 This is Jeff Deist and you're listening to the Human Action Podcast. Ladies and gentlemen, welcome back to week two of our foray through Human Action here on the Human Action Podcast. Now for some of you who had the opportunity to listen last week with Dr. Sean Rittenauer, we sort of went through some background on the book itself, when it was written, how it was written, how it came to be written, Mises' motivations, and we also tried to get some of you interested in getting this book into your personal collection, whether via audio book or Kindle or in physical form. And again, we will provide the links to where you can purchase this book either in hardcover or very inexpensive softcover on our website and use the code HA-POD, that's short for Human Action Podcast, and you'll get a $5 discount on either. And frankly, I think even the hardcover is only $20 before the $5, the softcover is very, very inexpensive. And this is a book, I think if you make it through, if you get through these podcasts and develop an interest in it, it's one of those books that you want to own in physical form. It's not something that you just want to have on your Kindle because it really is one of those seminal rare books that could change your life. So that said, as discussed last week, we are going to start this week with part one of the book, which is entitled Human Action 1, and that comprises the first 142 pages, the first seven chapters. And we thought that there would be no better guest for this portion of the book than our great friend, Dr. David Gordon, who is in Los Angeles. And David, I was talking to Sean last week about how this is considered, I guess, the philosophical part of the book, part one, where some people, especially math-brained econ types, perhaps lose a little patience with Mises. Oh, yes, Jeff. Well, I think in the, for most economists, especially they study the neoclassical mainstream economics, there's very little time spent on issues of method on what the nature of economic method is. They just start giving them all the equations and models right away. So they're not used to this philosophical discussion. I'm very glad Mises put this in because this is my specialty, and this keeps me in business if it weren't for this section. I probably wouldn't have a job, so I'm very glad he has this. By that you mean that you have a PhD in philosophy, you're a philosopher. In history, well, my PhD is in history, but all my publication or practically all my publications were in philosophy because it's much easier, you just have to come up with arguments instead of doing a lot of research. So it was, I'm very glad Mises, I think one thing very important, you'll come out when you read human action, is that unlike most economists or most academics today who are very narrowly specialized in their own discipline, Mises had an extremely broad culture. He was familiar with all the main areas of thought, and he could, he would assume that people would get all his references and know what he was talking about, and he had to sometimes decide, he would get the side discussions on where he'd give his opinions on all sorts of philosophical issues. So I think if you're studying economics, say in your regular university course, you won't be used to this, but once you get used to it, once you see that the ideas aren't really that hard to understand, they're really commonsensical ideas. Then once you get the main points, you can just keep going over and over the text and you'll always come up with new stuff, but you'll be able to understand the basics pretty much right away. And of course, for purposes of our discussion, we are using the Scholars Edition, which was published by the Mises Institute in 1998, but originally published by Mises in 1949, and that includes an introduction written by him that same year, a publication, David. And I noticed a couple of things you alluded to earlier. First of all, he points out that economics is the youngest of the social sciences, by which I think really for well into the 20th century, it was scarcely considered a standalone discipline, as Sean Rittenauer and I discussed last week. Also, I noticed in the introduction, he gets in a little dig, I believe, against the economic trends of his time in that profession where he says, in the introduction where he says, one must study the laws of human action and social cooperation as the physicist studies the laws of nature. And of course, we're seeing today, for example, in the MMT movement, there are lots of people who just flat out don't think there are laws of economics. Well, I guess that was the people who don't think there are laws of economics at all. That goes back to one of his primary targets with the German historical school. And they, just like the people you mentioned now, they didn't like the notion of laws of economics, because if there are laws of economics, then they limit the power of the state to do what it wants. For example, there's one influential movement now the MMT, I think Modern Monetary Theory, MMT, and they essentially say that the government doesn't have to worry about having enough money to embark on projects. Say the government says, well, we'd like to, say, give everybody a college education, but then opponents say, but this will cost a tremendous amount of money. So they say, oh, we don't have to worry about that. All we have to do is print the money because the government doesn't have to worry that it's going to go bankrupt if it prints too much money unlike private people. Say if I see all sorts of things I want to buy, I can't just keep going into debt and buying them because eventually all the credit cards will max out my credit cards and they'll come after me. So they say, well, this doesn't happen to the government. So if you hold that sort of view, then you won't like the idea that there are laws of economics that would say you can't do that and you'll