Praxeology and Economic Science

It is well-known that Austrians disagree strongly with other schools of economic thought, such as the Keynesians, the Monetarists, the Public Choicers, Historicists, Institutionalists, and Marxists.¹ Disagreement is most conspicuous, of course, when it comes to economic policy and economic policy proposals. At times there also exists an alliance between Austrians and, in particular, Chicagoites and Public Choicers. Ludwig von Mises, Murray N. Rothbard, Milton Friedman, and James Buchanan, to cite a few names, are often united in their efforts to defend the free market economy against its "liberal" and socialist detractors.

Nonetheless, as important as such occasional agreements may be for tactical or strategic reasons, they can only be superficial, for they cover up some truly fundamental differences between the Austrian school, as represented by Mises and Rothbard, and all the rest. The ultimate difference from which all disagreements at the levels of economic theory and economic policy stem—disagreements, for instance, as regards the merit of the gold standard vs. fiat money, free-banking vs. central banking, the welfare implications of markets vs. state-action, capitalism vs. socialism, the theory of interest and the business cycle, etc.—concerns the answer to the very first question that any economist must raise: What is the subject matter of economics, and what kind of propositions are economic theorems?

Mises’s answer is that economics is the science of human action. In itself, this may not sound very controversial. But then Mises says of the science of economics:

Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification and falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts. They are a necessary requirement of any intellectual grasp of historical events.²

In order to emphasize the status of economics as a pure science, a science that has more in common with a discipline like applied logic than, for instance, with the empirical natural sciences, Mises proposes the term “praxeology” (the logic of action) for the branch of knowledge exemplified by economics.³

It is this assessment of economics as an a priori science, a science whose propositions can be given a rigorous logical justification, which distinguishes Austrians, or more precisely Misesians, from all other current economic schools. All the others conceive of economics as an empirical science, as a science like physics, which develops hypotheses that require continual empirical testing. And they all regard as dogmatic and unscientific Mises’s view that economic theorems—like the law of marginal utility, or the law of returns, or the time-preference theory of interest and the Austrian business cycle theory—can be given definite proof, such that it can be shown to be plainly contradictory to deny their validity.

The view of Mark Blaug, highly representative of mainstream methodological thought, illustrates this almost universal opposition to Austrianism. Blaug says of Mises, “His writings on the foundations of economic science are so cranky and idiosyncratic that one can only wonder that they have been taken seriously by anyone.”⁴

Blaug does not provide one argument to substantiate his outrage. His chapter on Austrianism simply ends with that statement. Could it be that Blaug’s and others’ rejection of Mises’s apriorism may have more to do with the fact that the demanding standards of argumentative rigor, which an apriorist methodology implies, prove too much for them?⁵

What led Mises to his characterization of economics as an a priori science? From the present day perspective it might be surprising to hear that Mises did not see his conception as out of line with the mainstream view prevailing in the early twentieth century. Mises did not wish to prescribe what economists should be doing as opposed to what they actually were doing. Rather, he saw his achievement as a philosopher of economics in systematizing, and in making explicit what economics really was, and how it had implicitly been conceived by almost everyone calling himself an economist.

And this is indeed the case. In giving a systematic explanation of what was formerly only implicit and unspoken knowledge, Mises did introduce some conceptual and terminological distinctions that had previously been unclear and unfamiliar, at least to the English-speaking world. But his position on the status of economics was essentially in full agreement with the then-orthodox view on the matter. They did not employ the term “a priori,” but such mainstream economists as Jean Baptiste Say, Nassau Senior, and John E. Cairnes, for instance, described economics quite similarly.

Say writes: “A treatise on political economy will . . . be confined to the enunciation of a few general principles, not requiring even the support of proofs or illustrations; because these will be but the expression of what every one will know, arranged in a form convenient for comprehending them, as well as in their whole scope as in their relation to each other.” And “political economy . . . whenever the principles which constitute its basis are the rigorous deductions of undeniable general facts, rests upon an immovable foundation.“⁶

According to Nassau Senior, economic “premises consist of a few general propositions, the result of observations, or consciousness, and scarcely requiring proof, or even formal statement, which almost every man, as soon as he hears them, admits as familiar to his thoughts, or at least as included in his previous knowledge; and his inferences are nearly as general, and, if he has reasoned correctly, as certain as his premises.” And economists should be “aware that the Science depends more on reasoning than on observation, and that its principal difficulty consists not in the ascertainment of its facts, but in the use of its terms.”⁷

And John E. Cairnes remarks that while “mankind has no direct knowledge of ultimate physical principles” . . . “the economist starts with a knowledge of ultimate causes.” . . . “The economist may thus be considered at the outset of his researches as already in possession of those ultimate principles governing the phenomena which form the subject of his study, the discovery of which in the case of physical investigation constitutes for the inquirer his most arduous task.” “Conjecture [in economics] would manifestly be out of place, inasmuch as we possess in our consciousness and in the testimony of our senses . . . direct and easy proof of that which we desire to know. In Political Economy, accordingly, hypothesis is never used as a help toward the discovery of ultimate causes and laws.”⁸

The views of Mises’s predecessors, Menger, Böhm-Bawerk, and Wieser, are the same: They, too, describe economics as a discipline whose propositions can—in contrast to those of the natural sciences—be given some ultimate justification. Again, however, they do so without using the terminology employed by Mises.⁹

And finally, Mises’s epistemological characterization of economics was also considered quite orthodox—and certainly not idiosyncratic, as Blaug would have it—after having been explicitly formulated by Mises. Lionel Robbins’s book The Nature and Significance of Economic Science, which first appeared in 1932, is nothing but a somewhat watered-down version of Mises’s description of economics as praxeology. Yet it was respected by the economics profession as the guiding methodological star for almost twenty years.

In fact, Robbins, in his Preface, explicitly singles out Mises as the most important source of his own methodological position. And Mises and Richard von Strigl—whose position is essentially indistinguishable from Mises’s¹⁰—are cited approvingly in the text more often than anyone else.¹¹

Yet, illuminating as all this may be for an assessment of the present-day situation, it is only history. What then is the rationale of the classical economists for regarding their science as different than the natural sciences? And what is behind Mises’s explicit reconstruction of this difference as one between an a priori science and an aposteriori science? It was the recognition that the process of validation—the process of discovering whether some proposition is true or not—is different in one field of inquiry than in the other.

Let us first look briefly at the natural sciences. How do we know what the consequences will be if we subject some nature-given material to specified tests, let’s say, if we mix it with another kind of material? Obviously we do not know before we actually try it and observe what happens. We can make a prediction, of course, but our prediction is only a hypothetical one, and observations are required to find out if we are right or wrong.

Moreover, even if we have observed some definite outcome, let’s say that mixing the two materials leads to an explosion, can we then be sure that such an outcome will invariably occur whenever we mix such materials? Again, the answer is no. Our predictions will still, and permanently, be hypothetical. It is possible that an explosion will only result if certain other conditions—A, B, and C—are fulfilled. We can only find out whether or not this is the case and what these other conditions are by engaging in a never-ending trial and error process. This enables us to improve our knowledge progressively about the range of application for our original hypothetical prediction.

Now let us turn to some typical economic propositions. Consider the validation process of a proposition such as the following: Whenever two people A and B engage in a voluntary exchange, they must both expect to profit from it. And they must have reverse preference orders for the goods and services exchanged so that A values what he receives from B more highly than what he gives to him, and B must evaluate the same things the other way around.

Or consider this: Whenever an exchange is not voluntary but coerced, one party profits at the expense of the other.

