CHAPTER 20 Praxeology: A New Start from Ludwig von Mises

Ludwig von Mises created a whole new discipline based on extensive methodological deliberations which he called “the science of human action,” or “praxeology.” He may have been inspired to a significant degree by a long since forgotten, over 1,000 page work, Die wirtschaftliche Energie (1893) (“Economic Energy”), written by Hungarian-born journalist and Menger student, Julius Friedrich Gans von Ludassy (1858–1922). Von Ludassy suggested borrowing the cognitive foundations of economics from Immanuel Kant (1724–1804) (Gans-Ludassy 1893, pp. 579–593). He also casually provided an “ultimate definition of economics”: “All actions have a purpose, they are therefore purposive; they are purposive even when they do not seem so to a more astute economic mind; that is to say they have been undertaken from the viewpoint of the acting individual in order to attain his objectives. Economic insights have to do with economic actions. Economic actions, however, are simply actions. They must adhere to laws which apply to actions in general. Economics is therefore the science of action” (ibid., p. 982).

Ludwig von Mises’s goal was to understand human action in general; and subsequently to be able to clearly think through and present economic action as well. Such an all-encompassing “praxeology” must not be based on experiences bound by time and place, i.e., on empirical data, but would have to be a science which, “[i]n all of its branches … is a priori.” Because a universally valid science of human action is derived, “[l]ike logic and mathematics, … not … from experience; it is prior to experience. It is, as it were, the logic of action and deed” (Mises 1960/2003, p. 13).¹ Thus, the classical laws of economics were ultimately not derived from experience, but by “deduction from the fundamental category of action, which has been expressed sometimes as the economic principle (i.e., the necessity to economize), sometimes as the value principle or as the cost principle” (ibid., p. 18).

Empirical research, said Mises, which gathers its knowledge a posteriori, i.e., from experience, only allows for predictions in the form of hypotheses, which result from induction, i.e., by generalizing individual observations. In order to gain empirical validity, they need to be investigated further, either by making new observations or with the help of experiments, with the goal of either discarding them as useless, or retaining them in the form of laws. Yet empirical laws never lose their hypothetical character; in order to prove them conclusively, the process of validation would have to be continued ad infinitum. It is always possible that hitherto unobserved cases would run contrary to the claims and thus falsify the original hypothesis. Thus, empirical knowledge offers no ultimate certainty. Furthermore, every observation necessarily involves theories which play a decisive role in selecting what appears to be important. In empirical research, the observing subject is then necessarily involved in the observation process.

The fear that empirical research would dominate and manipulate the theory and practice of economics in the future was in the forefront of Mises’s mind. The notion of viewing human beings as mere test cases in order to put economic hypotheses into practice and to subsequently “confirm” them—manipulating human action within the scope of socio-political experiments and with the aid of government force, for example—was undoubtedly anathema to Mises. Economics therefore needed a secure foundation.

In his search for the roots of scientific thinking, Mises came across Immanuel Kant, a philosopher who wanted to clearly dissociate the field of knowledge from those of faith and conjecture. Going beyond Kant in his reflections, Mises eventually came up with a line of reasoning that would not stop “until it reaches a point beyond which it cannot go. Scientific theories are different from those of the average man only in that they attempt to build on a foundation that further reasoning cannot shake” (ibid., p. 29).

In Critique of Pure Reason (1781), Immanuel Kant developed the notion of there being two different ways of classifying judgments: on the one hand, judgments could be either analytical or synthetic, whereby the truth-value of analytical judgments (for example: “Bachelors are unmarried men”) can be sufficiently verified with the aid of logic; the truth-value of synthetic judgments, however, cannot be verified with the aid of logic (for example: “Today the weather is fine”). On the other hand, judgments could be a priori or a posteriori. Observations are needed to confirm a posteriori judgments (gained from experience), but not to confirm a priori judgments (which precede all experience). According to Kant, scientific knowledge would necessarily be valid and generic, whereby a priori analytical judgments always fulfilled these criteria: sentences such as “Bachelors are unmarried men” are necessarily and universally valid, because it is impossible to say “Bachelors are married, too.” But a priori analytical judgments have the drawback of not delivering any real findings. They are tautological, i.e., nothing new is added which was not already clear and given from the outset. The crucial question according to Kant must therefore be: “Are a priori synthetic judgments possible?” Kant himself was convinced he had found a whole series of such judgments: mathematical and geometrical theorems, or the principle of causality (cf. Liessmann 1998, p. 29), for example.

