Menger’s Proto-Misesian Methodology

I was reading Jeffrey Herbener’s incredibly educational introduction to The Meaning of Ludwig von Mises (which he also edited), and came across a quote he cites from Carl Menger’s Investigations into the Method of the Social Sciences that makes abundantly clear how close Menger and Mises were to each other on method, contrary to the claims of Max Keiser and John Aziz.

“Among economists the opinion often prevails that the empirical laws, ‘because they are based on experience,’ offer better guarantees of truth than those results of exact research which are obtained, as is assumed, only deductively from a priori axioms …

Testing the exact theory of economy by the full empirical method is simply a methodological absurdity, a failure to recognize the bases and presuppositions of exact research. At the same time it is a failure to recognize the particular aims which the exact sciences serve. To want to test the pure theory of economy by experience in its full reality is a process analogous to that of the mathematician who wants to correct the principles of geometry by measuring real objects. . . .

An empirical law lacks the guarantee of absolute validity a priori, i.e., simply according to its methodological presuppositions …

To want to transfer [the empirical method] to the results of exact research is, however, an absurdity, a failure to recognize the important difference between exact and realistic research. To combat this is the chief task of the preceding investigations.”

Also see David Gordon on this topic.

Comments

  1. Mr. Aziz,

    The claim that ‘Austrians’ believe that all theory is ‘a priori’ to human experience is simply wrong. Both Mises and Rothbard make claims that closely resemble those of Menger. I cannot at this moment find the relevent quotes from Mises, but this article written by Rothbard explains how Mises viewed praxeology and how he himself viewed it: http://mises.org/daily/6090/Praxeology-The-Methodology-of-Austrian-Economics

    Here are a few relevant quotes from Rothbard explaining how Mises viewed praxeology: “It should be noted that for Mises it is only the fundamental axiom of action that is a priori; he conceded that the subsidiary axioms of the diversity of mankind and nature, and of leisure as a consumers’ good, are broadly empirical.” and this: “Ludwig von Mises, as an adherent of Kantian epistemology, asserted that the concept of action is a priori to all experience, because it is, like the law of cause and effect, part of “the essential and necessary character of the logical structure of the human mind.”"

    It seems here that the only thing Mises saw as ‘a priori’ to human experience was the ‘action axiom’. All the other axioms were subject to observation. I disagree with this and take a more Rothbardian position. Here is a quote from Rothbard in the the same article:

    “If, in the broad sense, the axioms of praxeology are radically empirical, they are far from the post-Humean empiricism that pervades the modern methodology of social science. In addition to the foregoing considerations, (1) they are so broadly based in common human experience that once enunciated they become self-evident and hence do not meet the fashionable criterion of “falsifiability”; (2) they rest, particularly the action axiom, on universal inner experience, as well as on external experience, that is, the evidence is reflective rather than purely physical; and (3) they are therefore a priori to the complex historical events to which modern empiricism confines the concept of “experience.”

    Austrians generally agree that theory is ‘a priori’ to complex historical events, not to general observation of human behaviour. This very closely resembles what Menger believed as well. Finally, here is JB Say (not an Austrian):

    “Hence the advantage enjoyed by everyone who, from distinct and accurate observation, can establish the existence of these general facts, demonstrate their connection and deduce their consequences. They as certainly proceed from the nature of things as the laws of the material world. We do not imagine them; they are results disclosed to us by judicious observation and analysis.…

    Political economy … is composed of a few fundamental principles, and of a great number of corollaries or conclusions, drawn from these principles … that can be admitted by every reflecting mind.”

    Rothbard quotes this explanation of economic methodology very approvingly, indicating again that empirical observation is important to economic analysis.

    The problem here is that you have created a strawman which is being used by individuals such as Max Keiser to smear ‘Austrian’ economists as opposed to actually addressing their points. The argument that Mises deviated from Menger and therefore is not a ‘real’ Austrian can also be applied to Rothbard because he deviated from Mises … which of course just goes to show what nonsense is being peddled here.