Or the law of marginal utility: Whenever the supply of a good increases by one additional unit, provided each unit is regarded as of equal serviceability by a person, the value attached to this unit must decrease. For this additional unit can only be employed as a means for the attainment of a goal that is considered less valuable than the least valued goal satisfied by a unit of such good if the supply were one unit shorter.

Or take the Ricardian law of association: Of two producers, if A is more productive in the production of two types of goods than is B, they can still engage in a mutually beneficial division of labor. This is because overall physical productivity is higher if A specializes in producing one good which he can produce most efficiently, rather than both A and B producing both goods separately and autonomously.

Or as another example: Whenever minimum wage laws are enforced that require wages to be higher than existing market wages, involuntary unemployment will result.

Or as a final example: Whenever the quantity of money is increased while the demand for money to be held as cash reserve on hand is unchanged, the purchasing power of money will fall.

Considering such propositions, is the validation process involved in establishing them as true or false of the same type as that involved in establishing a proposition in the natural sciences? Are these propositions hypothetical in the same sense as a proposition regarding the effects of mixing two types of natural materials? Do we have to test these economic propositions continuously against observations? And does it require a never-ending trial and error process in order to find out the range of application for these propositions and to gradually improve our knowledge, such as we have seen to be the case in the natural sciences?

It seems quite evident—except to most economists for the last forty years—that the answer to these questions is a clear and unambiguous No. That A and B must expect to profit and have reverse preference orders follows from our understanding of what an exchange is. And the same is the case concerning the consequences of a coerced exchange. It is inconceivable that things could ever be different: It was so a million years ago and it will be so a million years hence. And the range of application for these propositions too is clear once and for all: They are true whenever something is a voluntary exchange or a coerced exchange, and that is all there is to it.

There is no difference with respect to the other examples given. That the marginal utility of additional units of supply of homogeneous goods must fall follows from the incontestable statement that every acting person always prefers what satisfies him more over what satisfies him less. It is simply absurd to think that continuous testing would be required to establish such a proposition.

The Ricardian law of association, along with a once-and-for-all delineation of its range of application, also logically follows from the very existence of the situation described. If A and B differ as described and accordingly there exists a technological substitution ratio for the goods produced (one such rate for A and one for B), then if they engage in a division of labor as characterized by the law, the physical output produced must be greater than it otherwise would be. Any other conclusion is logically flawed.

The same is true regarding the consequences of minimum wage laws or an increase in the quantity of money. An increase in unemployment and a decrease in the purchasing power of money are consequences which are logically implied in the very description of the initial condition as stated in the propositions at hand. As a matter of fact, it is absurd to regard these predictions as hypothetical and to think that their validity could not be established independently of observations, i.e., other than by actually trying out minimum wage laws or printing more money and observing what happens.

To use an analogy, it is as if one wanted to establish the theorem of Pythagoras by actually measuring sides and angles of triangles. Just as anyone would have to comment on such an endeavor, mustn’t we say that to think economic propositions would have to be empirically tested is a sign of outright intellectual confusion?

But Mises by no means merely notices this rather obvious difference between economics and the empirical sciences. He makes us understand the nature of this difference and explains how and why a unique discipline like economics, which teaches something about reality without requiring observations, can possibly exist. It is this achievement of Mises’s which can hardly be overrated.

In order to better understand his explanation, we must make an excursion into the field of philosophy, or more precisely into the field of the philosophy of knowledge or epistemology. In particular, we must examine the epistemology of Immanuel Kant as developed most completely in his Critique of Pure Reason. Mises’s idea of praxeology is clearly influenced by Kant. This is not to say that Mises is a plain and simple Kantian. As a matter of fact, as I will point out later, Mises carries the Kantian epistemology beyond the point at which Kant himself left off. Mises improves the Kantian philosophy in a way that to this very day has been completely ignored and unappreciated by orthodox Kantian philosophers. Nonetheless, Mises takes from Kant his central conceptual and terminological distinctions as well as some fundamental Kantian insights into the nature of human knowledge. Thus we must turn to Kant.

Kant, in the course of his critique of classical empiricism, in particular that of David Hume, developed the idea that all our propositions can be classified in a two-fold way: On the one hand they are either analytic or synthetic, and on the other they are either a priori or a posteriori. The meaning of these distinctions is, in short, the following. Propositions are analytic whenever the means of formal logic are sufficient in order to find out whether they are true or not; otherwise propositions are synthetic ones. And propositions are a posteriori whenever observations are necessary in order to establish their truth or at least confirm them. If observations are not necessary, then propositions are a priori.

The characteristic mark of Kantian philosophy is the claim that true a priori synthetic propositions exist—and it is because Mises subscribes to this claim that he can be called a Kantian. Synthetic a priori propositions are those whose truth-value can be definitely established, even though in order to do so the means of formal logic are not sufficient (while, of course, necessary) and observations are unnecessary.

According to Kant, mathematics and geometry provide examples of true a priori synthetic propositions. Yet he also thinks that a proposition such as the general principle of causality—i.e., the statement that there are time-invariantly operating causes, and every event is embedded into a network of such causes—is a true synthetic a priori proposition.

I cannot go into great detail here to explain how Kant justifies this view.¹² A few remarks will have to suffice. First, how is the truth of such propositions derived, if formal logic is not sufficient and observations are unnecessary? Kant’s answer is that the truth follows from self-evident material axioms.

What makes these axioms self-evident? Kant answers, it is not because they are evident in a psychological sense, in which case we would be immediately aware of them. On the contrary, Kant insists, it is usually much more painstaking to discover such axioms than it is to discover some empirical truth such as that the leaves of trees are green. They are self-evident because one cannot deny their truth without self-contradiction; that is, in attempting to deny them one would actually, implicitly, admit their truth.

How do we find such axioms? Kant answers, by reflecting upon ourselves, by understanding ourselves as knowing subjects. And this fact—that the truth of a priori synthetic propositions derives ultimately from inner, reflectively produced experience—also explains why such propositions can possibly have the status of being understood as necessarily true. Observational experience can only reveal things as they happen to be; there is nothing in it that indicates why things must be the way they are. Contrary to this, however, writes Kant, our reason can understand such things as being necessarily the way they are, “which it has itself produced according to its own design.”¹³

In all this Mises follows Kant. Yet, as I said earlier, Mises adds one more extremely important insight that Kant had only vaguely glimpsed. It has been a common quarrel with Kantianism that this philosophy seemed to imply some sort of idealism. For if, as Kant sees it, true synthetic a priori propositions are propositions about how our mind works and must of necessity work, how can it be explained that such mental categories fit reality? How can it be explained, for instance, that reality conforms to the principle of causality if this principle has to be understood as one to which the operation of our mind must conform? Don't we have to make the absurd idealistic assumption that this is possible only because reality was actually created by the mind? So that I am not misunderstood, I do not think that such a charge against Kantianism is justified.¹⁴ And yet, through parts of his formulations Kant has no doubt given this charge some plausibility.

Consider, for example, this programmatic statement of his: “So far it has been assumed that our knowledge had to conform to observational reality”; instead it should be assumed “that observational reality conform to our knowledge.”¹⁵

Mises provides the solution to this challenge. It is true, as Kant says, that true synthetic a priori propositions are grounded in self-evident axioms and that these axioms have to be understood by reflection upon ourselves rather than being in any meaningful sense “observable.” Yet we have to go one step further. We must recognize that such necessary truths are not simply categories of our mind, but that our mind is one of acting persons. Our mental categories have to be understood as ultimately grounded in categories of action. And as soon as this is recognized, all idealistic suggestions immediately disappear. Instead, an epistemology claiming the existence of true synthetic a priori propositions becomes a realistic epistemology. Since it is understood as ultimately grounded in categories of action, the gulf between the mental and the real, outside, physical world is bridged. As categories of action, they must be mental things as much as they are characteristics of reality. For it is through actions that the mind and reality make contact.