suffer certain consequences if you try that. So Mises was very opposed to that. Now, when he said you mentioned before, when he said the laws of, I wanted to connect two things. He said a little about laws. Some people say economics should be studied like laws of physics. He also quoted him saying economics is the youngest of the sciences. What he meant there was that economics has a different sort of law from the other sciences. The other sciences he thought were spinoffs from philosophy originally and they just became independent ways of investigating nature. But economics is a distinct discipline because unlike the other physical sciences, it doesn't study things from the outside, but it can study human action, action from the inside. We all act, so we know what action is and we can study that. And he thought that wasn't what was done in the other sciences, so that's why it's the youngest of all the sciences. So he gets into chapter one titled Acting Man with a bit of psychology and it struck to me that the psychologist and behavioral economists ought to actually take an interest in what he has to say here. So he opens really the book conceptually and as an aside, as Dr. Rittenauer and I mentioned last week, one of the beautiful things about this book is you see sort of his finest and fullest and exposition of various concepts, whether that's his money in banking or socialism or the origins of money or method or praxeology, all of these things have sort of culminated for him career-wise at this point by 1949. So if you only read human action and none of his earlier works, let's say socialism or the theory of money and credit, you would get the best sense of what he thought later in life and later in his career here. So when he opens with a chapter called Acting Man, you get the sense, David, that he has really thought this out and perfected it. So he talks about the idea that human action arises because we feel some sort of uneasiness and we sense that we could somehow improve our conditions around us and so we take some sort of purposeful action to alleviate it. Now, does all of this belong in an economics treatise or is this apparently not so simple as we think? Well, yeah. Well, the reason he puts that in is that he takes us to be action to be the basic concept of economics and he's going to try to deduce the body of economic theory from the concept of action plus a few subsidiary postulates. So this for him is not just some philosophical side path but this is the basis of the whole discipline and we can see this, for example, in say when we're studying theory of value, utility, he isn't as in classical economics just taking kind of utility scales as somehow given to people. You just start with certain scales and then you have them all out there and then you do various kinds of mathematical calculations on them but he tries to show how it's always action. We're always, in our situation, things are not perfect. There's always something we can try to improve our situation. We can try to make things better. If say things aren't going so well for us, we still have the question, how can things be made less bad than they might otherwise be? So we're always faced with choice and then from that we can rank the various alternatives we have and we would then choose the one that best enable us to relieve our uneasiness which would rank highest among our preferences. So I think it's a much better way of doing things than the standard way. He doesn't just jump into utility theory. He shows the whole basis of utility theory in action and how this is just a basic part of the human condition. One of the most essential parts of human beings is that human beings act. Well, so he quickly takes pains to disabuse us of this rational actor idea that still plagues economics today that human action isn't necessarily rational in the ordinary sense in which we use the word. But what he means here is that it's volitional. Human action is volition. It has a purpose to it. It doesn't necessarily mean that we are these rigid sort of rational economic automatons walking around acting in our best interest. It just means that we're acting out of volition. Yes, that's right. I mean, many people will contrast various kinds. They'll say, well, we could think of some people are very carefully calculating what to do where they're thinking things over very in a very painstaking way. Yeah, like Sherlock Holmes. Yeah. Yeah. And others are just impulsive. They just do whatever seems spur of the moment. What matters is just that you have some goal, some purpose. You think that there's a means of way you can achieve that purpose. So he gives cases such as people might take to be irrational in ordinary conversation. I mean, supposing, say, somebody just has an impulse. Mises was very interested in psychoanalysis. He knew Freud personally. Suppose somebody has some impulse that can be explained by psychoanalysis. He just feels like going out and killing somebody. So this counts as action as long as he has the goal, which is to kill the person. He has some means in mind to do it. So it doesn't matter what is the psychological origin of the goal that it doesn't have to be traced to some kind of reasoning process that how the person has arrived at the goal. We just know the person has a goal. He thinks there's a certain way he can achieve that goal. So that's an action and it doesn't have to be the means that he can be wrong about what will enable him to achieve the action. He could just have all sorts of some pretty crazy belief. Imagine somebody who thought if he bangs his head against the wall, 10 times that'll result in his winning the lottery. We would say, oh, that's crazy. He thinks that, but that still counts as action. He has the goal. His goal is to win the lottery. He thinks banging his head enabled him to do that. So that's an action. Well, he makes a couple of pretty sweeping