actor A attempts to attain some thing or situation (X), this is identical to his not having a wanted X.  The not having of a wanted X is identical to an “insufficient supply” or “short supply” (i.e., scarcity) of X from the point of view of actor A.  In other words, scarcity is a subjective phenomenon that is already implied in the actor’s attempt to attain an object or situation.  All action entails scarcity to the extent that action is aiming at an end–trying to attain something not presently had.  The trying to attain something not had is scarcity for the individual concerned.

Thus, as far as praxeology is concerned, the concept of scarcity is redundant in the sense that it is simply another way of considering (of conceiving) the actor’s attempt to reach an end.

Economization and Allocation

Sanchez’s considers the notions economization and allocation to be important praxeological concepts.

“Scarce means must be allocated to competing ends, leaving some ends unpursued. The ends pursued are chosen as recipients of some of the means. Each of those ends will be apportioned a certain quantity of the means. The ends left unpursued are renounced as recipients of any of the means. Such allocation is called economization. Scarce means are thus also called economic goods.

A definite way of using a means to pursue an end is a use. Thus, economization may also be said to be the allocation of scarce means to competing uses.”

However, there is an important distinction to be made between Robbinsonian economizing and Misesian praxeology.  In Robbins’s conception, economizing, in the sense of comparing different ways of utilizing and allocating resources, is the distinguishing and essential characteristic of action.  In Mises’s view, economizing is not an essential characteristic of action but rather only one possible mode of action.  Kirzner explains:

 “Economizing consists in the allocation of scarce resources among competing ends. Acting, in the praxeological sense, consists in selecting a pattern of behavior designed to further the actor’s purposes. Of course, the particular allocation that, in any given situation, will be made of scarce means in respect of different ends will constitute a course of action, a pattern of conduct designed to further the achievement of as many of those goals (in their preferred order) as possible. But the concept of action is wider and at the same time more fundamental than that of economizing.  Although action may be described in terms of ends and means, such a description is quite different from that of an operation of economizing. In the concept of economy, ends and means constitute a scheme more or less artificially imposed on action so that the relative valuations of ends can be reflected in the specific pattern in which resources are allocated. The essential idea becomes, not the intent pursuit of a set purpose, but the almost mechanical translation of the scale of “ultimate” ends into appropriately apportioned shares at the level of means. “Means” are required for the notion of economy because they are the entities that must be “allocated”; it is in the comparison of different ways of utilizing resources that economizing finds its place.  With the broader notion of action, on the other hand, we are not primarily interested in the particular pattern in which resources will be apportioned among ends. Such an allocation, if carried out, will be of interest as one of the possible implications of action and will, of course, as such, find a place somewhere in the science of human action. But on the basis of Robbins’ conception of the nature of economic science, economics can achieve homogeneity and individuality only by virtue of its concern with the existence of such operations of comparison and allocation of means. The praxeological approach, on the other hand, finds a basis for the homogeneity and individuality of economics at a deeper level, which does not necessarily require a clearly recognizable pattern of allocation. This basis is found in the fundamental characteristic of action, viz., that it is conduct directed at the achievement of a purpose.” (The Economic Point of View, pp. 161-2)

In other words, the Robbinsonian notion of economizing (comparison and allocation) is distinct from Mises’s conception of praxeology.  In praxeology, allocation is one possible mode of action, present in some actions but not present in others.  Whether economizing is present is an empirical question.  Economizing is thus not a universal feature of action and is not part of praxeology.

The Scale of Values

As is often the case, it is important to distinguish between the notion of value as Mises conceived it, and the quasi-objective notion of “scale of values” as Rothbard and others conceive it.  Sanchez proposes the objective version rejected by Mises. He writes:

This hierarchy of ends is called a value scale.  The further up the scale an end is, the higher it is said to be valued.

By contrast, here is Mises’s conception:

“People have often failed to recognize the meaning of the term “scale of value” and have disregarded the obstacles preventing the assumption of synchronism in the various actions of an individual.  They have interpreted man’s various acts as the outcome of a scale of value, independent of these acts and preceding them, and of a previously devised plan whose realization they aim at.  The scale of value and the plan to which duration and immutability for a certain period of time were attributed, were hypostatized into the cause and motive of the various individual actions.  Synchronism which could not be asserted with regard to the various acts was then easily discovered in the scale of value and in the plan.  But this overlooks the fact that the scale of value is nothing but a constructed tool of thought.  The scale of value manifests itself only in real acting.  It is therefore impermissible to contrast it with real acting and to use it as a yardstick for the appraisal of real actions.” (Human Action, 3rd rev. p. 102)