Kant had hinted at this solution. He thought mathematics, for instance, had to be grounded in our knowledge of the meaning of repetition, of repetitive operations. And he also realized, if only somewhat vaguely, that the principle of causality is implied in our understanding of what it is and means to act.¹⁶

Yet it is Mises who brings this insight to the foreground: Causality, he realizes, is a category of action. To act means to interfere at some earlier point in time in order to produce some later result, and thus every actor must presuppose the existence of constantly operating causes. Causality is a prerequisite of acting, as Mises puts it.

But Mises is not, as is Kant, interested in epistemology as such. With his recognition of action as the bridge between the mind and the outside reality, he has found a solution to the Kantian problem of how true synthetic a priori propositions can be possible. And he has offered some extremely valuable insights regarding the ultimate foundation of other central epistemological propositions besides the principle of causality, such as the law of contradiction as the cornerstone of logic. And he has thereby opened a path for future philosophical research that, to my knowledge, has hardly been traveled. Yet Mises’s subject matter is economics, and so I will have to lay to rest the problem of explaining in more detail the causality principle as an a priori true proposition.¹⁷

Mises not only recognizes that epistemology indirectly rests on our reflective knowledge of action and can thereby claim to state something a priori true about reality but that economics does so too and does so in a much more direct way. Economic propositions flow directly from our reflectively gained knowledge of action; and the status of these propositions as a priori true statements about something real is derived from our understanding of what Mises terms “the axiom of action.”

This axiom, the proposition that humans act, fulfills the requirements precisely for a true synthetic a priori proposition. It cannot be denied that this proposition is true, since the denial would have to be categorized as an action—and so the truth of the statement literally cannot be undone. And the axiom is also not derived from observation—there are only bodily movements to be observed but no such things as actions—but stems instead from reflective understanding.

Moreover, as something that has to be understood rather than observed, it is still knowledge about reality. This is because the conceptual distinctions involved in this understanding are nothing less than the categories employed in the mind’s interaction with the physical world by means of its own physical body. And the axiom of action in all its implications is certainly not self-evident in a psychological sense, although once made explicit it can be understood as an undeniably true proposition about something real and existent.¹⁸

Certainly, it is not psychologically evident nor is it observable that with every action an actor pursues a goal; and that whatever the goal may be, the fact that it is pursued by an actor reveals that he places a relatively higher value on it than on any other goal of action he could conceive of at the start of his action.

It is neither evident nor observable that in order to achieve his most highly valued goal an action must interfere or decide not to interfere (which, of course, is also an interference) at an earlier point in time to produce some later result; nor that such interferences invariably imply the employment of some scarce means (at least those of the actor’s body, its standing room and the time absorbed by the interference).

It is neither self-evident nor can it be observed that these means must also have value for an actor—a value derived from that of the goal—because the actor must regard their employment as necessary in order to effectively achieve the goal; and that actions can only be performed sequentially, always involving the making of a choice, i.e., taking up that one course of action which at some given point in time promises the most highly valued result to the actor and excluding at the same time the pursuit of other, less highly valued goals.

It is not automatically clear or observable that as a consequence of having to choose and give preference to one goal over another—of not being able to realize all goals simultaneously—each and every action implies the incurrence of costs. For example, forsaking the value attached to the most highly valued alternative goal that cannot be realized or whose realization must be deferred because the means necessary to effect it are bound up in the production of another, even more highly valued goal.

And lastly, it is not plainly evident or observable that at its starting point every goal of action must be considered worth more to the actor than its cost and capable of yielding a profit, i.e., a result whose value is ranked higher than that of the foregone opportunities. And yet, every action is also invariably threatened by the possibility of a loss if an actor finds, in retrospect, that the result actually achieved—contrary to previous expectations—has a lower value than the relinquished alternative would have had.

All of these categories—values, ends, means, choice, preference, cost, profit and loss, as well as time and causality—are implied in the axiom of action. Yet, that one is able to interpret observations in such categories requires that one already knows what it means to act. No one who is not an actor could ever understand them. They are not “given,” ready to be observed, but observational experience is cast in these terms as it is construed by an actor. Nor is their reflective reconstruction a simple, psychologically self-evident intellectual task, as proved by a long line of abortive attempts along the way to the just-outlined insights into the nature of action.

It took painstaking intellectual effort to recognize explicitly what, once made explicit, everybody recognizes immediately as true and can understand as true synthetic a priori statements, i.e., propositions that can be validated independently of observations and thus cannot possibly be falsified by any observation whatsoever.

The attempt to disprove the action-axiom would itself be an action aimed at a goal, requiring means, excluding other courses of action, incurring costs, subjecting the actor to the possibility of achieving or not achieving the desired goal and so leading to a profit or a loss.

And the very possession of such knowledge then can never be disputed, and the validity of these concepts can never be falsified by any contingent experience, for disputing or falsifying anything would already have presupposed their very existence. As a matter of fact, a situation in which these categories of action would cease to have a real existence could itself never be observed, for making an observation, too, is an action.

Mises’s great insight was that economic reasoning has its foundation in just this understanding of action; and that the status of economics as a sort of applied logic derives from the status of the action-axiom as an a priori-true synthetic proposition. The laws of exchange, the law of diminishing marginal utility, the Ricardian law of association, the law of price controls, and the quantity theory of money—all the examples of economic propositions which I have mentioned—can be logically derived from this axiom. And this is why it strikes one as ridiculous to think of such propositions as being of the same epistemological type as those of the natural sciences. To think that they are, and accordingly to require testing for their validation, is like supposing that we had to engage in some fact-finding process without knowing the possible outcome in order to establish the fact that one is indeed an actor. In a word: It is absurd.

Praxeology says that all economic propositions which claim to be true must be shown to be deducible by means of formal logic from the incontestably true material knowledge regarding the meaning of action.

Specifically, all economic reasoning consists of the following:

(1) an understanding of the categories of action and the meaning of a change occurring in such things as values, preferences, knowledge, means, costs, etc;

(2) a description of a world in which the categories of action assume concrete meaning, where definite people are identified as actors with definite objects specified as their means of action, with some definite goals identified as values and definite things specified as costs. Such description could be one of a Robinson Crusoe world, or a world with more than one actor in which interpersonal relationships are possible; of a world of barter exchange or of money and exchanges that make use of money as a common medium of exchange; of a world of only land, labor, and time as factors of production, or a world with capital products; of a world with perfectly divisible or indivisible, specific or unspecific factors of production; or of a world with diverse social institutions, treating diverse actions as aggression and threatening them with physical punishment, etc; and

(3) a logical deduction of the consequences which result from the performance of some specified action within this world, or of the consequences which result for a specific actor if this situation is changed in a specified way.

Provided there is no flaw in the process of deduction, the conclusions that such reasoning yield must be valid a priori because their validity would ultimately go back to nothing but the indisputable axiom of action. If the situation and the changes introduced into it are fictional or assumptional (a Robinson Crusoe world, or a world with only indivisible or only completely specific factors of production), then the conclusions are, of course, a priori true only of such a “possible world.” If, on the other hand, the situation and changes can be identified as real, perceived and conceptualized as such by real actors, then the conclusions are a priori true propositions about the world as it really is.¹⁹

Such is the idea of economics as praxeology. And such then is the ultimate disagreement that Austrians have with their colleagues: Their pronouncements cannot be deduced from the axiom of action or even stand in clear-cut contradiction to propositions that can be deduced from the axiom of action.