According to Kant, the truth of a priori synthetic judgments could be derived from self-evident axioms. Axioms are self-evident when you cannot dispute their truth without contradicting yourself. These kinds of axioms could be found to the extent that we consider ourselves cognitive human beings and thus understand the concept of our thought processes: the way our intellect works, and ultimately how our thinking apparatus is constructed. Mises has been rightly called a Kantian because he agreed with Kant in all of these deliberations (cf. Hoppe 1995/2007, pp. 18–19). But what he did not agree with was Kant’s idealistic assumption that reality is a mere construction of the intellect. According to Kant, a thing as such (Das Ding an sich) is unknowable. Reality can only be recognized as it appears to us by virtue of our reasoning, as we quasi-simulate or reconstruct it with the help of reasoning. Therefore no direct path to truth is available.

Mises, the realist and logician, could not accept the idealistic outlook— later adopted by constructivism—that thinking and reality are two separate worlds. In one simple, clear step, Mises went further than Kant in his thinking: based on self-evident axioms, true, synthetic a priori judgments are not purely cognitive constructs, and therefore conform to reality precisely because they are not just categories of reasoning, but also categories of action. Our intellect is always within an acting person. It never appears in isolation, as if it were a spirit, but within an acting human being. Therefore, the categories of our reasoning, for example causality, ultimately have to be founded in the categories of our action. Action means intervening in reality at an earlier point in time in order to achieve results at a later point in time. Every acting person must assume that a constant relationship between cause and effect does indeed exist. In this way, causality is a basic prerequisite of action. As a true a priori synthetic judgment, it proves to be both a category of thinking and of acting, both in cognitive and real terms (cf. Mises 1949/1998, pp. 22–23). The chasm between thinking and reality, and between the internal and external worlds, which Kant had considered an insurmountable barrier (cf. Hoppe 1995/2007, pp. 20–21), had been bridged.

“Human action,” Mises said, “is conscious behavior…. Conceptually it can be sharply and clearly distinguished from unconscious activity, even though in some cases it is perhaps not easy to determine whether given behavior is to be assigned to one or the other category” (Mises 2003 [1960], p. 24). This is what distinguishes the general theory of action, praxeol-ogy, from psychology. The subject-matter of psychology “[are] the internal events that result or can result in a definite action. The theme of praxeology is action as such” (Mises 1949/1998, p. 12). Action, i.e., conscious behavior, is thus “by definition … always rational. One is unwarranted in calling goals of action irrational simply because they are not worth striving for from the point of view of one’s own valuations. Such a mode of expressions leads to gross misunderstandings. Instead of saying that irrationality plays a role in action, one should accustom oneself to saying merely: There are people who aim at different ends from those that I aim at, and people who employ different means from those I would employ in their situation” (Mises 1960/2003, pp. 36–37).

It is not the task of the science of human action, Mises wrote in Human Action (1949/1998), “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. Science never tells a man how he should act; it merely shows how a man must act if he wants to attain definite ends” (Mises 1949/1998, p. 10). As the science of human action “is subjectivistic and takes the value judgments of acting man as ultimate data not open to any further critical examination, it is itself above all strife of parties and factions, it is indifferent to the conflicts of all schools of dogmatism and ethical doctrines, it is free from valuations and preconceived ideas and judgments, it is universally valid and absolutely and plainly human.” (ibid., p. 21). In the German predecessor of Human Action, Mises emphasized this more conspicously: “Value judgments,” he said, can “neither be proven nor justified and substantiated, nor rejected and discarded in a way every logically thinking man needs to accept as valid. Value judgments are irrational and subjective, one can commend and condemn them, approve or disapprove them, but one cannot call them true or false” (Mises 1940/1980, p. 53; cf. pp. 59–60).

Ultimately, it is important to become separated from the “metaphysical systems of the philosophy of history.” These systems “presume to be able to detect the ‘true’ and ‘real’ essence behind the appearance of things, which are hidden to the profane eye. They imagine themselves capable of discovering the final purpose of all mundane activity. They want to grasp the ‘objective meaning’ of events, which, they maintain, is different from their subjective meaning, i.e., the meaning intended by the actor himself. All religious systems and all philosophies of history proceed according to these same principles. Notwithstanding the bitterness with which they fight each other, Marxian socialism, German National Socialism, and the non-German movements related to it, which have taken a variety of forms, are all in agreement on logical method; and it is worth noting that they can all be traced back to the same metaphysical foundation, namely, the Hegelian dialectic” (Mises 1960/2003, p. 50).

It was patently clear to Mises that all those ideologies that were to turn the twentieth century into a bloodbath were ultimately based on Hegel’s philosophy of history. The philosophical counter-strategy that Mises developed—intended to debunk the dominating philosophy—was extreme sobriety. He didn’t allow himself any excessive enthusiasm: praxeology “is unable to give any answer to the question of the ‘meaning of the whole.’… It deliberately abstains from intruding into the depths of metaphysics. It suffers lightly the reproach of its opponents that it stops at the ‘surface’ of things” (ibid., pp. 50–51).

