Human Action: Introduction - PowerPoint Presentation

Slide1

Human Action: Introduction

Praxeology and

PolylogismSlide2

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 pro- capitalism sociology

that he was attempting to found in opposition to the anti-capitalism sociology that was forming around him.Slide3

Introduction: Main Assertions

All human actions can be modeled in the same morally neutral terms as actions within the market.

Economists must provide a timeless and universal foundation for their science that is free from all historical contingencies and class interests.

Economic theory has been a cause rather than a product of the modern progress in science and technology.

Sociology (praxeology) and economics (catallactics) share a common theoretical foundation.Slide4

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?

The model is

possible*

: The book attempts to show this.

The model is

rational*

: But rationality varies with preferences that are NOT universal.

The model is

obligatory*

: He can only make this normative claim if he can show:

Obligation is nothing but one form (among others) of rationality,

(Mises vs Weber)

It is rational in the obligatory sense. (see B and C1)

What are the alternatives to the claim?

Civic Republicanism, Critical Theory, PragmatismSlide5

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!Slide6

(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?Slide7

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 16

th

- 17

th

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.Slide8

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

narrow-minded

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).Slide9

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.Slide10

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 (17

th

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”Slide11

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. Slide12

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? Slide13

Other possible “Foundations”

Three “universal” foundations upon which to build the social sciences:

Empiricism & Elimination: Since values are non-empirical entities, we should stop talking about them altogether.

Study observable behavior only

. (Positivism)

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)

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.Slide14

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?Slide15

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. Slide16

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.Slide17

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. Slide18

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.Slide19

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).Slide20

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.Slide21

Capitalism & Theory Timeline

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 NationsSlide22

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.Slide23

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

, .Slide24

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?

If it is a source, we must wonder if “tangible results” is just another name for the very experimentalism that Mises wants to reject?

If it is a substitute, then we must wonder how economic theorists can “tangibly” contribute anything more than ideology to modern progress?