    • CT,

      Mises produced a lot of good theory, even from my point of view as a non-praxeologist. As I pointed out above, all theory is theory however it has been derived, and theory is ultimately be judged on how well that theory explains phenomena. Mises’ explanation of the problems with socialism and interventionism is valid however it was derived.

      I don’t care who is a “real” Austrian and who isn’t. Menger founded the Austrian school, Mises took it in a slightly different direction, Rothbard took it in a slightly different direction, Fekete took it in a slightly different direction, I have taken it in my own direction. I generally prefer Menger and Fekete’s work and methodology to Mises and Rothbard, but that does not mean I do not have plenty of time for some of Mises and Rothbard’s ideas. The key difference between me and Mises is that Mises subscribed to the Kantian epistemology, and I really don’t. To what extent Menger did is uncertain, there are quotes suggesting his views were similar to mine and quotes such as the one Sanchez produced suggesting he had sympathy for Mises’ views. I am not going to claim that Miseseans and Rothbardians are not Austrians as others have done however much I disdain the Kantian epistemology.

      On the other hand, if your problem is with Max Keiser, then that is another fight entirely.

      • Well I don’t subscribe to Kantian epistemology either and I disagree with Mises that the ‘action axiom’ is a priori to experience in the broader sense. My biggest issue is with your critique of Mises. You used the following quote to argue that Mises believed experience to be irrelevant to economic theory:

        “Our statements and propositions are not derived from experience. They are not subject to verification or falsification on the ground of experience and facts.”

        But in fact, when you read the article, it becomes clear he was referring to specific historical experience … not general observation of human beings and the way they behave. You made it seem as if Mises and Rothbard engaged in some kind of meaningless mental masterbation – which of course Keiser and his minions piled on top of.

        What should be clear from reading both Mises and Rothbard is that they both viewed facts to be important to determining theory (Mises less than Rothbard) and they both considered specific historical events as not being sufficient to overturn theory. On the other hand, and I can’t remember which book of Mises I read this in, Mises does write that if historical experience directly contradicts a theory, that either you have made a mistake in your theory and this must be fixed or there is data missing. So the contention that those who adhere to ‘Austrian’ economics don’t care about data is seriously misleading. Economists such as Robert Higgs and Robert Murphy analyze data all the time.

        Finally, from reading 3 of Menger’s books, it seems clear to me that his methodology is very close to that of Mises and Rothbard. For example, he identifies the characteristics that are essential for something to be considered as a ‘good’. He uses general observation to support his theory and yet no historical event that I can conceive of could possibly overturn his theory of what constitutes a good (both higher and lower order).

    • “It seems here that the only thing Mises saw as ‘a priori’ to human experience was the ‘action axiom’. All the other axioms were subject to observation.”

      CT,

      That is incorrect. Mises characterized ALL of praxeology and economics as aprioristic.

      From Human Action:

      “But the end of science is to know reality. It is not mental gymnastics or a logical pastime. Therefore praxeology restricts its inquiries to the study of acting under those conditions and presuppositions which are given in reality. It studies acting under unrealized and unrealizable conditions only from two points of view. It deals with states of affairs which, although not real in the present and past world, could possibly become real at some future date. And it examines unreal and unrealizable conditions if such an inquiry is needed for a satisfactory grasp of what is going on under the conditions present in reality.

      However, this reference to experience does not impair the aprioristic character of praxeology and economics. Experience merely directs our curiosity toward certain problems and diverts it from other problems. It tells us what we should explore, but it does not tell us how we could proceed in our search for knowledge. Moreover, it is not experience but thinking alone which teaches us that, and in what instances, it is necessary to investigate unrealizable hypothetical conditions in order to conceive what is going on in the real world.”