If one wanted to explore and describe human action, one would have to recognize that every action is preceded by thinking, insofar as “[t]hinking is to deliberate beforehand over future action and to reflect afterward upon past action. Thinking and acting are inseparable. Every action is always based on a definite idea about causal relations….Action without thinking, practice without theory are unimaginable. The reasoning may be faulty and the theory incorrect; but thinking and theorizing are not lacking in any action. On the other hand, thinking is always thinking of a potential action.… It is of no relevance for logic whether such action is feasible or not” (Mises 1949/1998, p. 177). The act of thinking is always purposeful (intentional). When action is eventually taken, it is “not simply giving preference.…Thus a man may prefer sunshine to rain and may wish that the sun would dispel the clouds. He who only wishes and hopes does not interfere actively with the course of events and with the shaping of his own destiny. But acting man chooses, determines, and tries to reach an end. Of two things both of which he cannot have together, he selects one and gives up the other. Action therefore always involves both taking and renunciation” (ibid., p. 12).

Consequently, the acting individual applies the means to attain his ends. The use of one’s own labor is generally included, but definitely not in every case: “Under special conditions a word is all that is needed. He who gives orders or interdictions may act without any expenditure of labor. To talk or not to talk, to smile or to remain serious, may be action. To consume and to enjoy are no less action than to abstain from accessible consumption and enjoyment…. For to do nothing and to be idle are also action, they too determine the course of events” (ibid., p. 13).

The goal, purpose or end of all action is the result, which ultimately “is always the relief from a felt uneasiness” (ibid., p. 92). “Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state. The incentive that impels a man to act is always some uneasiness. A man perfectly content with the state of his affairs would have no incentive to change things. He would not act; he would simply live free from care. But to make a man act, uneasiness and the image of a more satisfactory state alone are not sufficient. A third condition is required: the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness. In the absence of this condition no action is feasible…. These are the general conditions of human action. Man is the being that lives under these conditions. He is not only homo sapiens, but no less homo agens” (ibid., pp. 13–14).

“A means,” according to Mises, “is what serves to the attainment of any end, goal, or aim. Means are not in the given universe; in this universe there exist only things. A thing becomes a means when human reason plans to employ it for the attainment of some end and human action really employs it for this purpose. Thinking man sees the serviceableness of things, i.e., their ability to minister to his ends, and acting man makes them means…. Means are necessarily always limited, i.e., scarce with regard to the services for which man wants to use them…. If this were not the case, there would not be any action with regard to them. Where man is not restrained by the insufficient quantity of things available, there is no need for any action” (ibid., pp. 92–93).

Step by step, Mises subsequently described a science of rigorous universality “like those of logic and mathematics,” (ibid., p. 32) formulated sentences that were logically derived from the basic concept of action and that revealed nothing that was not already present in the prerequisites. With the concept of action, Mises said, “we simultaneously grasp the closely correlated concepts of [path and goal, means and end, cause and effect, beginning and end and thus also of] value, wealth, exchange, price, and cost. All of these are inevitably implied in the concept of action, and along with them the concepts of valuing, scale of value and importance, scarcity and abundance, advantage and disadvantage, success, profit and loss” (Mises 1960/2003, pp. 24–25).² Also included is the notion of “temporal sequence”: “What distinguishes the praxeological system from the logical system epistemologically is precisely that it implies the categories both of time and of causality. The praxeological system too is aprioristic and deductive. As a system it is out of time. But change is one of its elements. The notions of sooner and later and of cause and effect are among its constituents. Anteriority and consequence are essential concepts of praxeological reasoning. So is the irreversibility of events” (Mises 1949/1998, p. 99). To put it simply, praxeology was thus nothing but logic plus time within the framework of causality.

Accordingly, praxeology enables us to make predictions about future events. Admittedly, these predictions necessarily lack quantitative precision, because “the allocation of scarce resources to want satisfaction in various periods of the future is determined by value judgments and indirectly by all those factors which constitute the individuality of the acting man.” (Mises 1949/1998, p. 531). In the closing words of his Nationalökonomie, the German predecessor of Human Action, Mises explicated succinctly what that implies: “praxeological and economic insights cannot inform us about the future of society and of human culture or about the course of future events…. These facts may disappoint some people and make them underestimate the significance of praxeological and economic insights. However, man has to accept that there are limits to his mind’s thinking and research. We will never know what the future has in store for us. It cannot be any other way. Because if we knew in advance what the future would unalterably bring, we could no longer act…. That men act and that they do not know the future are not two independent matters but only two different modes of the same fact” (Mises 1940/1980, pp. 750–751).

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¹In order to make use of the original translation of the relevant chapters of Mises’s Grundprobleme der Nationalökonomie (1933), we refer in the following to his Epistemological Problems of Economics (1960/2003).

²Words in brackets missing in the translation (1960/2003) of the 1933 German original.