Transcript Human Action: Introduction

HUMAN ACTION:
INTRODUCTION
Praxeology and Polylogism
A HISTORY OF “PRAXEOLOGY”
• His original name for the method/science that he advocated was “sociology.”
• Sociology, keep in mind, was not a well-developed discipline prior to the 1930’s.
• During 1920’s – 1930’s “sociology” eventually came to represent a somewhat broad
coalition of social theorist, united by nothing more than their shared opposition to
capitalism (anthropology deals with pre-capitalist communities).
• It is worth pointing out that Max Weber, who is today regarded as the most influential of all
German social theorists, was himself a liberal and, as such, opposed to socialism.
• Even as late as 1933 Mises still referred to his own program as “sociology”, after
which he chose to appropriate the word “praxeology” as the new name for the procapitalism sociology that he was attempting to found in opposition to the anticapitalism sociology that was forming around him.
INTRODUCTION: MAIN ASSERTIONS
1. All human actions can be modeled in the same morally neutral terms as actions
within the market.
2. Economists must provide a timeless and universal foundation for their
science that is free from all historical contingencies and class interests.
3. Economic theory has been a cause rather than a product of the modern progress in
science and technology.
4. Sociology (praxeology) and economics (catallactics) share a common theoretical
foundation.
1. THE UNIVERSAL MARKET
• What is being claimed?
• All human actions can* be modeled in the morally-neutral, economic terms of the market.
• What is the relevance of the claim?
• Normative theories/vocabulary are no longer needed to describe any human actions!
• What is the support for the claim? Well, which claim?
A. The model is possible*: The book attempts to show this.
B. The model is rational*: But rationality varies with preferences that are NOT universal.
C. The model is obligatory*: He can only make this normative claim if he can show:
1. Obligation is nothing but one form (among others) of rationality, (Mises vs Weber)
2. It is rational in the obligatory sense. (see B and C1)
• What are the alternatives to the claim?
• Civic Republicanism, Critical Theory, Pragmatism
A MORALLY NEUTRAL VIEW OF MAN
“Bewildered, people had to face a new view of society. They learned with stupefaction
that there is another aspect from which human action might be viewed than that of good
and bad, of fair and unfair, of just and unjust.” (2)
• Can morality can be fully reduced to rationality?
• Max Weber held that there is “instrumental” rationality and “value” rationality.
• Mises insisted that the latter is just one form of the former.
• Mises is not saying that we never help or care about another person.
• He is saying, however, that we never help another person solely because “it is morally
right.” We will only help another person if it furthers our own ends – which may or
may not include that person’s well-being.
• This assumes that the degree to which we care about others is an independent variable!
(NON-)NEUTRALITY & (IM)MORALITY
• Civic Republican treatises were never meant to be morally-neutral information that
any individual reader could use as they saw fit. They were more like instruction
manuals as to which human actions should and would be praised/rewarded or
condemned/punished within a moral community.
• Significantly, this also included punishing those who were “neutral” toward
righteousness and evil, since this “neutrality” was itself an evil.
• Such treatises, then, were definitely normative but not necessarily utopian in nature.
• Question: Is value-neutrality itself a value and therefore not neutral?
• Mises’ treatise 1) condemns those treatises that condemn and 2) praises those treatises
that do not praise. Is this a contradiction?
• He presupposes enforcement while rejecting evaluation, but can they come apart?
THE MARKET AS EXCEPTION OR RULE?
“For more than a hundred years, however, the effects of this radical change in the
methods of reasoning were greatly restricted because people believed that they
referred only to a narrow segment of the total field of human action, namely, to market
phenomena.” (2)
• Production was not primarily aimed at market exchange until the 16th - 17th century.
Until then, there was no reason to assume that economic terms had wide-application.
• There were also moral reasons for this restricted scope:
• Understanding the difference between the “broad-minded noble” and the “narrow-minded
merchant” is essential to understanding this restricted scope.
• Traditionally, the “market” was outside of or at the edge of a moral community
(oikos/polis). It was at this non-moral edge that morally-neutral exchange took place.
• Merchants were a small and morally despised minority… Especially to the nobles and
clergy who were the spokesmen for “virtue” and history as we have received it.
POLITICS VS PROFIT: ARISTOTLE
• Within the “subsistence economy,” each person was expected to provide a different
good/service for the collective household. These goods were not negotiated and asking
“What’s in it for me?” was a form of moral corruption (even if people might have thought it).
• Production/distribution was regulated by moral/legal enforcement, not market exchange.
Exchange for profit took place outside of moral evaluation and was seen as narrowminded and vulgar. Exchange for profit preluded all merchants from citizenship in the Polis.
• Nobles were legally bound to their land (it was not private property) and were thus
subject to both a) legal protection from necessity, and b) a legal/moral obstacle to the
profit motive. Being the head of a self-sufficient household (that did not depend upon
market exchange) was a prerequisite for broad-minded virtue and hence citizenship.
