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July 1, 2013 / Adam Knott

Analysis of the Categories of Action versus Analysis of the Propositions of Economics

It is also important to note that Mises describes two possible approaches to praxeological study.  In one approach we attempt to deal directly with the categories of action at their primary or fundamental level.  In the other approach, we examine the extant propositions or laws of social science and attempt to verify their validity.  This latter approach is tantamount to examining the laws or propositions of economics since economics, in Mises’s conception, is the only mature branch of praxeology that has articulated a number of a priori or praxeological laws.  We either start with the simplest elements of action and attempt to construct from them the foundation of praxeology, or we take the historically-developed propositions and concepts of economics and attempt to validate their praxeological character.  These are our choices according to Mises.

There are two different ways of setting methodological and epistemological investigations upon a secure foundation. One can attempt to reach solid ground by undertaking to deal directly with the ultimate problems of epistemology. This procedure would no doubt be the best if it offered any promise of success, so that one could hope to find truly firm ground at that deep level. However, one can also take another path, by starting from the definite concepts and propositions of science and verifying their logical character. It is evident that cognition of the ultimate foundations of our knowledge can never be attained in this manner. But neither does the first way offer such a possibility. On the other hand, the second way protects us from the fate that has befallen most investigations that have been concerned with the methodological and epistemological questions of economics in recent years. These investigations became so badly bogged down in the difficulty of the ultimate problems of epistemology that they never reached the point where they could deal with the logical problems of sociology, which are comparatively easier to solve. (EP, p. 70)

As we can see, Mises considered the direct study of epistemological or praxeological categories (Menger’s “simplest elements”) the ideal approach, but he believed this approach held out little hope of success.  Menger held that exact science[i] examines the way in which complex phenomena are comprised of simple or elemental phenomena:

Exact science, accordingly, does not examine the regularities in the succession, etc., of real phenomena either.  It examines, rather, how more complicated phenomena develop from the simplest, in part even unempirical elements of the real world in their (likewise unempirical) isolation from all other influences…It does this without taking into account whether those simplest elements, or complications thereof, are actually to be observed in reality uninfluenced by human art; indeed, without considering whether these elements could be found at all in their complete purity. (I, p. 61)

The risk is that a direct study of these “simplest elements” gets bogged down in a morass of complex distinctions and classifications and in the end is not able to shed any light on the important problems of social science.  The likelihood of this happening is high, and thus Mises judges that the most prudent way to proceed is to arrive at praxeological laws by verifying the validity of economic laws.  His examination of the law of marginal utility (HA, pp. 119-127) and his defense of it as a praxeological law is an example of this procedure.

However, there are also important risks associated with this second procedure which Mises describes.  First, the realm of economics (catallactics) can only be distinguished from other realms of human action by the assumption or introduction of specific “economic” content.  What distinguishes market phenomena from the other phenomena of intentional consciousness is a specific or concrete set of contents.  The risk in considering an economic law a praxeological law is that the economic law may depend on the assumption of specific economic content and thus may not be clearly or plausibly applicable to forms of human action in which this economic content is absent.

Second, the fact that a given proposition seems logically valid does not necessarily mean the proposition is a valid praxeological proposition.  This depends on how we define praxeology.  A logical proposition that refers to a social situation (two people plus two people equals four people) is not necessarily a praxeological proposition.  Thus, if the propositions of praxeology are not built up step by step from the foundational elements of praxeology, but are instead taken from economic science as they lay, the risk is that the resulting logical arguments and propositions may be plausibly valid and yet not praxeological arguments and propositions.  In order to clearly distinguish a praxeological proposition from a logical proposition of another kind, we must first clearly distinguish praxeology from the other disciplines that advance logical propositions.  If we take economic propositions as they lay and validate their logic, we do not thereby learn whether the propositions in question are praxeological propositions.  Verifying the validity of an extant economic proposition does not necessarily render that proposition a praxeological one.  It is a mistake to simply assume that the valid propositions of economics are praxeological propositions.  Thus, this second path to praxeological knowledge has significant risks perhaps not specifically foreseen by Mises.



EP = Epistemological Problems of Economics, Mises, 1976
EPV = The Economic Point of View, Kirzner, 1976
ESA = Economic Science and the Austrian Method, Hoppe, 1995
FM = The Free Market and its Enemies, Mises, 2004
HA = Human Action, Mises, 1966
I = Investigations Into the Method of the Social Sciences, Menger, 1985
IEO = Individualism and Economic Order, Hayek, 1948
LR = An Essay on the Nature & Significance of Economic Science, Robbins, 1945
MBS = Minds, Brains and Science, Searle, 2003
MES = Man, Economy, and State, Rothbard, 1993
MM = Money, Method, and the Market Process, Mises, 1990
MOP = A Man of Principle, Essays in Honor of Hans F. Sennholz, 1992
POAE = “The Philosophical Origins of Austrian Economics,” Gordon, 1996
PP = Physics and Philosophy, Heisenberg, 1958
PSW = The Phenomenology of the Social World, Schutz, 1967
UF = The Ultimate Foundation of Economic Science, Mises, 2002

[i] Exact social science is identical to praxeology.

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