The Online Library of Liberty

A project of Liberty Fund, Inc.

• Foreword
• Introduction to the Second Edition
• Author’s Preface
• Acknowledgments
• 1: On Defining the Economic Point of View
• The Economic Point of View and the Scope of Economics
• The Multitude of Economic Points of View
• The Controversy Over the Utility of Definition
• An Interpretation of the Controversy
• The Economists and Their Definitions: the Classical Economists
• The Economic Point of View: the Background of the “methodenstreit”
• Twentieth–century Economic Points of View
• 2: The Science of Wealth and Welfare
• The Emergence of Political Economy As the Science of Wealth
• The Science of Material Wealth
• The Science of Subsistence
• The Science of Wealth Retained
• Man Against Nature
• From Wealth to Welfare
• The Science of the Lower Side of Human Nature
• 3: The Science of Avarice; Getting the Most For the Least
• The Science of Avarice
• The Economic Principle
• The “economic Impulse”
• Selfishness and “non-tuism”
• Economics and Mechanics
• 4: Economics, the Market, and Society
• Economics and Catallactics
• Exchange and the Propensity to Truck
• Exchange and the Division of Labor
• The “purely Formal” Concept of Exchange
• Exchange and the Economic System
• Economics, the Economy, and the “volkswirtschaft”
• Economy and Society
• 5: Economic Affairs, Money, and Measurement
• Money, Wealth, and Exchanges
• Money As the Measuring Rod
• Money As a Universal Measuring Rod
• Measurement and Economics
• Money and Price-economics
• Money As an Economic Institution
• 6: Economics and Economizing
• The Economics of Professor Robbins
• Scarcity and Economics
• Economizing and Maximization
• The Character of Robbins' Definition
• A. the “breadth” of Robbins' Definition
• B. the “formalism” of Robbins' Definition
• The Nature of Ends and Means
• “given” Ends and Means
• Single End and Multiple Ends
• Economics and Ethics: the Positive and the Normative
• The Nature of Economic Science and the Significance of Macroeconomics
• 7: Economics As a Science of Human Action
• I
• The Sciences of Human Action
• The Emergence of the Praxeological View of Economics
• Max Weber and Human Action
• Acting Man and Economizing Man: Mises and Robbins
• Ii
• Praxeology and Purpose
• Praxeology and Rationality
• The Assumption of Constant Wants—the Praxeological Context
• Praxeology, Apriorism, and Operationalism
• The Economic Point of View and Praxeology

Praxeology, Apriorism, and Operationalism

The considerations set forth in the previous section are sufficient to make clear what writers have had in mind when they have characterized economics as an a priori science. This description of economic knowledge has been repeatedly misunderstood; it has been repeatedly taken out of context and held up for ridicule.32 But the matter is essentially logical and clear.

Professor Mises in particular has stressed the a priori nature of praxeological knowledge. A theorem of a praxeological science provides information that has been derived by sheer reasoning; it is the product of pure logic without the assistance of any empirical observation. As such, a praxeological theorem is congeneric with a theorem of geometry; being the rigorously derived consequences of given assumptions, it partakes of the “apodictic certainty” that is necessarily possessed by such an exercise in logic.

Disagreement with this approach has been vigorously expressed by a number of writers. Dissatisfaction has arisen from several points of view. On the one hand, it is pointed out that an a priori theorem, being derived by sheer logic from given axioms, is necessarily circular, in that it merely tells us in a different way what we already know by our knowledge of the axioms themselves. All the information provided by economic reasoning is thus merely extended circumlocution. So long as economics was not acknowledged as a praxeological science, it is argued, this objection could not be raised. So long as it had been necessary to introduce specific postulates about the way in which people actually behave, an economic theorem did tell something new. If, for example, it was postulated that men behave “rationally” and rationality was defined so as to possess definite empirical content, such as a pattern of behavior that maximized money profits, and the like, then the consequences of this assumption do provide new information. Deduction from the specific assumption made has yielded a theory, against which the assumption could, in fact, be tested for its faithfulness to the facts. But with the emergence of the view of economic knowledge that saw it as completely independent of particular empirical assumptions, the situation became completely altered. A theorem describing the consequences of human behavior that does not take into account the concrete content of that behavior must remain, it has been repeatedly asserted, simply a different way of saying that people behave as they behave.33

Closely connected with this criticism of economics a priori are the objections raised against its supposed misuse of a method of doubtful respectability, viz., introspection. Implicit in much of the unfavorable discussion of apriorism in economics is the current belief that only “operationally meaningful” propositions ought to find a place in science.34 A theorem which makes no direct reference to observable facts, and which therefore cannot be “tested” against observable facts, is one the interpersonal validity of which must remain in doubt and to which “scientific” status is to be denied.

Now, these are issues that concern basic epistemological problems far wider than the range of this book. Closely though they relate to the praxeological view of the nature of the economic aspect of affairs, they themselves are concerned with inquiries into the nature of science and knowledge that would carry us far away from our own subject. Professor Robbins has gone so far as to relegate completely to philosophy all such discussions concerning the a priori character of economics.35 Mises, Knight, and Hayek have most vigorously justified the kind of introspection that is necessary for the conception of economic knowledge as “scientific” without being empirically “testable.”36 We are not so much concerned here with the scientific validity that may be attributed to a priori economics as with the clarification of the precise sense in which the praxeological conception of the economic point of view does, in fact, imply a strictly a priori position.