And even if there is agreement on the identification of facts and the assessment of certain events as being related to each other as causes and consequences, this agreement is superficial. For such economists falsely believe their statements to be empirically well-tested propositions when they are, in fact, propositions that are true a priori.

II

Non-praxeological schools of thought mistakenly believe that relationships between certain events are well-established empirical laws when they are really necessary and logical praxeological ones. And they thereby behave as if the statement “a ball cannot be red and non-red all over at the same time” requires testing in Europe, America, Africa, Asia and Australia (of course requiring a lot of funds in order to pay for such daring nonsensical research). Moreover, the non-praxeologists also believe that relationships between certain events are well-established empirical laws (with predictive implications) when a priori reasoning can show them to be no more than information regarding contingent historical connections between events, which does not provide us with any knowledge whatsoever regarding the future course of events.

This illustrates another fundamental confusion non-Austrian schools have: a confusion over the categorical difference between theory and history and the implication that this difference has for the problem of social and economic forecasting.

I must again begin with a description of empiricism, the philosophy which thinks of economics and the social sciences in general as following the same logic of research as that, for instance, of physics. I will explain why. According to empiricism—today’s most widely held view of economics—there is no categorical difference between theoretical and historical research. And I will explain what this implies for the idea of social forecasting. The very different Austrian view will then be developed out of a critique and refutation of the empiricist position.

Empiricism is characterized by the fact that it accepts two intimately related basic propositions.²⁰ The first and most central one is: Knowledge regarding reality, which is called empirical knowledge, must be verifiable or at least falsifiable by observational experience. Observational experience can only lead to contingent knowledge (as opposed to necessary knowledge), because it is always of such a kind that, in principle, it could have been different than it actually was. This means that no one can know in advance of experience—that is before actually having had some particular observational experience—if the consequence of some real event will be one way or another. If, on the other hand, knowledge is not verifiable or falsifiable by observational experience, then it is not knowledge about anything real. It is simply knowledge about words, about the use of terms, about signs and transformational rules for signs. That is to say, it is analytical knowledge, but not empirical knowledge. And it is highly doubtful, according to this view, that analytical knowledge should be regarded as knowledge at all.

The second assumption of empiricism formulates the extension and application of the first assumption to problems of causality, causal explanation, and prediction. According to empiricism, to explain causally or predict a real phenomenon is to formulate a statement of either the type “if A, then B” or, should the variables allow quantitative measurement, “if an increase (decrease) in A, then an increase (decrease) in B.”

As a statement referring to reality (with A and B being real phenomena), its validity can never be established with certainty, that is, by examining the proposition alone, or of any other proposition from which the one in question could be logically deduced. The statement will always be and always remain hypothetical, its veracity depending on the outcome of future observational experiences which cannot be known in advance. Should experience confirm a hypothetical causal explanation, this would not prove that the hypothesis was true. Should one observe an instance where B indeed followed A as predicted, it verifies nothing. A and B are general, abstract terms, or in philosophical terminology, universals, which refer to events and processes of which there are (or might be, in principle) an indefinite number of instances. Later experiences could still possibly falsify it.

And if an experience falsified a hypothesis, this would not be decisive either. For if it was observed that A was not followed by B, it would still be possible that the hypothetically related phenomena were causally linked. It could be that some other circumstance or variable, heretofore neglected and uncontrolled, had simply prevented the hypothesized relationship from actually being observed. At the most, falsification only proves that the particular hypothesis under investigation was not completely correct as it stood. It needs some refinement, some specification of additional variables which have to be watched for and controlled so that we might observe the hypothesized relationship between A and B. But, to be sure, a falsification would never prove once and for all that a relationship between some given phenomena did not exist, just as a confirmation would never definitively prove that it did exist.²¹

When we consider this position, we notice that it again implies a denial of a priori knowledge that is at the same time knowledge about anything real. Any proposition that claims to be a priori can, according to empiricism, be no more than signs on paper that are related to each other by definition or by arbitrary stipulation, and is thus completely void: it is without connection to the world of real things whatsoever. Such a system of signs only becomes an empirically meaningful theory once an empirical interpretation is given to its symbols. Yet as soon as such an interpretation is given to its symbols, the theory is no longer a priori true but rather becomes and remains forever hypothetical.

Moreover, according to empiricism, we cannot know with certainty whether something is a possible cause of something else. If we want to explain some phenomenon, our hypothesizing about possible causes is in no way constrained by a priori considerations. Everything can have some influence on anything. We must find out by experience whether it does or not; but then experience will never give us a definite answer to this question either.

The next point brings us to our central topic of this section: the relationship between history and theory. We notice that according to empiricism there is no principal difference between historical and theoretical explanations. Every explanation is of the same type. In order to explain a phenomenon we hypothesize some other phenomenon as its cause and then see whether or not the hypothesized cause indeed preceded the effect in time. A distinction exists between a historical and a theoretical explanation only insofar as a historical explanation refers to events that already happened, something that lies in the past, whereas a theoretical explanation would be an explanation, or rather a prediction, of an effect that has not yet occurred. Structurally, though, there is no difference between such historical explanations and theoretical predictions. There is, however, a pragmatic difference which explains why empiricists in particular stress the importance of a theory’s predictive power and are not content with testing it only vis-à-vis historical data.²² The reason for this is quite evident to anyone who was ever engaged in the foolish game of data analyses. If the phenomenon to be explained has already occurred, it is easy as cake to find all sorts of events that preceded it in time and could possibly be considered its cause. Moreover, if we don't want to lengthen our list of possible causes by finding more preceding variables, we can do the following (and in the age of computers, it’s even easier): We can take any one of the preceding variables and try out different functional relationships between it and the variable to be explained—linear or curvilinear ones, recursive or non-recursive functions, additive or multiplicative relations, etc. Then one, two, three, we find what we were looking for: a functional relationship that fits the data. And you will find not just one but any amount of them that you could possibly desire.

But which of all these preceding events, or of all the types of relationships, is the cause or the causally effective relation? There are no a priori considerations, according to empiricism, that could help us here. And that, then, is the reason why empiricists emphasize the importance of predictions. In order to find out which one of these manifold historical explanations is indeed correct—or at least not false—we are asked to try them out by using them in predicting events that have not yet occurred, see how good they are, and thereby weed out the wrong explanations.

So much for empiricism and its ideas about theory, history, and forecasting. I will not go into a detailed analysis of the question whether or not this emphasis on predictive success changes much, if anything at all, with respect to the rather evident relativistic implications of empiricism. Just recall that according to its very own doctrine, neither a predictive confirmation nor a predictive falsification would help us either in deciding whether a causal relationship between a pair of variables did or did not exist. This should make it appear rather doubtful that anything is gained by making prediction the cornerstone of one’s philosophy.

I would like to challenge the very starting point of the empiricists' philosophy. There are several conclusive refutations of empiricism. I will show the empiricist distinction between empirical and analytical knowledge to be plainly false and self-contradictory.²³ That will then lead us to developing the Austrian position on theory, history, and forecasting.

This is empiricism’s central claim: Empirical knowledge must be verifiable or falsifiable by experience; and analytical knowledge, which is not so verifiable or falsifiable, thus cannot contain any empirical knowledge. If this is true, then it is fair to ask: What then is the status of this fundamental statement of empiricism? Evidently it must be either analytical or empirical.