pronouncements in this chapter. One is that causality is really our only suitable method for studying the world around us. I'm not sure that mystics, for example, would accept that. And he also basically says that praxeology is universal. So discuss these two and how he arrives at these. Oh, well, when he says causality, what he has in mind there is when we want to do something, we have to think there's a way that will enable us to do that. We have a goal. We think this will enable us to do this. So we have some sort of view that doing such and such will enable me to get that. So that's what he means by causality. We think something will produce something else. So I don't think he's not really assuming any particular analysis of causality just says, this is really how we get things. So the other one was... The idea that praxeology is universal. Well, he says that obviously most people haven't studied praxeology, so formal science, but the category of action and choice are ones that all people use. Everyone acts and has goals and means to achieve these. And then when they're acting in this way, when they're trying to act, they're carrying out, they're putting into effect the principles of praxeology that when he's going on later and showing how the law of diminishing utility is derived, that this is something that people do in their action. Unless they've studied economics, they won't know it under that name, but they'll be applying it in their own life. So it's universal in the sense that we all apply it in our daily life. We all use praxeology. It's just like the character in Moliere's play who said that he had been speaking prose all his life and didn't realize that people are using praxeology in their life, whether they think of it in that way or not. Well, I think it's an example of why you need to read this book, ladies and gentlemen, why you need to recommend it to others, because it really does give you a different kind of framework for looking not only at economics but at the broader branch of praxeology. And this leads us, David, into chapter two, which from my perspective is the densest and most difficult part of this section of the book anyway. It's all about epistemology. It is entitled The Epistemological Problems of the Sciences of Human Action. And this, of course, is where he really takes us into the differences between praxeology and history and social sciences versus the natural sciences and makes an important distinction about our priori knowledge, which of course applies to disciplines like logic, like math, like praxeology, but not to natural sciences. So, David, kind of tell us, what's our big takeaway? What's the core of chapter two here about epistemology? Well, one thing, Jeff, I say, you know, this is the best chat. This is the most fun chapter, actually, not the most difficult. This is the one that keeps me in business. This is my best one. Well, what he does there first in contrast history with the sciences. So, say, we have history. This is a particular event, like, say, you're on the phone talking to me or I'm talking to you, and we have all sorts of events. So, we can try to have not only list all the events, kind of have a chronology, say, this happened in this year, this happened in this year. We can try to have explanations of those events, say, why did those events happen? So, we have explanations of particular events. Then, on the other side, we have the sciences, which are trying to come up with general laws, not only say why did specific events happen, but why aren't there generally repeated patterns that we find. In physics, why is it that two masses will attract each other with certain gravitational force? So, we have attempt to find general laws. Then, within the sciences, we have a division between sciences that are concerned with general laws for particular events, trying to explain particular things that happened in nature, repeated things that happened in nature, and they're purely, what we call purely a priori disciplines. These give us things we can figure out just by thinking about them, such as mathematics, logic. They don't require, or they don't reference to particular events at all. And, Mises thinks that we can develop economics as an a priori discipline of this kind, just by thinking about action, what's involved in the concept of action. We can work out a priori structure that has to be supplemented by some subsidiary postulates, but once you put those in, everything is, again, figured out a priori. So, it's really a contrast between studying history, studying particular events. Economics is studying action, which is not concerned with particular actions, but just general truths about all actions. Mises argues that this can be studied just by thinking about action. So, that's what he means by a priori, from before. But when he means human action, or uses that term, he's talking about something different than natural phenomena. Human action is a different category. Yes, that's right, because, say, we're looking at non-human actions. We're looking, say, you have a billiard where you're playing pool and you see one billiard ball hitting another one, or you see one golf ball, a golf that strikes the ball, and you see the golf ball going in a certain direction. So, the golf ball is not thinking, saying, well, I've got to go this way, or maybe it will be nice to play a trick on this player and get this. I'll go into the sand trap. The ball is just following certain laws of physics, and if we're interested in studying those laws, we could only observe this from the outside, because the ball is going a certain way. We can't get into the golf ball's mind. It doesn't have one. But human beings aren't like that. We not only are making physical motions when we do something, but we have purposes, and we have means that we think will help us attain those purposes. We know this because we're acting ourselves, so we can