The concept of human action is sufficient, in the praxeological view, for the deduction of complex chains of reasoning concerning the choices men will make, the alternatives from which they will be forced to choose, and the like. Human action relates to real entities, goods, or services; it develops against the background of objectively measurable price relationships. Economic science seeks to provide an explanation of these real phenomena; it seeks to explain the consequences of given changes in data, to relate market phenomena to the underlying human motives. Praxeology envisages the successful attainment of these goals through the scrutiny of human affairs from a specific point of view that recognizes the teleological and rational nature of human action. This point of view makes possible the construction of chains of reasoning that are purely formal, in the sense that they refer to goods, services or factors of production only abstractly; they depend for their validity not on the specific objects with which human action may be concretely concerned, but only on postulated attitudes of men towards them. The propositions that can be deduced in this manner may thus, of course, include the analysis of situations that may be quite unreal. And in order to be of service in the understanding of reality, praxeology must direct its attention exclusively to the analysis of situations that correspond to the actualities of the external world. It would be possible, for example, to examine the consequences of a world in which labor was preferred over leisure. Economics could certainly deduce theorems concerning prices, incomes, and production in such a world. But this would be intellectual gymnastics of a fruitless kind.37

To maintain contact with situations that do in fact require explanation, economics must thus resort to experience for guidance. It must take the facts as they are and apply to them the a priori logic of human action. “It adopts for the organized presentation of its results a form in which aprioristic theory and the interpretation of historical phenomena are intertwined.”38 It is clear that the exposition of economics as an a priori science has never implied that it can dispense with references to factual observation in the final statement of its results. Particular economic propositions will concern human attitudes and conventions that do conform to those of the real world. The sense in which it is maintained that economics is an a priori branch of knowledge is a much narrower one. It concerns the contribution that the recognition of the concept of human action makes to the explanation of social phenomena.

The observation of facts provides useful knowledge. This is the procedure of history. But observation does not exhaust the knowledge and understanding that we can attain concerning these affairs. The economic point of view injects an immediate sense of order into these affairs, an order that brings with it a large measure of explanation. This explanation is achieved by subjecting the observed data to a specific scientific procedure, praxeological reasoning. This procedure is in itself quite independent of the facts to which it is applied. It could be applied to conditions that are nonexistent. It is itself the contribution of human logic and reasoning alone. In this sense the theorems of economics, closely though they refer to concrete reality, are to be described as a priori. They are derived purely from the knowledge that the human mind possesses of the category of action.39

The separation that is thus emphasized, between the facts and their logical analysis through economic reasoning, is a fruitful one. It stresses the quite distinct operations that are being performed in the observation of economic history and in the development of economic theorems. It focuses attention on the new source of knowledge that is provided by our understanding the nature of action. It illuminates the striking fact that pure reason can convey knowledge concerning brute facts of the real world. Because men act as reasoning beings, it is possible to explain their concrete patterns of behavior by applying to their attitude the theorems that our own reason has supplied.

All this does not prevent the praxeologist from maintaining a becoming modesty with regard to his own contribution. He does not in any way believe that his theorems can exhaust all that can be known about social phenomena; he does insist on the unique assistance he can provide. He does not deplore close attention to market data, to masses of statistics, and the like; but he does deprecate the view that this kind of scrutiny can be a substitute for economic reasoning or that it needs to be resorted to as a “test” for the correctness of such reasoning. His recognition of the category of human action does impress upon him most forcefully the utter helplessness with which the masses of facts must be faced without the illumination provided by a procedure of analysis that itself owes nothing to these facts—the application of economic reasoning.

[[32]]For passages in which the a priori view has been compared to scholasticism, see R. F. Harrod, The Trade Cycle, pp. 38–39; E. C. Harwood, Reconstruction of Economics, p. 39.

[[33]]See, e.g., T. W. Hutchison, Significance and Basic Postulates of Economic Theory, p. 116; P. A. Samuelson, Foundations of Economic Analysis (Cambridge, 1948), p. 91.

[[34]]On this see the references in the previous note; see also A. G. Papandreou, Economics as a Science (1958). For a criticism of this position, see F. Machlup, “The Inferiority Complex of the Social Sciences” in On Freedom and Free Enterprise, Essays in Honor of Ludwig von Mises, ed. M. Sennholz (1956).

[[35]]L. Robbins, “Live and Dead Issues in the Methodology of Economics,” Economica, August, 1938, p. 348.

[[36]]See, e.g., L. Mises, Theory and History, pp. 283 ff.; F. H. Knight, “‘What Is Truth’ in Economics?” On the History and Method of Economics, p. 160; F. A. Hayek, Counter-Revolution of Science, Part I, ch. III; cf. also P. A. Sorokin, Socio-cultural Causality, Space, Time (Durham, 1943), ch. I. See also F. S. C. Northrop, Logic of the Sciences and the Humanities, p. 247, for the recognition of the “empirical verification” of economic theory in the confirmation of its logical derivation from the immediately confirmed postulates. On this see also M. Rothbard, “Mises' ‘Human Action’: Comment,” American Economic Review, March, 1951, p. 181; M. Rothbard, “Towards a Reconstruction of Utility and Welfare Economics” in On Freedom and Free Enterprise, Essays in Honor of Ludwig von Mises, ed. M. Sennholz (1956), pp. 225–228.

[[37]]L. Mises, Human Action (Yale, 1949), p. 65; cf. M. Pantaleoni, Pure Economics (English ed.; London, 1898), p. 8.

[[38]]L. Mises, Human Action, p. 66. See also F. A. Hayek, “Economics and Knowledge,” Economica, 1937; reprinted in Individualism and Economic Order (1948), pp. 47–48.

[[39]]See especially the remarks on Mises' “apriorism” by H. Bernadelli in his “What Has Philosophy to Contribute to the Social Sciences, and to Economics in Particular?” Economica, November, 1936, p. 449. For an analysis of propositions concerning land rent which displays the a priori nature of the pure economic theory involved as well as its relation to the empirical finding that makes the theory applicable to specific situations, see Hayek, Counter-Revolution of Science, p. 32.