Let us first assume it is analytical. According to the empiricist doctrine, however, an analytical proposition is nothing but scribbles on paper, hot air, entirely void of any meaningful content. It says nothing about anything real. And hence one would have to conclude that empiricism could not even say and mean what it seems to say and mean. Yet if, on the other hand, it says and means what we thought it did all along, then it does inform us about something real. As a matter of fact, it informs us about the fundamental structure of reality. It says that there is nothing in reality that can be known to be one way or another prior to future experiences which may confirm or disconfirm our hypothesis.

And if this meaningful proposition is taken to be analytical, that is, as a statement that does not allow any falsification and whose truth can be established by an analysis of its terms alone, one has no less than a glaring contradiction at hand. Empiricism itself would prove to be nothing but self-defeating nonsense.²⁴

So perhaps we should choose the other available option and declare the fundamental empiricist distinction between empirical and analytical knowledge an empirical statement. But then the empiricist position would no longer carry any weight whatsoever. For if this were done, it would have to be admitted that the proposition—as an empirical one—might well be wrong and that one would be entitled to hear on the basis of what criterion one would have to decide whether or not it was. More decisively, as an empirical proposition, right or wrong, it could only state a historical fact, something like “all heretofore scrutinized propositions fall indeed into the two categories analytical and empirical.” The statement would be entirely irrelevant for determining whether it would be possible to produce propositions that are true a priori and are still empirical ones. Indeed, if empiricism’s central claim were declared an empirical proposition, empiricism would cease altogether to be an epistemology, a logic of science, and would be no more than a completely arbitrary verbal convention of calling certain arbitrary ways of dealing with certain statements certain arbitrary names. Empiricism would be a position void of any justification.

What does this first step in our criticism of empiricism prove? It proves evidently that the empiricist idea of knowledge is wrong, and it proves this by means of a meaningful a priori argument. And in doing this, it shows that the Kantian and Misesian idea of true a priori synthetic propositions is correct. More specifically, it proves that the relationship between theory and history cannot be as depicted by empiricism. There must also be a realm of theory—theory that is empirically meaningful—which is categorically different from the only idea of theory empiricism admits to having existence. There must also be a priori theories, and the relationship between theory and history then must be different and more complicated than empiricism would have us believe. How different indeed will become apparent when I present another argument against empiricism, another a priori argument, and an a priori argument against the thesis implied in empiricism that the relation between theory and empirical research is the same in every field of knowledge.

However appropriate the empiricist ideas may be in dealing with the natural sciences (and I think they are inappropriate even there, but I cannot go into this here),²⁵ it is impossible to think that the methods of empiricism can be applicable in the social sciences.

Actions are the field of phenomena which constitutes what we regard as the subject matter of the social sciences. Empiricism claims that actions can and must be explained, just as any other phenomenon, by means of causal hypotheses which can be confirmed or falsified by experience.²⁶

Now if this were the case, then empiricism would be first forced to assume—contrary to its own doctrine that no a priori knowledge about anything real exists—that time-in-variantly operating causes with respect to actions exist.

One would not know a priori which particular event might be the cause of any particular action. But empiricism wants us to relate different experiences regarding sequences of events as either confirming or falsifying each other. And if they falsify each other, then we are to respond with a reformulation of the original hypothesis. Yet in order to do so, we must assume a constancy over time in the operation of causes as such—and to know that causes for actions do exist is, of course, knowledge about the reality of actions. Without such an assumption regarding the existence of causes as such, different experiences can never be related to each other as confirming or falsifying one another. They are simply unrelated, incommensurable observations. Here is one, there is another; they are the same or similar; or they are different. Nothing else follows.²⁷

In addition, there is yet another contradiction, and making it evident will immediately lead us to Mises’s central insight that the relationship between theory and history in the field of the social sciences is of an entirely different nature than that in the natural sciences.

What is this contradiction? If actions could indeed be conceived of as governed by time-invariantly operating causes, then it is certainly appropriate to ask: But what then about explaining the explainers? What about causally predicting their actions? They are, after all, the persons who carry on the very process of creating hypotheses and of verification and falsification.

In order to assimilate confirming or falsifying experiences—to replace old hypotheses with new ones—one must assumedly be able to learn from experience. Every empiricist is, of course, forced to admit this. Otherwise why engage in empirical research at all?

But if one can learn from experience in as yet unknown ways, then one admittedly cannot know at any given time what one will know at a later time and, accordingly, how one will act on the basis of this knowledge. One can only reconstruct the causes of one’s actions after the event, as one can explain one’s knowledge only after one already possesses it. Indeed, no scientific advance could ever alter the fact that one must regard one’s knowledge and actions as unpredictable on the basis of constantly operating causes. One might hold this conception of freedom to be an illusion. And one might well be correct from the point of view of a scientist with cognitive powers substantially superior to any human intelligence, or from the point of view of God. But we are not God, and even if our freedom is illusory from His standpoint and our actions follow a predictable path, for us this is a necessary and unavoidable illusion. We cannot predict in advance, on the basis of our previous states, the future states of our knowledge or the actions manifesting that knowledge. We can only reconstruct them after the event.²⁸

Thus, the empiricist methodology is simply contradictory when applied to the field of knowledge and action—which contains knowledge as its necessary ingredient. The empiricist-minded social scientists who formulate prediction equations regarding social phenomena are simply doing nonsense. Their activity of engaging in an enterprise whose outcome they must admit they do not yet know, proves that what they pretend to do cannot be done. As Mises puts it and has emphasized repeatedly: There are no empirical causal constants in the field of human action.²⁹

By means of a priori reasoning then, one has established this insight: Social history, as opposed to natural history, does not yield any knowledge that can be employed for predictive purposes. Rather, social and economic history refers exclusively to the past. The outcome of research into how and why people acted in the past has no systematic bearing on whether or not they will act the same way in the future. People can learn. It is absurd to assume that one could predict in the present what one will know tomorrow and in what way tomorrow’s knowledge will or will not be different from today’s.

A person cannot predict today his demand for sugar in one year any more than Einstein could have predicted the theory of relativity before he had actually developed it. A person cannot know today what he will know about sugar one year from now. And he cannot know all the goods that will be competing against sugar for his money in a year. He can make a guess, of course. But since it must be admitted that future states of knowledge cannot be predicted on the basis of constantly operating causes, a person cannot pretend to make a prediction of the same epistemological type as, for instance, one regarding the future behavior of the moon, the weather, or the tides. Those are predictions that could legitimately make use of the assumption of time-in-variantly operating causes. But a prediction about future sugar demand would be an entirely different thing.

Provided social and economic history can only come up with reconstructive explanations and never with explanations that have any systematic predictive relevance, another extremely important insight regarding the logic of empirical social research follows. And this amounts to another decisive criticism of empiricism, at least regarding its claim of being an appropriate methodology for social science research.

Recall what I said earlier about why it is that empiricism so strongly emphasizes the predictive function of explanatory theories. For every phenomenon to be explained there are a multitude of preceding events and a multitude of functional relationships with such preceding events by which the phenomenon in question could possibly be explained. But which of these rival explanations is correct and which ones are not? The empiricist answer was: Try to predict, and your success or failure in predicting future events will tell you which explanation is or is not correct. Evidently, this advice won't do if there are no time-invariantly operating causes with respect to actions. What then? Empiricism, of course, cannot have an answer to this question.

Yet even if actions cannot be predicted in any scientific way, this does not imply that one reconstructive historical explanation is just as good as any other. It would be regarded as absurd if someone explained the fact that I moved from Germany to the United States by pointing out, for example, that the corn in Michigan, prior to my decision, was experiencing a growth spurt and that this had caused my decision. But why not, assuming here that the event regarding Michigan’s corn indeed happened prior to my decision? The reason is, of course, that I will tell you that Michigan’s corn had no relevance for my decision. And insofar as anything is known about me at all, it can be recognized that this is indeed the case.