• Within this mindset, socialists want to raise as many peasants as possible to the status of
broad-minded nobles (one, big Polis), while liberals want to free up as many peasants as
possible to be narrow-minded merchants (one, big market).
ACHIEVEMENT VS ASCRIPTION
• When loved ones rather than I decide what I get, there is admittedly very little
mobility, liberty, innovation or efficiency, but:
• The entire community knows exactly who is morally obliged to provide what to whom.
• Necessity is clearly defined in terms of the subsistence that a household and each of its
members is morally entitled to – as judged by the moral community.
• Luxury and Greed are defined as seeking more than one is morally entitled to – as judged
by the moral community – regardless of it is in your possession or somebody else’s.
• A Fair Trade, then, is an exchange that the moral community approves of. Because greed is
evil, the “equal value” of goods has nothing to do with how much each party wants the goods,
but more to do with how the community morally evaluates the transaction.
• Merchants exchange outside the evaluation of any such third party and are free to engage
in “unfair” trades based in “the profit motive” without any regard for moral entitlements.
• This “neutral” blindness to moral evaluations was clearly a threat to the moral order.
THE WORLD AS A UNIVERSAL MARKET
“Until the late nineteenth century political economy remained a science of … wealth and
selfishness. It dealt with human action only to the extent that it is actuated by … the profit
motive, and it asserted that there is in addition other human action whose treatment is the
task of other disciplines. The … modern subjectivist economics … converted the theory of
market prices into a general theory of human choice.” (2-3)
• Mises is claiming that broad-mindedness is actually nothing more than an indirect type of
narrow-mindedness since narrow-mindedness is universal in scope.
• This destroys the civic republican distinction between politics and profit.
• The Catholic Jansenists (17th cent.) reasoned that since Protestants could not possibly have
God’s grace, and grace was necessary for “true” charity, all of their seemingly charitable acts
were actually a convoluted and well-disguised type of self-interest.
• Question: Can Mises demonstrate that third-party, moral evaluations are nothing but a
type of private end-seeking without making the latter “truthful but vacuous”?
• E.g. the dormative principle or “the murderer did it”
2. UNIVERSAL VS HISTORICAL AXIOMS
• What is being claimed?
• Economists must provide a timeless and universal foundation for their science that is free
from all historical contingencies and class interests.
• What is the relevance of the claim?
• Marx claims that economic theory is an ideological expression of contingent economic
relations. A timeless, theoretical foundation would be immune to this accusation.
• What is the support for the claim?
• A theory deduced from axioms that a) equally describe all people and b) are equally
endorsed by all people must be neutral with regard to all class/national distinctions.
• What are the alternatives to the claim?
• By their tangible fruits – not their theoretical foundations – ye shall know them.
ECONOMIC RELATIONS & THEORY
“It is a complete misunderstanding of the meaning of the debates concerning the essence,
scope, and logical character of economics to dismiss them as the scholastic quibbling of
pedantic professors. It is a widespread misconception that … economics itself, indifferent to
these idle disputes, went quietly on its way.” (4)
• Mises claims that theoretical foundations (ideas) determine the research program.
Marxists, by contrast, take economic (material) relations to drive research programs.
• The “Science Wars” of the 1990’s were a larger replay of the Methodenstreit of the 1880’s. In the
1990’s, the natural sciences won by rejecting the need for theoretical foundations.
• Marx explains (other people’s) universal theories in terms of historical economic relations.
Mises explains historical economic relations in terms of a universal theory.
• Both seem to accept the universal rationality of drawing deductive inferences correctly, no
matter the costs or benefits of doing so.
• Is science and logic only as rational to the extent that it removes discomfort?
OTHER POSSIBLE “FOUNDATIONS”
Three “universal” foundations upon which to build the social sciences:
1) Empiricism & Elimination: Since values are non-empirical entities, we should stop
talking about them altogether. Study observable behavior only. (Positivism)
2) Criticism & Demystification: Asserting and defending a set of values is itself a form
of human action aimed at some end. Study and expose which ends are best served
by any observable behavior. (Critical theory)
3) Rationalism & Privatization: Since we cannot (dis)prove them, we must simply take
each individual’s values as metaphysically given and reason from there. Focus on
which behaviors would best serve those private ends. (Subjectivism)
The natural sciences typically do not care about or appeal to any of these. When
pressed, however, they usually endorse (1) since the others smack of Aristotelianism.
FOUNDATIONS & SUPERSTRUCTURE
“Marxism asserts that a man's thinking is determined by his class affiliation. Every
social class has a logic of its own. The product of thought cannot be anything else than
an ‘ideological disguise’ of the selfish class interests of the thinker.” (5)
• Marx: Economic relations historically determine which types of politics/theory are
rational and therefore stable - the former do not fully determine the latter. Different
foundations are better designed to support different theoretical/political structures.