study actions in different ways from the physical side. Now, I'll mention here, because I think it's a point of historical interest. This went against Aristotle and some of his followers in this way that Aristotle thought that, although it's true say that the physical bodies don't have minds, the concept of purpose still applies to nature. We can talk about things doing things in nature, doing things for a purpose. They're asked, or say, the way an acorn is growing into an oak, because that's what its nature is, where the nature would be guiding it to grow into an oak. So, Mises didn't like that idea at all. He thought, oh, no, this is all wrong, but action just applies to human beings. The nature we can't talk about, we shouldn't talk about nature as the purposes apart from human action. This is one point in the center where he differed from Martin Rothbard, because Rothbard was more Aristotelian, he thought, but he wouldn't have rejected this notion of purpose in nature. But Mises does, he's explaining the physical science completely different from human action that the only purposes in nature are human purposes. So, David, as he gets into this chapter, of course, he brings up what he calls the principle of methodological singularism, which is a different way of saying individual methodology, I suppose. And so everything you've been saying up to this point, we have to understand in terms of Mises is talking about looking at individual action, not collective or group action or aggregates, as we often see in econ. And he actually has a statement on page 45 of the book for people who are reading along against universalism. And it's something that's actually repeated not only at a few different points throughout this book, but in different writings throughout his varied career, this Mises in case against universalism. So talk about what he means here by the principle of methodological singularism. Yes, well, what he means there is that both you want to study action in the way I've been talking about, you want to know what is the nature of action. So what we do is we study, we just take any action you want. So you evacuate all the particular features of that action. What is the general structure that applies to this action as well, any other action? And in doing that, you're considering you're an individual, you're not a collective, it's only individuals and so what you'd be doing, this is methodological individual, talking, getting this a priori structure of action. You're talking about any action of a particular individual and you're saying, what are the features of that action? This will enable you to understand all actions because you're not concerned with particular actions. You're concerned with general structure that applies to all actions. That's why in studying the general feature of an action, you'll be getting the structure that applies universally to all actions. Well, what I think about this chapter and I think about epistemology, two things come to mind. First of all, as you mentioned earlier, economics doesn't normally start with this stuff at all. It goes straight into graphs and charts and models and numbers. So it ignores epistemology, so to speak. And number two, David, is if Mises is right here or largely correct, doesn't that rest modern whatever we want to call neoclassical economics on a very shaky framework because modern economics is generally not in agreement with Mises here? Oh, yes, that's right. The way they do things, they'll just construct arbitrary models and then they try to test these and say, how does this apply? Is this confirmed in reality? Our model says such and such should happen. Then we say, does this happen? So Mises says, oh, no, that's wrong. What you would get there is you could come up with, you would come up with such and such as happened at particular times. Say we know that prices have risen or fallen in particular for particular goods at various times, but that won't get you any general laws. That'll just get you particular items that have happened on individual occasions, but you won't be able to get any general laws the way you get general laws in economics is to proceed in the way he does in human action by elaborating a whole structure of what's involved in the concept of what's involved in action. He didn't think there was a different way of getting laws. He didn't think you could just come up with empirical laws of economics. They would try to do in the neoclassical economics. They would say, well, we've got our model. Now we're testing it out so we can come up with laws. For example, French economist Thomas Piketty has said, well, there's a law that he claims based on certain statistical data that he hasn't. Well, he can show that the percentage of income going to capital will rise as capital is developed. According to Mises, you couldn't have that kind of law that you could say such and such has happened about the percentage of income going to capital. You wouldn't be able to get a general law from that. The only general laws in economics are praxeological ones. And thus individualistic in approach. I suppose you say something like Germany invaded Russia on June 22, 1941. So it isn't that there's a country of Germany act. There's no sort of collective entity. Hitler, the German leader, gave certain orders as a result. Brothers, people did the result was the evasion. But it isn't that the collective act is somehow some entity apart from the individual. Right. And this is also the chapter where he introduces the concept in the German word of vert free, meaning value free. That all of this, everything we're talking about in the epistemological arena here is observational. It's not normative. It's not based on any overarching values or something that this is purely scientific in that sense of the word, value free. Oh yes, this is one of the most important notions in Mises' whole way of looking at