But how can you recognize this? The answer is by understanding my motives and interests, my convictions and aspirations, my normative orientations, and my concrete perceptions resulting in this action. How do we understand somebody and, moreover, how do we verify that our understanding is indeed correct? As regards the first part of the question—one understands somebody by engaging in a pseudo-communication and interaction with him. I say pseudo because, evidently, we cannot engage in an actual communication with Caesar in order to find out why he crossed the Rubicon. But we could study his writings and compare his convictions expressed therein with his actual deeds; we could study the writings and actions of contemporaries and thereby try to understand Caesar’s personality, his time, and his particular role and position within his time.³⁰

As regards the second part of the question—the problem of verification of historical explanations—one has to admit from the outset that there is no absolutely clear-cut criterion that would allow one to decide which one of two rival explanations, both equally based on understanding, is definitely correct and which one is not. History is not an exact science in the same sense as the natural sciences are exact sciences or in the very different sense in which economics is an exact science.

Even if two historians agree in their description of facts and their assessment of factors of influence for a given action to be explained, they might still disagree on the weight that should be assigned to such factors in bringing about the action. And there would be no way to decide the matter in a completely unambiguous way.³¹

Yet let me not be misunderstood here. There is nonetheless some sort of truth-criterion for historical explanations. It is a criterion that does not eliminate all possible disagreements among historians, but that still excludes and disqualifies a wide range of explanations. The criterion is that any true historical explanation must be of such a kind that the actor whose actions are to be explained must, in principle, be able to verify the explanation and the explanatory factors as being those that contributed to his acting the way he did.³² The key phrase here is: in principle. Naturally, Caesar could not possibly verify our explanation for his crossing the Rubicon. Moreover, he might actually have strong reasons not to verify the explanation even if he could, since such a verification might conflict with some other objectives that he might have.

Also, to say that any true explanation must be verifiable by the actor in question is not to say that every actor is always best qualified to be his own explainer. It may be that Einstein can explain better than anyone else why and how he came up with the theory of relativity when he did. But this might not be so. As a matter of fact, it may well be possible that a historian of science may understand Einstein and the influences leading to his discovery better than he himself did or could. And this would be possible because the influencing factors or the rules that determined one’s actions might only be subconscious.³³ Or they might be so obvious that one would fail to notice them simply on account of this.

The following analogy may be quite helpful in understanding the curious fact that others might understand a person better than the person himself. Take, for example, a public speech. Of course, to a large extent the person giving the speech can probably give reasons for saying what he says and formulate the influences that led him to see things the way he does. He can probably do so better than anyone else. And yet, in saying what he says, he follows rules habitually and unconsciously that he could hardly or only with great difficulties make explicit. He also follows certain rules of grammar when he says what he says. But quite often he would be completely unable to formulate these rules even though they clearly influence his actions. The historian who understands someone’s actions better than the person himself is quite analogous to the grammarian analyzing the sentence structure of the public speaker. Both reconstruct and explicitly formulate the rules that are actually followed, but that could not, or only with extreme difficulties, be formulated by the speaker himself.³⁴

The speaker may not be able to formulate all the rules that he follows and may need the professional historian or grammarian to help him. But it is of great importance to realize that the truth criterion for the grammarian’s explanation would nonetheless be that the speaker would have to be able—in principle—to verify the correctness of the explanation after what was previously known implicitly was made explicit. In order for the grammarian’s or historian’s explanations to be correct, the actor would need to be able to recognize these rules as being those which indeed influenced his actions. So much for the logic of historical research as necessarily reconstructive research based on understanding.³⁵

The argument establishing the impossibility of causal predictions in the field of human knowledge and actions now might have left the impression that if this is so, then forecasting can be nothing but successful or unsuccessful guessing. This impression, however, would be just as wrong as it would be wrong to think that one can predict human action in the same way as one can predict the growing stages of apples. It is here where the unique Misesian insight into the interplay of economic theory and history enters the picture.³⁶

In fact, the reason why the social and economic future cannot be regarded as entirely and absolutely uncertain should not be too hard to understand: The impossibility of causal predictions in the field of action was proven by means of an a priori argument. And this argument incorporated a priori true knowledge about actions as such: that they cannot be conceived of as governed by time-invariantly operating causes.

Thus, while economic forecasting will indeed always be a systematically unteachable art, it is at the same time true that all economic forecasts must be thought of as being constrained by the existence of a priori knowledge about actions as such.³⁷

Take, for example, the quantity theory of money, the praxeological proposition that if you increase the quantity of money and the demand for money stays constant, then the purchasing power of money will fall. Our a priori knowledge about actions as such informs us that it is impossible to predict scientifically whether or not the quantity of money will be increased, decreased or left unchanged. Nor is it possible to predict scientifically whether or not, regardless of what happens to the quantity of money, the demand for money to be held in cash balances will go up or down or stay the same. We cannot claim to be able to predict such things because we cannot predict future states of knowledge of people. And yet these states evidentiy influence what happens with respect to the quantity of money and the demand for money Then, our theory, our praxeological knowledge incorporated in the quantity theory, has a rather limited usefulness for one’s business of predicting the economic future.

The theory would not allow one to predict future economic events even if, say, it is an established fact that the quantity of money had been expanded. One would still be unable to predict what would happen to the demand for money And though, of course, concurrent events regarding the demand for money do affect the shape of things to come (and cancel, increase, decrease, accelerate, or decelerate the effects stemming from the source of an increased money supply), such concurrent changes cannot in principle be predicted or experimentally held constant. It is an outright absurdity to conceive of subjective knowledge, whose every change has an impact on actions, as predictable on the basis of antecedent variables and as capable of being held constant. The very experimenter who wanted to hold knowledge constant would, in fact, have to presuppose that his knowledge, specifically his knowledge regarding the experiment’s outcome, could not be assumed to be constant over time.

The quantity theory of money then cannot render any specific economic event, certain or probable, on the basis of a formula employing prediction constants. However, the theory would nonetheless restrict the range of possibly correct predictions. And it would do this not as an empirical theory, but rather as a praxeological theory, acting as a logical constraint on our prediction-making.³⁸ Predictions that are not in line with such knowledge (in our case: the quantity theory) are systematically flawed and making them leads to systematically increasing numbers of forecasting errors. This does not mean that someone who based his predictions on correct praxeological reasoning would necessarily have to be a better predictor of future economic events than someone who arrived at his predictions through logically flawed deliberations and chains of reasoning. It means that in the long run the praxeologically enlightened forecaster would average better than the unenlightened ones.

It is possible to make the wrong prediction in spite of the fact that one has correctly identified the event “increase in the money supply” and in spite of one’s praxeologically correct reasoning that such an event is by logical necessity connected with the event “drop in the purchasing power of money.” For one might go wrong predicting what will occur to the event “demand for money.” One may have predicted a constant demand for money, but the demand might actually increase. Thus the predicted inflation might not show up as expected. And on the other hand, it is equally possible that a person could make a correct forecast, i.e., there will be no drop in purchasing power, in spite of the fact that he was wrongly convinced that a rise in the quantity of money had nothing to do with money’s purchasing power. For it may be that another concurrent change occurred (the demand for money increased) which counteracted his wrong assessment of causes and consequences and accidentally happened to make his prediction right.

However, and this brings me back to my point that praxeology logically constrains our predictions of economic events: What if we assume that all forecasters, including those with and without sound praxeological knowledge, are on the average equally well-equipped to anticipate other concurrent changes? What if they are on the average equally lucky guessers of the social and economic future? Evidently, we must conclude then that forecasters making predictions in recognition of and in accordance with praxeological laws like the quantity theory of money will be more successful than that group of forecasters which is ignorant of praxeology.