• Two assumptions:
• 1) One-way causation: Changing the theoretical/political structure does not alter or erode
the economic base upon which it is built. (Weber took aim at this assumption by Marxists.)
• 2) Causal Sufficiency: Economic relations alone constrain the theoretical/political structure.
(Marxists only tacitly endorse this with their silence regarding any other constraints.)
• Question: Does Mises make the same assumptions about human nature and exchange?
LAWS OF NATURE OR LAWS OF MEN?
• Marx fully accepts that capitalism is beneficial (for some much more than others).
• His claim was that the classical theorists merely legitimized the independent spread of
capitalism as if it were a discovery of nature’s binding and exclusive laws for man, rather
than a historical innovation that might itself be improved upon.
• Sort of like a social Newton proving that there can be no social Einstein.
• The laws of economic exchange presuppose too many human institutions to be universal,
natural laws. (A power struggle entails exchange only if: 1) cheating is too risky, 2)
dependency on future relationship and/or 3) “neutral” protection by a third party).
• E.g. Explorers discover a pass through the mountains. Map maker’s label it “The Pass.” But it is
only “the pass” from a certain starting point, at a certain point in time (future passes might be
discovered) with certain technologies at hand (no roads, tunnels, airplanes, etc.).
• Mises wants to deductively derive economics from a timeless and universal axiom in order
to support the very timeless exclusivity of capitalism that Marx objects to.
ECONOMICS AND ITS FOUNDATIONS
“It is incumbent upon no branch of learning other than economics to examine all the
objections raised ... against the usefulness ... of economic theory for the elucidation of the
problems of human action… It is necessary to build the theory of cataIlactics upon the solid
foundation of a general theory of human action, praxeology.” (7)
• Question: Is Mises’ account universal or subjective?
• Darwin (maybe Aristotle): universality of objective ends.
• Marx: universality of relative ends.
• Mises: universality of subjective ends.
• Is a theory universal if believing or teaching it is only “rational” for some individuals?
• Or can Mises show that all subjective actions rationally lead to his universal theory?
• Might rationality lead us to drop the “categories of human action” for some other categories?
• Question: Why is indubitable theory a more solid foundation than tangible results?
• The failure of one path through the mountains says nothing about other untried paths.
3. THE ROLE OF ECONOMIC THEORY
• What is being claimed?
• Economic theory is responsible for the modern progress in science and technology.
• What is the relevance of the claim?
• Many think the experimental method caused modern progress. Marx and Mises are both
ambivalent about this. Marx says capitalism caused progress. Mises says theory.
• What is the support for the claim?
• An appeal to history(!): British economists and (especially) the French Physiocrats set the
pace for the industrial revolution, political liberation and social progress in general.
• What are the alternatives to the claim?
• The theorists merely rationalized and spread what the capitalists themselves had created.
ARISTOTLE VS BACON
“There are … some naturalists and physicists who censure economics for not being a natural science
and not applying the methods and procedures of the laboratory. It is one of the tasks of this treatise to
explode the fallacy of such ideas.” (7-8)
• Economics rejects the “scientific method” (experience is not an illustration but a test of human
reason) and thus cannot be built upon that experimental foundation.
• “Economics” was not new to Aristotle, but it meant economizing within an oikos or polis. As such, it was very
normative in nature. The last thing he would advocate was a “science of morally neutral exchange.”
• Aristotelian physics: All objects tend toward their own end – just like Mises says about human action.
Experimentalism, as advocated by Francis Bacon, was specifically designed to free us from that
view: observation must correct rather than merely illustrate what we claim to know “by definition”.
• Hobbes also rejected experimentalism when he claimed that human nature entailed absolutism.
• By rejecting experimentalism, economics thus threatens to become “backwards” unless Mises finds
some non-experimental foundation to distance it from the now abandoned Aristotelian physics.
CAPITALISM, METHOD OR REASON
“British political economy and French Physiocracy were the pacemakers of modern
capitalism. It is they that made possible the progress of the natural sciences that has heaped
benefits upon the masses.” (9)
• A bold claim: It was not the experimental method that was responsible for modern progress,
but capitalism and the classical economists.
• Question: Is this an appeal to experimental results and history?
• We must not conflate the capitalists themselves with the theorists of capitalism:
• Marx absolutely agrees that capitalist economics led to scientific and technological progress.
• He would not, however, agree that economic theory played a major role in this process.
• What, then, was more responsible for modern progress: 1) the experimental method
(ideal), 2) the capitalist economy (material) or 3) the economic theorists (ideal)?
• Mises and Marx are ambivalent about (1), strongly endorse (2) and disagree about (3).
CLASSICAL THEORY: PRODUCT OR FACTOR?
