Week 5 of the Mises Institute’s Home Study Course in Austrian Economics includes one audio lecture, four book chapters, and two long essays all dealing with the methodological foundations of Austrian economics.

  1. The Austrian Method: Praxeology” by Hans-Hermann Hoppe: This lecture from the 2001 Mises University is a condensed version of the two essays assigned for this week, which I summarize below.
  2. “What’s Going On? The Nature of Economics” (Ch. 1 of Gene Callahan, Economics for Real People): Callahan begins by noting that much confusion exists over the precise definition and nature of the study of economics. The field developed as an attempt to explain certain regularities in human interactions in society, what Hayek and others dub “spontaneous order.” Adam Smith popularized this notion with his “invisible hand.” In the 19th century a series of attacks against the field came from different quarters: intellectuals who resisted the addition of a new scholarly discipline with a new methodology to existing categories of knowledge, and would-be social reformers frustrated by economists who told them their proposed reforms would not work. In the late 19th century the Austrian school reconstructed the foundations of economics on a theory of human action. Callahan writes that a study of economics is beneficial because it gives us a “deeper understanding of our own situation as acting humans.” He concludes with a brief argument for praxeology as opposed to empiricism by using a brilliant example of a real estate closing on a piece of raw land (too detailed to go into here).
  3. “The Method of Economics” (Ch. 1 of David Gordon, An Introduction to Economic Reasoning): Here we have a crash course on deductive logic. Gordon discusses Aristotle’s three fundamental laws of logic and outlines what makes an argument valid or invalid. We also get a taste of hypothetical syllogisms and immediate inferences.
  4. “Action and Preference, Part 1″ (Ch. 2 of Gordon): This book is intended for high school students, and Gordon uses a more conversational tone in an attempt not to intimidate readers. For example, he defines action here as “anything you do on purpose.” The reality of action is a “commonsense truth” that can’t seriously be doubted. This chapter includes brief but effective arguments against hedonism and utilitarianism.
  5. “Action and Preference, Part 2″ (Ch. 3 of Gordon): This chapter begins by considering the argument that Austrians are simply presenting a tautology when they say that people always choose their most highly valued ends. Gordon denies this claim, stating that Austrians in fact are telling us something very important about action with this insight. However, he goes on, if the Austrians’ reasoning is in fact tautological, it doesn’t matter because it still brings us to a fuller understanding of choice. Gordon then moves on to marginal utility, first presenting the idea and then defending it against the “indifference” objection. The chapter concludes with an explanation of the difference between voluntary exchanges (which are mutually beneficial) and coercive exchanges (which are zero-sum or negative-sum).
  6. “Praxeology and Economic Science” (in Hans-Hermann Hoppe, Economic Science and the Austrian Method): This essay was first published in 1987. It summarizes several objections against the deductive methodology of the Austrian school, notes that until the 20th century the deductive approach was the mainstream one, and then defends praxeology against its empiricist detractors in the current mainstream. Hoppe focuses on Karl Popper’s insistence that a scientific statement must be falsifiable and notes that Popper’s claim itself, if falsifiable, is just one more hypothesis and not an epistemology. On the other hand, if it is not falsifiable, then it does not qualify as a scientific statement.
  7. “On Praxeology and the Praxeological Foundation of Epistemology” (in Hans-Hermann Hoppe, Economic Science and the Austrian Method): In this essay Hoppe discusses both empiricism and historicism and, following Mises, argues that they are self-contradictory. Historicists claim that no time-invariant causal relationships exist in historical or economic events. If this is true, no one can ever say anything about history of economics that has a constant truth value. Hoppe then goes on to an original argument that assumes a priori that humans can argue (denial of this claim proves its truth). Hoppe claims that because argumentation implies both action and knowledge in the actors, knowledge is a category of action; thus praxeology provides the foundation of epistemology. This is a pretty involved argument that I will need to revisit at some point; I ‘m not sure I grasped all of Hoppe’s points.

This is the first new post in this series on the Mises Institute’s home study course in some time. Hopefully I’ll be able to step up the pace now that my summer projects are completed.

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About Dr. J

I am an Associate Professor and head of the Department of Humanities at Faulkner University. I am also Associate Editor of the Journal of Faith and the Academy.
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5 Responses to Praxeology

  1. John Ward says:

    WOW Dr. J. As an academic you are treading on dangerous ground. The Academic majority Keynsians and Econometricians don’t even consider the epistemological foundations of their thought. They just assume it is like physics. Mises pointed out, successfully in my opinion, that economics is not physics. It is about Human Action with all of the foibles, neurotic tendencies, and follow the crowd mentality. By starting with Human Action and the nature of man you have a better chance at reaching some valid conclusions. Thanks for bringing up Praxeology. The vast majority of us have never heard the word.

    • Dr. J says:

      John, in the humanities empiricism is not the danger so much as historicism (except in the field of history, which people keep trying to frame as a “social science”). As Hoppe states, historicism has made a comeback via literature and is now all over the arts.

  2. bcolebennett says:

    Keynesians really need to understand history, especially the reaction Keynes’ contemporaries had to him. They realized he was appealing to emotion (“the multiplier effect will feed people and give hurting people relief”) but did NOT work philosophically nor mathematically. History since Keynes has borne this out.

  3. John Ward says:

    Dr. J:

    Thanks for the comment regarding Historicism. After reading a little about it, I see your point. While much of the material that I saw includes Hegel, Marx, Dewey, and others, I saw no mention of Immanuael Kant. In my limited perspective Kant laid the ground work by successfully attacking the foundation of mans ability to reason (the legitimacy) and the idea that an absolute truth exists. Epistemology, the quest for a basis of truth/knowledge/method, seems to be a major battle ground not just in Philosophy, but in all disciplines. Thanks for keeping the conversation going.

    • Dr. J says:

      John, I know that Ayn Rand and some others dislike Kant. Hoppe actually has a favorable view of him and classifies Mises as a Kantian (with one or two caveats). I’m sure you’d find Hoppe’s essays in “Economic Science and the Austrian Method” interesting.

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