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Is Strategy a Branch of Praxeology?

January 24, 2014

In popular writings on Austrian economics, the terms “praxeology” and “economics” are sometimes used interchangeably, although economics is only one branch of the broader logic of human action. However, in The Ultimate Foundation of Economic Science (1962), Mises did observe that economics is the best developed branch of praxeology, and this has certainly remained true over time. But the question often arises what the other branches of praxeology might be.

In a 1951 article in the American Economic Review, Rothbard listed several types of praxeological theory:

A. The Theory of the Isolated Individual (Crusoe Economics)

B. The Theory of Voluntary Interpersonal Exchange (Catallactics, or the Economics of the Market)

1. Barter

2. With Medium of Exchange

a. On the Unhampered Market

b. Effects of Violent Intervention with the Market

c. Effects of Violent Abolition of the Market (Socialism)

C. The Theory of War—Hostile Action

D. The Theory of Games (e.g., Von Neumann and Morgenstern)

E. Unknown

Recently, Jakub Wiśniewski has developed the following diagram to further explain not only the different parts of praxeology, but also their relation to what Mises calls thymology, or the study of the precedents and causes of action.

Praxeology and Thymology

The relations between the different branches are often complex, as they often overlap, and there are numerous grey areas. There are also controversies about whether certain branches, such as praxeological ethics, can be developed (see here for one take). What is certain though is that there is relatively little research on the non-economic branches of praxeology.

I’ve been exploring some of these branches in my own research, especially regarding the fields of strategy and war making. I recently had the opportunity to talk about some of these ideas at the Ludwig von Mises Institute Romania, in a lecture titled “From the Science of Praxeology to the Art of War.” You can find a video of the seminar here.

What I argue in the lecture is that some classic writings on strategy (especially military strategy) discuss strategic reasoning in terms similar to economic reasoning, or even actively incorporate economic thinking into strategic theory. This is particularly true of famous works such as Sun Tzu’s Art of War, which incorporates ideas about scarcity, resource management, and the arrangement of incentives within hierarchical organizations. It also says a great deal about the creative, innovative, and “unorthodox” decision making characteristic of both excellent strategists and entrepreneurs. In a new paper, I explain in greater detail how Sun Tzu’s thought is grounded in the economic point of view.

This raises an interesting question though: are fields like strategy independent, unique branches of praxeology, or simply other avenues of applied economic reasoning? I do not think there is a clear answer to this question yet, but it may be that strategic decision making falls into the non-catallactic branch of economics; that is, the part of economics outside the sphere of exchange and economic calculation. However, further work needs to be done if we want to obtain a more complete picture of the larger network of praxeological studies.

In any case, one broader inference that may be obtained from the classics is that strategic decision making begins from the same starting point as traditionally economic behavior. That is, strategy (which involves execution in addition to planning) does not occur in a vacuum or in the abstract, but requires the use of scarce resources, especially time. Strategy must also take account of the purposes of the strategist, without which there is no goal for strategy to accomplish. In my opinion, this approach shows that strategy can be conceptualized in essentially praxeological terms. Others have also begun to see the similarities between Sun Tzu’s thought and economic reasoning. Mark Spitznagel, for example, argues that the Art of War can be applied to investment strategy from an Austrian perspective.

It is therefore reasonable to suggest that there is some common ground between the way the ancients conceived of strategic behavior and how praxeology might. Although the Chinese classics derive from a very different epistemological and philosophical tradition than Austrian economics, they perceive strategy in a similar way: as a series of universal principles often closely tied to human choice and purpose. There are, however, some trickier problems involved, such as whether the classical theorists would conceive of their principles as causal; especially in the Chinese classics, the notion of mutual determination typically dominates. Still, the classics may have a great deal to teach us about strategy in the broadest sense, as well as its narrower applications in business and warfare.

These applied fields have been receiving more attention in recent years. Business strategy is one of the fastest-growing fields in management studies, and fellow bloggers Nicolai Foss, Peter Klein, and Per Bylund have all done work on the topic. For anyone interested in applying praxeological thinking to warfare, I highly recommend Joe Salerno’s Independent Review article “Imperialism and the Logic of War Making.” Salerno explains how war making must be understood with reference to human purpose. When applied to the behavior of states, it then becomes clear why states display such a strong tendency toward conflict and war. That is, states are fundamentally oligarchic, and an inherent conflict of interest exists between rulers and ruled. War (or the threat of war) is used by states to obscure this conflict and also to expand the economic gains of the state and its allies. While this view of war making has a long history, it is vital to understand that it is an implication of the logic of state behavior, not an accidental result of certain forms of state organization.

I would like to thank Vlad Topan and Tudor Smirna of the Mises Institute Romania for generously inviting me to give the lecture.

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