Truth and Human Action

"He chose...poorly."
--Grail Knight (Indiana Jones and the Last Crusade)

Right on cue after yesterday's post, Rothbard discusses the methodology employed to develop the theory in Human Action.

Mises (and other Austrian economists) believed that valid economic theory is not likely to be derived from the empirical, hypothesize-and-test methods common to physical sciences. Economics is a social science with myriad variables in motion at any point. To the Austrians, it seems improbable that empirical methods can generate broadly generalizable contributions to economic science.

Instead, Mises and other Austrian economists prefer methods of praxeology. Praxeology involves applying fundamental axioms of human behavior to phenomena of interest in order to draw generalizable conclusions. Many academics have contested praxeological methods because, well, they don't fit the current paradigm of what constitutes 'science' (insert wink from Thomas Kuhn right here). Plus, as Rothbard notes, by employing praxeology a well-reasoned thinker can come to sound, generalizable conclusions about economics in relatively short order--something that would put legions of economists pursuing tiny empirical research projects out of work.

The basic approach to praxeology is to start with self-evident, uncontestable axioms about nature and human behavior and build generalizable conclusions from there using well-reasoned thought processes. This is akin to getting closer to the truth by building on what we already know to be true (and false).

Rothbard suggests that the fundamental axiom of praxeology is the existence of human action itself. It essentially boils down to this: People act toward some ends. And people employ some means to achieve those ends. This is indeed a self-evident axiom; it would be intellectually dishonest to generalize otherwise. From this fundamental truth, Rothbard argues that 'almost the entire fabric of economic theory' can be generated.

Some have contested that praxeology implies 'rationality' of action--a trait that is not necessarily evident in much human action. Rothbard observes, however, that rationality is not an underlying condition of praxeology. Nothing is assumed about the wisdom of man's ends, or about the correctness of his means. It is only postulated that men act toward some ends, and that they employ some means to try to attain those ends.

It has also been said that Mises' theory attempts to generate political conclusions from economic science. Any reader of Mises knows this is not true. Perhaps more so than any other economist, Mises was careful to separate political beliefs from economic realities. The former is based on judgment systems upon which firm conclusions can never be obtained. The latter, on the other hand, is grounded in natural laws that have predictable consequences.

For example, the content of these pages often implies that capitalism is a 'superior' economic system to socialism because standard of living w.r.t. resource abundance is certain to be higher under capitalism. That capitalism will generate more economic abundance is a predictable outcome grounded in natural law. However, calling capitalism 'superior' to socialism is really a subjective statement of values. It presupposes that people value abundance over poverty. In fact, it is possible that proponents of socialism may prefer the opposite. For example, they might prefer poverty if it can be evenly spread across the populace.

Praxeology, the study of human action, provides machinery for helping us understand the economic consequences of various political actions. Once these consequences are known, individuals can apply their own value judgments.