economics, is that in economics we're studying the values people have, the subjective values that we're trying to explain by the terms of the values people have, their preferences. But in doing that, we're making scientific assertions about people's values. We're not imposing our own values or going on our own, based on our own values. It isn't safe. We know that Mises like the free market. So he's going to say, well, I like the free market. So I'm going to come up with a science that supports the free market. A Marxist economist could say, I don't like the free market. So I want to help the proletariat. I'm going to come up with a science that will help them based on my values. Now the view that many people have that Mises is irrational, is a revolt against reason, is that people don't think there are objective science in this way. They say all that we have is particular value systems and people will be trying to support. This is particularly true in economics. Some people say, well, you can always find economists on one side of an issue or another side, depending on what the values they have. Mises said, no, no, this is right. It is certainly the case that the conclusions he comes up with on the basis of his analysis will support the free market, but that doesn't rest on his value judgment. That's just a scientific result. So suppose we say, for example, minimum wage laws cause unemployment. That's a strictly scientific statement. So if you then say, well, I don't want unemployment. So I think it's a mistake to have minimum wage laws. That would be a value judgment, but it's based on the strictly scientific statement that isn't a value judgment. Minimum wage laws cause unemployment. And chapter three is, in fact, entitled economics and the revolt against reason. And this is where, as you just now alluded to, he gets into this concept of polylogism. So what is polylogism? And why does Mises devote a chapter, albeit a rather brief chapter, to polylogism? Well, as I mentioned, talking about the basic concept that he's giving in the whole book in particular in these first seven chapters is that we have an a priori science of human action. This is the basis of economics. So this isn't going to be that big a claim if it turns out that there are different groups that have different ways of reasoning. Suppose somebody said, well, you know, you say there's an a priori structure of human reason that's universal, but in fact, that's not right. There are different classes. Workers, proletarians have a different logic from capitalists. There are different racial groups that have different logic. People have different ways of reasoning depending on what historical era they're living in. So if you hold that sort of view, that'll knock out economic theories as Mises conducts economics. So he naturally argues against that, and he says, no, no, if you people really reason in the same way these concepts are universal, that he's talking about, of course, people have very different beliefs about things that's better in all sorts of ways, but the structure of action is still the same. Universally say we look at their societies very different from our own. We'll still find people are acting people have goals and their have means to attain these goals. And he's very critical of theories that were popular around the time he was running in their still. There's no people who hold these today that say human beings really don't act on the basis of reason in the sense of having goals and trying to achieve them. Some people say human beings just act on instinct. They just kind of, I shouldn't say act on them because they don't really act. They just have feelings that inevitably draw them to behave in certain ways or instincts that make them do things. So Mises says no, that's wrong. One view that was influential when he was writing is that there's a primitive mentality that's completely different from the way people reason today. Of course, those uses come out of fashion. Now in anthropology, if you use the word primitive, you can be taken out and shot. Be canceled. Right. But what strikes me though about this chapter is the modern analogy to this idea like we'll speak your truth from your lived experiences. It sounds an awfully lot like the polylogism that Mises is fighting that we all have our own logic our own forms of reason. And of course Marxist in his day and still today want to attack logic and reason as mechanisms for truth finding because as we started the show with if there really are let's say objective laws to economics and that's bad for status and Marxist and people with grandiose plans to do things legislatively by fiat which might in fact violate those laws. So I was struck rereading this chapter the other night and it's short, this idea of your truth. There's no such thing in Mises's mind. And I think he would argue today that polylogism is a very dangerous mentality. It makes us think that we all have our own separate logic based on let's say our racial characteristics or our gender or whatever it might be and not a recipe for harmony in society. Oh yes, I think one of the things you find it's a phrase that I find really upsetting people say something like this is true for me. And what they mean by that is that they hold such a view that they take such a view to be true but that doesn't mean something is true for individuals in the sense that there are different realities that particular individuals have. Don't say that at your local Objectivist meeting. I'd say that much. You're going to get slapped. I want to talk about chapter four, the category of action. This is another relatively short chapter but really, really interesting. I really enjoy these cerebral short chapters. I mean, Mises is such a master. He just brings this stuff to life and makes you think it's actually fun and invigorating to reread some of this stuff. So he starts once again, David, with this