  2. Except Menger wrote (via Jorge Guido Hulsmann):

    Referring to the disagreements between his theory of prices and the price theory of his French correspondent, Menger argued that real-life experience was the only legitimate way to decide the points under contention. The merit of a theory “always depends on the extent to which it succeeds in determining the true factors (those that correspond to real life) constituting the economic phenomena and the laws according to which the complex phenomena of political economy result from the simple elements.”

    This is where I stand, anyway: all theories that pretend to describing real-world phenomena will be assessed relative to their description and prediction of real-world phenomena. Economics as a discipline arose in response to people wanting to understand the real world, just as geometry as a discipline arose from people wanting to understand the real world. Pythagoras’ Theorem would not hold up if it could be falsified in the real. The same applies to economic theory. So all theory is theory, irrespective of whether we wish to call it praxeology or whether we wish to call it something else.

    I think any discussion on empirical methodology in economic theory needs to begin with the point that the current crop of “empiricists” aren’t really very empirical. Throwing a load of math together to create a model that requires that its user assumes away reality is — by my reckoning — just as deductionist as praxeology, and philosophically more problematic, because at least the praxeologists are aware of their own true philosophical basis. Even if such models’ outputs are tested by falsification, such methods can only show us what is not true rather than what is true. At any point, the empirical data might permit any number of separate contradictory theories, all of which might be falsified in the immediate future. Reality is a bitch.

    I approach this in a radically different way to everyone else. When I talk about my yearning for empirical economics I am talking about free markets. Historical data shows that freer markets produce more technology, and longer-lasting prosperity. My theory (reached deductively, but falsifiable) is that free markets are truly empirical systems, because they encode the freedom to experiment with different systems of organisation, different means of commerce, different currencies, different business models, etc — different ways of satisfying individual human needs and wants. This allows societies and individuals to build what works. Central planning is (according to my theory) largely anti-empirical, because it retards the level of autonomous experimentation in the wider economy.

    • What you quote is exactly Mises’ approach as well, and it has nothing to do with “falsification”. You are interpreting “merit” as “validity”, when it really means “applicability”. Mises, like Menger, was not concerned with theorems that do not apply to given reality. This is why Mises called the mathematical analysis of general equilibrium an idle pastime. And in undertaking economic history, they were only concerned with the theorems that are applicable to the reality of the particular historical episode at hand.

      You don’t even try to reconcile my quote with your (erroneous) interpretation of yours. You just say, “but he also said this!” Doesn’t the fact that the two don’t jibe strike you as an indication that you’re missing something?

      You even make a claim about geometry that you offer as an illustration of your allegedly “Mengerian” position, even though it is *directly* controverted by the very Menger quote that you are responding to!

      • Menger existed between two worlds. While Mises proposed one kind of theory — praxeology, validated by logical consistency, and applied as per observation, Menger proposed a schism between the “empirical science” and the “exact science”, the latter of which is akin to praxeology, and the former of which is akin to positivism. In the quote I produced Menger was talking about the “empirical science”. The distinction between applicability and validity is Mises’, not Menger’s.

        Now, to me there is no “exact science” of economics, only an empirical one. Economics should not be abstracted from the physical and human reality. And empirical “laws” are just patterns of observation, and there is nothing fundamental about a pattern of observation. I reject the notion of “laws” in economics altogether; there is data, and there are theories that try to account for that data. When I try to predict, I use theory, not laws.

        As I do not recognise that there is any underlying “exact science”, Menger’s pronouncements on that subject are not relevant to me. If I were to accept the notion of an “exact science” of economics, my (proposed) laws would probably look a lot like those of Mises and Menger.

        • “In the quote I produced Menger was talking about the “empirical science””

          Nope. Menger was talking about the price theory he elaborated in Principles of Economics, which he formulated using the “exact method”.

          The problem he had with the price theory of his correspondent (Walras) was not that it was “falsified” by historical events, but that it started from unrealistic assumptions (assumptions that did not *apply* to reality).

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