It is impossible to build a prediction formula which employs the assumption of time-invariantly operating causes that would enable us to scientifically forecast changes in the demand for money. The demand for money is necessarily dependent on people’s future states of knowledge, and future knowledge is unpredictable. And thus praxeological knowledge has very limited predictive utility.³⁹

Yet of all forecasters who correctly forecast that a change such as an increase in the demand for money will take place and who equally correctly perceive that an increase in the quantity of money has indeed happened, only those who recognize the quantity theory of money will make a correct prediction. And those whose convictions are at variance with praxeology will necessarily go wrong.

To understand the logic of economic forecasting and the practical function of praxeological reasoning, then, is to view the a priori theorems of economics as acting as logical constraints on empirical predictions and as imposing logical limits on what can or cannot happen in the future.

¹The first two essays are based on two lectures delivered at the Ludwig von Mises Institute’s “Advanced Instructional Conference on Austrian Economics,” June 21-27, 1987. The third essay is reprinted from The Economics and Ethics of Private Property (Kluwer Academic Publishers in 1993), pp. 141–64.

²Ludwig von Mises, Human Action (Chicago: Henry Regnery, 1966), p. 32.

³Mises’s methodological work is contained mainly in his Epistemological Problems of Economics (New York: New York University Press, 1981); Theory and History (Washington, D.C.: Ludwig von Mises Institute, 1985); The Ultimate Foundation of Economic Science (Kansas City, Kans.: Sheed Andrews and McMeel, 1978); Human Action, part I.

⁴Mark Blaug, The Methodology of Economics (Cambridge: Cambridge University Press, 1980), p. 93; for a similar statement of outrage see Paul Samuelson, Collected Scientific Papers, vol. 3 (Cambridge, Mass.: Harvard University Press, 1972), p. 761.

⁵Another prominent critic of praxeology is Terence W. Hutchison, The Significance and Basic Postulates of Economic Theory (London: Macmillan, 1938). Hutchison, like Blaug an adherent of the Popperian variant of empiricism, has since become much less enthusiastic about the prospects of advancing economics along empiricist lines (see, for instance, his Knowledge and Ignorance in Economics [Chicago: University of Chicago Press, 1977]; and The Politics and Philosophy of Economics [New York: New York University Press, 1981]), yet he still sees no alternative to Popper’s falsificationism. A position and development quite similar to Hutchison’s is to be found in H. Albert (see his earlier Marktsoziologie und Entscheidungslogik (Neuwied: 1967). For a critique of the empiricist position, see Hans-Hermann Hoppe, Kritik der kausalwissenschaftlichen Sozialforschung. Unterschungen zur Grundlegung von Soziologie und Ökonomie (Opladen: 1983); “Is Research Based on Causal Scientific Principles Possible in the Social Sciences?” Ratio 25, no. 1 (1983); “In Defense of Extreme Rationalism,” Review of Austrian Economics 3 (1988); “On Praxeology and the Praxeological Foundations of Epistemology and Ethics,” in Llewellyn H. Rockwell, Jr., ed., The Meaning of Ludwig von Mises (Auburn, Ala.: Ludwig von Mises Institute, 1989).

⁶Jean-Baptiste Say, Treatise on Political Economy (New York: Augustus Kelley, [1880] 1964), p. xx, xxvi.

⁷Nassau Senior, An Outline of the Science of Political Economy (New York: Augustus Kelley, [1836] 1965), pp. 2–3, 5.

⁸John E. Cairnes, The Character and Logical Method of Political Economy (New York: Augustus Kelley, 1965), p. 83, 87, 89–90, 95–96.

⁹See Carl Menger, Untersuchungen über die Methoden der Sozialwissenschaften (Leipzig: 1883); idem, Die Irrtümer des Historismus in der Deutschen Nationalökonomie (Wien: 1884); Eugen von Böhm-Bawerk, Schriften, F. X. Weiss, ed. (Vienna: 1924); Friedrich von Wieser, Theorie der gesellschaftlichen Wirtschaft (Tübingen: 1914); idem, Gesammelte Abhandlungen (Tübingen: 1929). For Mises’s evaluation of his predecessors, see his Epistemological Problems of Economics, pp. 17–22. The term “a priori” in connection with economic theorems is also used by Frank H. Knight; his methodological writings, however, lack systematic rigor. See his “What Is Truth in Economics,” in Knight, On the History and Method of Economics (Chicago: University of Chicago Press, 1956); and his “The Limitations of Scientific Method in Economics,” in Knight, The Ethics of Competition (Chicago: University of Chicago Press, 1935).

¹⁰ Richard von Strigl, Die ökonomischen Kategorien und die Organisation der Wirtschaft (Jena: 1923).

¹¹It may be worth mentioning that Robbins’s methodological position, much like Friedrich A. Hayek’s, became increasingly less Misesian over time due mainly to the influence of Karl R. Popper, their colleague at the London School of Economics. See on this Lionel Robbins, An Autobiography of an Economist (London: Macmillan, 1976); Hayek’s disagreement with Mises’s idea of praxeology has been most recently restated in his “Einleitung” to Ludwig von Mises’s Erinnerungen (Stuttgart: 1978). Mises’s own, entirely negative verdict on Popper can be found in his The Ultimate Foundation of Economic Science, p. 70. In support of this verdict see also Hans H. Hoppe Kritik der kausalwissenschaftlichen Sozialforschung (Opladen: Westdeutscher Verlag, 1983), pp. 48–49.

¹²A brilliant interpretation and justification of Kant’s a prioristic epistemology is to be found in F. Kambartel, Erfahrung und Struktur. Bausteine zu einer Kritik des Empirismus und Formalismus (Frankfurt/M.: 1968), esp. chapter 3; see also Hans-Hermann Hoppe, Handeln und Erkennen (Bern: 1976).

¹³Immanuel Kant, Kritik der reinen Vernunft, in Kant, Werke, vol. 2, W. Weischedel, ed. (Wiesbaden: 1956), p. 23.

¹⁴See in particular F. Kambartel’s work cited in note 12; instructive is also the Kant interpretation given by the biologist-ethologist K. Lorenz, Vom Weltbild des Verhaltensforschers (Munich: 1964); idem, Die Rückseite des Spiegels. Versuch einer Naturgeschichte menschlichen Erkennens (Munich: 1973). Among some followers of Austrianism, the Kant interpretation of Ayn Rand (see, for instance, her Introduction to Objectivist Epistemology (New York: New American Library, 1979); or For the New Intellectual (New York: Random House, 1961) enjoys great popularity. Her interpretation, replete with sweeping denunciatory pronouncements, however, is characterized by a complete absence of any interpretive documentation whatsoever. See, on Rand’s arrogant ignorance regarding Kant, B. Goldberg, “Ayn Rand’s ‘For the New Intellectual’,” New Individualist Review 1, no. 3 (1961).

¹⁶For Kantian interpretations of mathematics see H. Dingler, Philosophie der Logik und Mathematik (Munich: 1931); Paul Lorenzen, Einführung in die operative Logik und Mathematik (Frankfurt/M.: 1970); Ludwig Wittgenstein, Remarks on the Foundations of Mathematics (Cambridge, Mass.: M.I.T. Press, 1978); also Kambartel, Erfahrung und Struktur, pp. 118–22; for an unusually careful and cautious interpretation of Kantianism from the point of view of modern physics, see P. Mittelstaedt, Philosophische Probleme der modernen Physik (Mannheim: 1967).