idea of felt uneasiness, that this is the impulse we want to change our circumstances. But that economics is about men. It's about people and action. It's not about things and stuff and money. Oh, yes. I mean, if you take money, if you just take it as a physical thing, say pieces of metal or piece of paper, bank certain marks on the computer, this is money only because of the way people take it, the way people are acting on the basis of giving meaning to these physical entities. So we're always concerned in economics with action how people, explaining things through people, subjective values and their use of means to attain those the ends according to their value scales and physical entities aren't significant economics apart from how they enter into action. And he's introducing the subject of the value in terms of ordinal preferences that we can't calculate values per se, but we can only understand an individual subjective or ordinal preferences. Oh, yes. This is, again, one of the key ideas in human action. He said, when we're facing alternatives, what we're doing is we rank the alternatives available to us just as we're considering over the time. Both I have a choice between I can eat an apple now or an orange. So I rank one over the other. It isn't that there are units of value that I can calculate in. There aren't numerical units. It's all that we're doing in action is ranking alternatives one over the other. When we talk about trying to relieve felt uneasiness, there aren't units of uneasiness that we can figure out. The orange will satisfy five units of uneasiness. The apple only three, so I'll take the orange. It's just that we rank one over the other. And I think it's important to remember that in this introductory part of the book, we are strictly looking at the individual. We're not looking at so-called catalactics, which is exchange between one or more individuals, market exchanges. We're just talking about what's behind praxeology. And so in this chapter four of the book, Mises introduces this really I think fascinating idea of action as an exchange. In other words, when humans act to alleviate this uneasiness because they imagine perhaps a better state of affairs for themselves, they're trading sort of one state of affairs for hopefully a more satisfactory one in that we can actually view this, we can view human action as a form of exchange even at the individual level. Oh, yeah, as you say, it's a very interesting idea. You said that, say, if you have your state of uneasiness, so you're in the state at a time, this is your condition, and if your action is successful, then you're better off than you were before. So you've, one state of affairs has been traded for another so you could take, I think an unusual way of looking at things, he's taking the existing state of affairs, the one that's traded for the one that's realized as kind of the cost and the result is what's been produced. And if your satisfaction is higher, you relieve uneasiness. So there's what he calls a psychic profit you gained on the deal. So it's just like in it, say if you have an exchange with two people, you can say, I'm giving you one good in return for you're giving me something else so you have an exchange there and we can both profit. You can take exchange in this extended way of exchanging for an individual, one, your existing state, or some other state which results from your action. And of course, all of this implicates our next subject in chapter 5, which is time. And as Mises tells us, you know, praxeology requires an understanding of the temporal character of what human beings do. So David, tell us a little bit about time now. We don't get into interest necessarily in this in chapter 5, but we get into the idea of time in human action. For example, action implies a future that you're not going to be dead, for example. I'm planning on doing things tomorrow on Friday and my actions depend on me not being dead. So that's one thing. And the other thing is that I think this chapter starts to allow the reader to figure out that we have to economize time and we all understand this, I think, inherently by virtue of our mortality, but to understand it more concretely in terms of praxeology and then how that fits into economics would be to say, David, for example, that a person might prefer their dream house at age 40 over age 90. And there's a reason for that. So what is chapter 5 all about? Well, I think what he has in mind there is say we have, we were talking about earlier in action, we have a goal and we have where the means to achieve this goal. So the goal says we don't have it now, otherwise there would be no need to action. We already have a goal. The goal is something in the future. Say I want such and such. So the goal is in the future and then we have how do we achieve the goal? That would imply the process of achieving the goal. But David, let me interrupt you briefly. When you say we're talking about the future, that could mean something just as short as the next 30 seconds I'm going to walk to the fridge and get a Diet Coke. It doesn't have to mean a lofty or far away future. Oh, yes, that's right. When Mises talks about future, what he has primarily in mind is there's a temporal structure to action. The goal is out ahead and I want to get that action. In the future in that structure where you have the past of the action, the past is the time before the action the period in which the action takes place and then the realization of the action, that's the time as the individual is experiencing that. And Mises distinguishes that from time in a kind of physical sense, say, as we would study it in physics where it's just motion of some sort of going on, just in some kind of physical process, the time is individual to the after. So the individual, two actions of an individual are never synchronous, so to speak. They succeed one another. They happen one after the