“Deluded by Marxian myths, they consider modern industrialism an outcome of the
operation of mysterious ‘productive forces’ that do not depend in any way on ideological
factors. Classical economics, they believe, was not a factor in the rise of capitalism, but rather
its product, its ‘ideological superstructure,’ i.e., a doctrine designed to defend the unfair
claims of the capitalist exploiters.” (9)
• The French tend to want reason to lead experience, while the British tend to want reason to
follow experience (Bacon, Hume, Burke), but this is the experimentalism he wants to avoid.
• Did the classical theorists rationalize capitalism in universal terms so that people would
go along with it, or did they discover natural laws for nations and individuals to follow?
• Probably both, but we must not exaggerate this. Dutch and (to a lesser extent) British
capitalism preceded the classical theorists by 100 years or so.
• This does not mean that Marx was right and that the theorists were nothing more than
ideological legitimation. They absolutely were, however, a product of capitalism in some sense.
CAPITALISM & THEORY TIMELINE
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1581 Dutch independence from Spain – Beginning of the Dutch Golden Age
1602 Dutch East India Company becomes the 1st publicly traded company
1620 Francis Bacon’s Novum Organum defends the experimental method against Aristotle
1637 "Tulip Mania" causes the world's first speculation bubble
1651 Hobbes’ Leviathan rejects experimentalism, claims universal human action entails absolutism
1669 The Dutch EIC becomes the richest private company in world history
1687 Newton’s Principia Mathematica is published in the tradition of Bacon
1689 John Locke’s A Letter Concerning Toleration and Two Treatises of Government are published.
Written in Amsterdam, they combine Newtonian science with a rationalization of the Dutch economy
1694 Founding of the Bank of England
1700 Per Capita GNP in the Netherlands is 150% that of England
1705 Bernard Mandeville’s The Fable of The Bees: or, Private Vices, Public Benefits is published
1715 Treaty of Utrecht - British mercantile power eclipses the Dutch
1733 Invention of the flying shuttle; Voltaire’s Letters on England published
1750 The Industrial Revolution is underway
1751 1st volume of the French Encyclopedie is published
1758 The French Physiocrat François Quesnay’s Tableau économique is published
1766 The French Physiocrat Anne-Robert-Jacques Turgot’s Réflexions is published
1776 Adam Smith’s Wealth of Nations
DIFFERENT SCIENCE, SAME RULES?
“It is true that economics is a theoretical science and as such abstains from any judgment of value. It is not
its task to tell people what ends they should aim at. It is a science of the means to be applied for the
attainment of ends chosen, not, to be sure, a science of the choosing of ends. Ultimate decisions, the
valuations and the choosing of ends, are beyond the scope of any science.” (10)
• Placing “ends” beyond the scope of any science is pretty extreme. Doing so leaves the social
distribution of chosen ends as a black box for individualistic psychology.
• Several sociological (non-psychological) explanations for such distributions (Marx, Bourdieu) by treating
chosen ends as dependent variables. Mises cannot simply declare these wrong or unscientific by definition!
• Natural science as we know it abstains from judgements of value. This rule was institutionalized by
the Baconians that formed the Royal Society and was a precondition for their royal charter and their
freedom from political interference. The French Encyclopedie, by contrast, was explicitly political
and value-oriented in nature.
• Economic science is not Baconian thus needs an independent argument for its value-neutrality.
4. WHOSE GAME? WHOSE RULES?
• What is being claimed?
• Economics can no longer be treated as an autonomous subset of all social interactions.
• What is the relevance of the claim?
• By defining economics as one among many types of social interactions, the sociologists
had positioned themselves as the “foundation” for economics.
• What is the support for the claim?
• The existence and relevance of the Methodenstreit: the two disciplines were already
competing with each other, but according to the rules of social theory.
• What are the alternatives to the claim?
• Side with the sociologists, provide practical results, pluralism a la Feyerabend, .
4. ECONOMICS, SOCIOLOGY OR RESULTS?
“At the present stage, both of economic thinking and of political discussions concerning the
fundamental issues of social organization, it is no longer feasible to isolate the treatment of
catallactic problems proper. These problems are only a segment of a general science of
human action and must be dealt with as such.” (10)
• Does he explain human action in terms of markets or the other way around?
• Social theorists reduce economics to sociological categories. Mises reduces sociology to
economic categories. Should theory or subjective results decide between the two?
• Many natural scientists see isolation as a sign of progress and an exaggerated focus on
theoretical foundations as a sign that tangible results are lacking.
• Is a solid theoretic foundation a substitute or a source of tangible results?
1) If it is a source, we must wonder if “tangible results” is just another name for the very
experimentalism that Mises wants to reject?
2) If it is a substitute, then we must wonder how economic theorists can “tangibly” contribute
anything more than ideology to modern progress?