In Mises’s conception, a thing X can be said to be “valued” only by being sought by an actor.  When an actor attempts to attain X we may define this attempt to attain X as “valuing X.”  This is what Mises means in writing “The scale of value manifests itself only in real acting.”  By contrast, in the conception proposed by Sanchez, a thing X can be said to be “valued” merely by appearing on an imagined or written “value scale” of the actor.  In this latter conception, an actor may claim that the highest thing on his “scale of values” is to buy a clock, and yet in the next instant buy some socks.  In Mises’s conception this would be considered nonsensical.  To Mises, things are valued only in being sought in action:

“Neither is value in words and doctrines.  It is reflected in human conduct.  It is not what a man or groups of men say about value that counts, but how they act.” (HA, 96)

“But this overlooks the fact that the scale of value is nothing but a constructed tool of thought.  The scale of value manifests itself only in real acting…” (HA, 102)

“The assignment of orders of rank through valuation is done only in acting and through acting.” (HA, 120)

Thus, in each action, that thing, X, is “valued” which is sought or done in action.  E.g.:

Action 1:  Actor asserts “The most important thing for me is to buy a clock.”  (the action was making this assertion)

Action 2:  Actor buys some socks.  (the action was buying socks)

Strictly speaking, there is no “scale of values” but rather a sequence of actions and thus a sequence of values (a sequence of things sought or done in action).  In Mises’s conception there cannot be several things (X, Y, and Z) all of which are “valued” to different degrees.  There can only be thing X valued in action 1, thing Y valued in action 2, thing Z valued in action 3, etc.    X, Y, and Z cannot be “valued” (regardless of relative degrees such as “higher” or “lower”) simultaneously by being symbolically represented by the actor in an imagined or written scale or plan.  This is why Mises writes:

[People]… have disregarded the obstacles preventing the assumption of synchronism in the various actions of an individual…Synchronism which could not be asserted with regard to the various acts was then easily discovered in the scale of value and in the plan.

In other words, the conception “scale of values” allows the theoretician to claim synchronism (or simultaneity) in the actor’s “valuing” of multiple objects in action.  Mises argues that this is wrong, and we can only designate as “valued” those things actually pursued or actualized in action.  If an actor imagines or sketches a scale of his values, or draws up plans for a future action, these are all actions.  Given that the actor is doing them or has done them, we may say the actor “values” or “valued” doing them.  The concrete plan or scale that was written or imagined during these actions has no necessary bearing on a separate action of the actor.  As Mises explains in a slightly different context:

It may be very interesting that yesterday goals were set for today’s acting other than whose really aimed at today.  But yesterday’s plans do not provide us with any more objective and nonarbitrary standard for the appraisal of today’s real acting than any other ideas or norms. (Human Action, 3rd rev. p.102-3)

In the Misesian conception the term value is reserved for things sought or done in action.  In this conception, when X is sought or done this constitutes an action.  If something else Y is sought or done this defines or is identical with a new action.  With regard to the valuing of X and Y, there are then two separate instances of valuing (two separate instances of doing or of seeking).  In the alternate conception which Mises describes, the theoretician tries to overcome the obstacles preventing the assumption of simultaneity in valuing several objects in action, by implying that the actor may simultaneously value multiple objects simply by including them in the scale or plan.  This theoretical mistake has serious further consequences as we will soon see.

The Law of Marginal Utility

Sanchez conceives the law of marginal utility to be a praxeological law (as does Mises) that applies to all means utilized in action.

The Law of Marginal Utility applies to all means, whether they are used to directly pursue ultimate ends (as consumption goods) or are used to indirectly pursue ultimate ends (as production goods), or both.  The less of a means in a person’s stock, the more valuable is the ultimate end, whether pursued directly or indirectly, that depends on any given amount of it: that is, the higher is its marginal utility. The more of a means in a person’s stock, the less valuable is the end, whether pursued directly or indirectly, that depends on any given amount of it: that is, the lower is its marginal utility.

However, this is a mistake for several reasons, if we are speaking about the law of marginal utility in its traditional or standard interpretation.  The law of marginal utility in its traditional or standard formulation applies only to a special circumstance in human action: the case in which an actor possesses a homogeneous supply or supply of identical units, and either increases or decreases his supply of these units.  See Mises’s explanation of the law of marginal utility:

“The judgment of value refers only to the supply with which the concrete act of choice is concerned.  A supply is ex definitione always composed of homogeneous parts each of which is capable of rendering the same services as, and being substituted for, any other part….All parts—units—of the available stock are considered as equally useful and valuable if the problem of giving up one of them is raised.”