other. And of course, just like other factors in his life, time is potentially scarce. He has to economize it. Oh, yes, I mean, we can't achieve all our goals in an unlimited way. We have, say, we have a period of 24 hours in a day. So we have to decide how, if we use the time to achieve one goal, then there'll be less of it to achieve other goals. Just as we have different goals that we want. So if I concentrate on one goal, I can't concentrate on other goals. At the same time, we have to realize also we have the time available to us is limited so we can only try to achieve a certain number of our goals. Time is scarce and has to be considered something to be economized on. I have to consider that if I use time in our, for one thing, that'll give me less time to achieve something else. And of course, what time gives us in life or the ticking amount of time we have left is uncertainty. That's chapter six. We don't know what the future holds and we don't know how the world and the physical world and other people around us will necessarily respond to different things. So chapter six, I think dovetails with chapter five, time and uncertainty are related and interrelated. So uncertainty, including death means that we have to consider probability. And that's really what this chapter delves into. It's interesting to note, David, of course, that his brother Richard was a very famous mathematician at Harvard who dealt in statistics and probability actually wrote in that field a famous text on this very topic. So I'm sure Mises, at least by osmosis, learned some stats and probability from his brother. What he says about probability theory in this chapter is very much in line with his brother's theory. But he modified the theory. Somebody didn't really change, but he expressed it in a non-mathematical form in some ways. He made it. Thank God for that. He made it simpler. And what the key thought here is that, as you know, in probability theory and mathematical theory of probability, they have various theorems. Say, if you toss a fair coin in the air 100 times, what are chances that you'll get 25 heads and 75 tails? So you can work out the answer to that mathematically. So what Mises can follow, his brother said, is that that sort of mathematical probability, which he calls class probability, applies only to classes of events where you just know, say, as an example I gave with the coin, you know the mathematical theory that will give me answers to that. But if you don't have repeated theories of the same event, then he thinks mathematical theory of probability doesn't apply at all. He talks about case probability. Case probability is non-mathematical. Well, as I say, what is the probability that Joe Biden will be the Democratic nominee for president? So there is a unique event. I couldn't say, according to Mises, well, the odds are one in 10 that Joe Biden will be the nominee or eight in 10. Because that, according to Mises, wouldn't have any meaning. Mathematical probability only applies to the general classes. So could I object to that? I said, well, don't people say that all the time? People, you can look on various websites and you'll see estimates of what are the chances Biden will win the nomination. But here Mises says we're not really using mathematical probability, even though we say we're giving certain figures. We're just giving subjective estimates. We have strong belief in something that we're trying to just express a certain belief. But the theory of probability doesn't apply. So this least important distinction between risk and uncertainty. Risk means cases where we can figure out what the probabilities are mathematically. And uncertainty is where we can't do this. We could just say something might happen, but we can't give mathematical estimates. And Mises takes uncertainty to be a pervasive feature of action. So let me just build on this a little bit. The first category, class probability. We could say, take a class, let's say Americans. The average life expectancy of an American is 72 years. Now, of course, we understand that that's skewed by people who might die at infancy. It's skewed by people who live to be 112. But nonetheless, we could come up with a number for the class. Now, that won't tell us how, you know, if we say it is 72, that's the average. Now, that doesn't mean that that newborn baby today is guaranteed living 72 years. We all understand that this is a probability for a class of people we've chosen like Americans. Okay, fine. Now, the second category, when you say, well, Biden be the next president. Well, there's not a class here. So it's the normal rules of risk and uncertainty or risk calculation don't apply. I'm thinking here of Nassim Nicholas Talib, who writes on this, the author of the Black Swan. So some people think that the horrible stock market and housing crash of 2008 was a Black Swan event. In other words, an event that was not necessarily foreseeable or predictable because there were so many potential factors in its cause. So help me understand where does a Black Swan event fit into this? What does Mises tell us? That's a very interesting question. I mean, Mises, I think, would view the matter somewhat differently from Talib. The way Talib takes it is he accepts the notion that probability theory applies to individual events. So he's differing from Mises. But what he says is that probability theories in German people use probability theory don't take sufficient account of events that are outliers. So say you have in, you draw kind of a Gaussian curve and you say, here's the chances this is going to have, according to probability theory, the chances are going to be 80% within this range. Maybe there's a 2% chance it could be something on the outside. So Talib says, well, it's a mistake. People using probability theory just dismiss these outlying events with Mises who say you can't use probability theory at all in