¹⁷For some farther reaching considerations on these matters, see Hoppe “In Defense of Extreme Rationalism.”

¹⁸On this and the following see Mises, Human Action, chapters IV,V.

¹⁹See also Hoppe, Kritik der kausalwissenschaftlichen Sozialforschung, chapter 3.

²⁰For various representative accounts of empiricism—united in their opposition against any form of apriorism—see R. Carnap, Der logische Aufbau der Welt (Hamburg: 1966); idem, Testability and Meaning (New Haven, Conn.: Yale University Press, 1950); Alfred J. Ayer, Logic, Truth, and Language (New York: Dover, 1952); Karl R. Popper, Logic of Scientific Discovery (New York: Harper and Row, 1959); idem, Conjectures and Refutations (London: Routledge and Kegan Paul, 1969); C. G. Hempel, Aspects of Scientific Explanation (New York: Free Press, 1970); for accounts which also give some attention to economics, see in particular Ernest Nagel, The Structure of Science (New York: Harcourt, Brace and World, 1961); Felix Kaufmann, Methodology of the Social Sciences (Atlantic Highlands, N.J.: Humanities Press, 1944).

²¹On the relativistic and—on the level of politics—interventionist implications of empiricism, see Hans-Hermann Hoppe, “The Intellectual Cover for Socialism,” The Free Market (February 1988).

²²For the emphasis placed on prediction by empiricist-positivists, see in particular Milton Friedman, “The Methodology of Positive Economics” in Friedman, Essays in Positive Economics (Chicago: University of Chicago Press, 1953).

²³On rationalist critiques of empiricism, see Kambartel, Erfahrung und Struktur; Brand Blanshard, Reason and Analysis (LaSalle, Ill.: Open Court, 1964); A. Pap, Semantics and Necessary Truth (New Haven, Conn.: Yale University Press, 1958); Martin Hollis and Edward Nell, Rational Economic Man (Cambridge: Cambridge University Press, 1975).

²⁴Writes Mises in The Ultimate Foundation of Economic Science:

The essence of logical positivism is to deny the cognitive value of a priori knowledge by pointing out that all a priori propositions are merely analytic. They do not provide new information, but are merely verbal or tautological, asserting what has already been implied in the definitions and premises. Only experience can lead to synthetic propositions. There is an obvious objection against this doctrine, viz., that this proposition that there are no synthetic a priori propositions is in itself—as the present writer thinks, false—a synthetic a priori proposition, for it can manifestly not be established by experience. (p. 5)

²⁵On this see, in addition to the works cited in note 23, in particular H. Dingler, Die Ergreifung des Wirklichen (Munich: 1955); idem, Aufbau der exakten Fundamentalwissenschaft (Münich: 1964; Paul Lorenzen, Methodisches Denken (Frankfurt/M.: 1968); F. Kambartel and J. Mittelstrass, eds., Zum normativen Fundament der Wissenschaft (Frankfurt/M.: 1973); also my “In Defense of Extreme Rationalism.”

²⁶In addition to the literature cited in note 20 see, for instance, such typical empiricist products as Arthur Goldberger and Otis D. Duncan, eds., Structural Equation Models in the Social Sciences (San Diego, Calif.: Academic Press, 1973); H. B. Blalock, ed., Causal Inferences in Non-Experimental Research (Chapel Hill: University of North Carolina Press, 1964); Arthur L. Stinchcombe, Constructing Social Theories (New York: Harcourt, Brace & World, 1968).

²⁷On this and the following, see Hoppe, Kritik der kausalwissenschaftlichen Sozialforschung, chapter 2, and “Is Research Based on Causal Scientific Principles Possible in the Social Sciences?”

²⁸Interestingly, this argument was first advanced by Karl R. Popper in the Preface to his The Poverty of Historicism (London: Routledge & Kegan Paul, 1957). However, Popper entirely failed to notice that such an argument actually invalidates his own idea of a methodological monism (Einheitswissenschaft) and demonstrates the inapplicability of his falsificationism in the field of human action and knowledge. See on this my Kritik der kausalwissenschaftlichen Sozialforschung, pp. 44–49; K. O. Apel, Die Erklären: Verstehen Kontroverse in transzendental-pragmatischer Sicht (Frankfurt/M.: 1979), pp. 44–46, footnote 19.

²⁹Mises, Human Action, pp. 55–56.

³⁰On the logic of history see Mises, Theory and History, chapter 14; The Ultimate Foundation of Economic Science, pp. 45–51; Human Action, pp. 47–51, 59–64.

³¹Mises, Human Action, pp. 57–58.

³²On the logic of historical and sociological reconstruction and verification, see also Hoppe, Kritik der kausalwissenschaftlichen Sozialforschung, pp. 33–38.

³³On the logic of psychoanalytic explanation and verification, see A. MacIntyre, The Unconscious (London: Duckworth, 1958); Jürgen Habermas, Erkenntnis und Interesse (Frankfurt/M.: 1968), chapter 2; on the relevance of psychoanalysis also Mises, Human Action, p. 12.

³⁴On the logic of linguistic explanations as involving the reconstruction of rules which require confirmation through the “intuitive knowledge” of “competent speakers,” see Noam Chomsky, Aspects of the Theory of Syntax (Cambridge: M.I.T. Press, 1965); also K. O. Apel, “Noam Chomskys Sprachtheorie und die Philosophie der Gegenwart” in Apel, Transformation der Philosophie, vol. 2 (Frankfurt/M.: 1973).

³⁵For important critiques of the empiricist-positivist philosophy of the empirical social sciences, and explanations of social research as based on reconstructive understanding, see also K. O. Apel, Transformation der Philosophie; idem, Die Erklären: Verstehen Kontroverse in transzendental-pragmatischer Sicht; Peter Winch, The Idea of a Social Science and Its Relation to Philosophy (Atlantic Highlands, N.J.: Humanities Press, 1970); idem, Ethics and Action (London: Routledge and Kegan Paul, 1972); Jürgen Habermas, Zur Logik der Sozialwissenschaften (Frankfurt/M.: 1970); G. H. von Wright, Explanation and Understanding (Ithaca, N.Y.: Cornell University Press, 1971).

³⁶On the relation between theory and history, see in particular Mises, Human Action, pp. 51–59; and Epistemological Problems of Economics, chapters 2–3.

³⁷The former Austrian and neo-historicist-hermeneutician-nihilist Ludwig Lachmann, who repeats ad nauseam the unpredictability of future states of knowledge (see his “From Mises to Shackle: An Essay on Austrian Economics and the Kaleidic Society,” Journal of Economic Literature 54 (1976); The Market as an Economic Process (New York: Basil Blackwell, 1986), entirely misses recognizing this latter point. In fact, his arguments are simply self-defeating. For evidently he claims to know for certain the unknowability of future knowledge and, by logical extension, of actions. Yet then he does know something about future knowledge and action. He must know something about knowledge and action as such. And this, precisely, is what praxeology claims to be: knowledge regarding actions as such, and (as I have explained in my “On Praxeology and the Praxeological Foundations of Epistemology and Ethics,” p. 49 below) knowledge about the structure which any future knowledge must have by virtue of the fact that it invariably must be knowledge of actors.

³⁸On the logic of social and economic forecasting, see also Hoppe, “In Defense of Extreme Rationalism,” sections 3, 4.

³⁹See also Murray N. Rothbard, Power and Market (Kansas City, Kans.: Sheed Andrews and McMeel, 1977), pp. 256–58, on the different function of economic theorizing in a free market environment vs. an environment hampered by government intervention.