Or, see Hoppe’s definition of the law of marginal utility in Economic Science and the Austrian Method:

“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.”

The law of marginal utility (in its traditional or standard formulation) only applies to the special case in human action where the actor possesses a homogeneous stock or supply and either increases or decreases his stock.   If all actions entail means, and if the law of marginal utility does not apply to all actions, then it would seem that there are means to which the law of marginal utility does not apply, namely, those means of which the actor does not possess a homogeneous stock.

There are at least two important problems in the relationship between the law of marginal utility (in its standard formulation) and praxeology.

Problem  #1:

Here is how Mises describes the focus of praxeology:

HA-32 “Praxeology is a theoretical and systematic, not a historical, science.  Its scope is human action as such, irrespective of all environmental, accidental, and individual circumstances of the concrete acts.  Its cognition is purely formal and general without reference to the material content and the particular features of the actual case.”

HA-51 “The cognition of praxeology is conceptual cognition.  It refers to what is necessary in human action.  It is cognition of universals and categories.”

HA-47 “Praxeology is not concerned with the changing content of acting, but with its pure form and its categorical structure.”

HA-44 “[praxeology] does not concern itself with the accidental and environmental features of this action and with what distinguishes it from all other actions, but only with what is necessary and universal in its performance.”

(all passages from Human Action, 3rd rev. ed.)

It seems clear that Mises considers praxeology to be the study of only those aspects of action that all actions have in common—those aspects of action that are necessary and universal in the performance of an action.  If action does not necessarily and universally require the relinquishing or obtaining of a unit(s) of a homogeneous supply, then the law of marginal utility (standard formulation) only applies to a specific, concrete situation in action—a situation that is present in some actions, but not present in other actions.  The fact that a particular action involves a homogeneous stock would seem to be an “environmental, accidental, and individual circumstance of the concrete act” and a “particular feature of the actual case.”  In other words, the fact that action A involves a homogeneous stock whereas action B does not, implies we are dealing with concrete or empirical content—with a feature that differentiates act A from act B.  This is in conflict with Mises’s explicit conception of praxeology as concerned with only the universal aspects of action.

Problem  #2:

The so-called “scale of values” (a written or imagined entity) does not determine what the actor “values” at a later time or in a different act.   If I draw up a supposed scale of my own values, or concentrate on imagining one, then I have chosen to perform these actions (drawing or imagining a value scale) over all other possible actions.  I have chosen to write or imagine a value scale, and thereby demonstrated that I valued doing so.  The fact that the drawn or imagined scale lists a number of things in order (car, bike, shirt, gum, etc.) says nothing necessary about what my next action will be.  My next action may be combing my hair.  This is what Mises means in writing:

 “Neither is value in words and doctrines.  It is reflected in human conduct.  It is not what a man or groups of men say about value that counts, but how they act.” (HA, 96)

“But this overlooks the fact that the scale of value is nothing but a constructed tool of thought.  The scale of value manifests itself only in real acting…” (HA, 102)

“The assignment of orders of rank through valuation is done only in acting and through acting.” (HA, 120)

Thus, we designate as “valuable” or “valued” those things that we conceive have undergone the valuational process of having been sought or attained in action.  X is considered “valuable” because actor A seeks to attain X, or has attained X, or because X occupies some specific action-categorical position in the action theory in question.  If X is considered valuable because it is sought or attained in an action, and if Y has neither been sought nor attained in an action, then Y is not “less” valuable than X (valuable, but “less so” than X), but instead simply “non valued.”  (Y was not sought or attained in an action as was X)  For X to be considered “more” or “less” valuable than Y, both X and Y must be “valued” (i.e., subjected to the same valuation process or procedure) and the resulting relative magnitudes compared.   It is a theoretical error to refer to a secondary valuation, Y, as having “increased” or “decreased” if Y’s value has not been actualized in an action.

In short, the terms “increase in value” and “decrease in value” imply two acts of valuation, and this is the shortcoming in the traditional or standard formulation of the law of marginal utility.  If two acts of valuation are required, this poses likely insurmountable theoretical problems.  It means the possibility of a time increment between the two acts (during which circumstances can change), and it means the necessity of an intertemporal comparison of two valuations.  Consider a case in which actor A uses 1 unit of C to purchase R today, and then uses 1 unit of C to purchase S tomorrow.  Assuming A received no new units of C, does this mean that actor A necessarily values R more or less than S?  I don’t think it does.  As Hulsmann has written:

 “…nobody has solved the problem of comparing non-extended entities like value, utility, preference ranks, etc.” (The Quarterly Journal of Austrian Economics, Winter, 1999)

Consider the fact that the law of marginal utility is an attempt to express a relatively simple idea, and yet Mises spends eight and one half pages of Human Action trying to clarify and defend it.  (3rd rev. ed. pp. 119-127)  The problem is that binary terms such as: least urgent/most urgent, smallest satisfaction/largest satisfaction, least important/most important, less valuable/more valuable, etc., imply two acts.  If two acts are explicitly described in the formulation of the law, this creates insurmountable theoretical problems.  The reason Mises must expend so much effort defending the law of marginal utility in its traditional formulation, is because the law as formulated implies two acts of valuation, and Mises is trying to defend the law while at the same time trying to avoid referring to two separate actions.

The problem can be further elucidated if we put forth a simplified version of the law of marginal utility.  The law of marginal utility expresses a necessary relationship between supply and value (between an actor’s supply and his valuing of that supply).  We can easily conceive that when an actor attempts to attain X (an object or situation) this constitutes his valuing of X.  Similarly, when an actor attempts to attain X, this constitutes his seeking a “supply” of X (he seeks for a “supply” of X that he currently lacks).  And thus, supply and value are necessarily related in action because the act through which an actor values X is the same act through which he seeks a supply of X.

This explanation requires reference to only one action, and so it overcomes the shortcoming of the traditional formulation of the law of marginal utility.  However, it is achieved by abandoning the attempt to utilize physical conceptual pairs such as “increase/decrease,” “more/less,” “higher/lower,” “internal/external,” etc.  The simplified expression of the law of marginal utility above is confined to saying something about the logic of action (it expresses an identity relationship) and does not try to say anything about the physical aspects of action (aspects that may be measured or compared in terms of their size, position, magnitude, intensity, etc.)

On Classifying the Phenomena of Nature or of the External World

It is common in an introduction to praxeology to find what amounts to a proposed classification of objects of the “external” world (a proposed classification of the objects of nature).  Sanchez writes:

Action does not include non-purposeful change.  For example, let us say a piece of wood from Crusoe’s ship also rises to the surface. This is not an action. The wood was not pursuing an end. It naturally floats in water due to its physical properties.

Non-purposeful changes are called natural phenomena.

Other natural phenomena include: lightning strikes, plan growth, chemical reactions, heartbeats, erosion

It is worthwhile to note that this type of classification exercise is pleonastic since all phenomena of the natural world may be treated by praxeology simply by considering them objects of action.  For example, a lightning strike is seen, or observed, or heard.  These are all actions.  A chemical reaction is seen, or observed, or initiated, or described.  These are all actions.  Thus, there is no reason to embark on a taxonomy of the objects of nature.  All such objects, processes, or events, are comprehended by praxeology in the sense that they are objects of action (objects of conscious conduct).  We may translate any physical or “objective” phenomenon into a social or subjective phenomenon simply by conceiving the object in question as an object of action.

Conclusion

It is a positive development to see young writers such as Daniel Sanchez, Konrad Graf, and Daniel Hieber, take an interest in praxeology.  It is also promising to see the growing realization of the breadth and comprehensiveness of Mises’s praxeological vision.  One hopes that writers and scholars will begin to reexamine the social thought of Mises with more care and insight, and perhaps start to repair some of the damage done by the “praxeology as economics” misinterpretation that has been prevalent for so long.

“To be sure, the praxeological perspective embraces a range of human action far wider than that usually treated in economic theory.  All human actions, motivated though they may be by the entire range of the purposes that have inspired and fired men to act, come within the sway of the ideal praxeological discipline.”

“Economic theory has traditionally dealt with the phenomena of the market, prices, production, and monetary calculation.  In these spheres of human activity, theorists have developed constructions that help to explain the regularities these phenomena evince and to bring into clear focus the tendencies for change in these phenomena consequent upon given autonomous changes in the data.”

“The subject matter of economics came to be connected with the material things that are the objects of traffic in the market; it came to be linked peculiarly with the use of money in market transactions or with the specific social relationships that characterize the market system.  Where writers came closest to the recognition that these criteria were only accidental characteristics of the affairs upon which economic analysis could be brought to bear, where they were able to glimpse the congenerousness of the specifically economic type of analysis with the underlying actions of men, they were unable to follow this clue to the conclusion to which it pointed.  Precisely because those features in action that made it susceptible of economic analysis seemed common to all human activities, these writers were driven back to look for some other defining characteristic.  And this meant again the search for some arbitrary quality to justify selecting the particular slice of pie that made up economic theory; but it meant in addition the relegation yet further into the background of the true recipe of that larger pie from which their conception of economics was being arbitrarily hacked.” (The Economic Point of View, Kirzner, pp. 181-3)

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