this kind of case. So it's a bit, Mises is a bit rather more radical. Mises would say it's not, say when people didn't forecast the collapse of the stock market in 2008. It isn't that they forgot to put in this outlier in probability. It's that you can't apply probability theory to such a new event at all. Okay. Okay. So does that mean praxeological knowledge helps us understand at the individual level or to predict the outcome of some sort of act? But it can never help us predict quantitative matters. Yeah. Yeah, that's right. According to Mises, there are no quantitative laws in economics because there are no, in his constant action that enable us to have such laws. I could say, you have laws that you always choose your most highly valued action. But there aren't laws that will say you value your most highly valued action to say 1.5 times as much as your second most highly valued action. There aren't quantitative constants. So wrap this up for us. Chapter seven, the final chapter of part one of this book is entitled Action Within the World. And this chapter is all about utility. It's all about this praxeological notion of utility, which we might also call subjective use value of something. Marginal utility factors into this chapter. What's the key takeaway from chapter seven? This is very much along the lines of what we've been talking about earlier at that. When you're acting, you're trying to achieve your most highly valued goal. So you say, well, what will enable me to achieve that? Supposing, say you have a number of units of a particular good, say you have 10 cows. Of course, I had 10 cows. I couldn't know what to do with them. I'd be completely cowed by that. But only I have 10 cows. David, your neighborhood in Los Angeles is not particularly rural. No, it would be another failure there if I put in cows. Supposing I say, well, I would devote my first, the first cow to such a huge that would be my say I want to get milk for my family. So that's the highest value used. So then if I have another unit, I would put it to a less highly valued use because I use the first one would go to the most high value. So as I have more and more units of the good, they would go to less and less valued uses. So that's what's called the marginal utility utility of the last unit would diminish. So David, obviously this is all an exposition of what is already I guess this 70 or 80 year old concept now by now when he writes this book of marginal utility. So he gets into the idea here of utility is something that can't be measured. So action is choices between alternatives, but action does not measure utility. So talk about this idea that we that we can't calculate values. Yes, well, what he has in mind there is that when we say why we talk about diminishing utility means that this is not a psychological matter in this way that some people think. Well, they think marginal utility diminishes because imagine this case, suppose you haven't some you're eating ice cream cone. You have an ice cream cone. You'll feel good about that. But if you keep eating ice cream cones, eventually you'll get sick. So they think this is a psychological matter. You just have it eventually you'll get satiated. You'll have all the ice cream you want. So as you eat more and more psychological satisfaction, you will keep going lower and lower. And Jesus says, no, no, this isn't what's involved. What's involved is just purely ordinal choices. You're ranking one use higher than the other. It's not a psychological matter at all. That's why you can't be measured because you're just ranking one use over the other. Now, the other point I want to mention, which I think is very interesting, where Jesus introducing says this is a subsidiary assumption of possibility that the labor has this utility or leisure is a good. So what he means there is that we could conceive a world in which say you labor to achieve things you want and then you keep applying maybe your first hour will be devoted to what you value highest and you'll get lower and lower values. You keep laboring. But we can conceive a world is as long as your labor is giving you something you want, you'll keep going as long as this is physically possible. So he says this is not a world we're actually living in. Most people will want to stop laboring. They'll want leisure. So as the value of what you're using your labor before it goes down, the value of leisure goes up. But he says this doesn't have to be the case. Now, I find you know, in the years I've been teaching this, there are a lot of people who don't like this idea. One argument that's sometimes given again, it is not. I think it's an instrument. It's good to see what's wrong with it. People say, well, look, we don't need to have this extra assumption that labor has this utility because we know that since the utility of labor will diminish because labor will be used for less and less valuable goods. So it follows from that that leisure is going up as labor is diminishing. But can you see this is all wrong because it's assuming what is at issue that leisure is good to everybody. And what Mises says, no, it could be that some people don't take leisure as a good. So then even though labor would be going down as it's applied to more and more uses, it wouldn't be the value of leisure is going up because people don't take, those people don't take leisure to be a good at all. So if you argued in the way I was suggesting, you'd be begging the question. So that's why Mises said this has to be introduced as a separate assumption because it's one that could be considerably denied. So rather than thinking of labor as a good, we think of labor as a means, let's say rather than an end. So if we go to work, it's because we prefer that paycheck to the leisure we might get from foregoing the paycheck by staying home all day, right? Right. So that's different. That's not a good per se. No. No, that's right. We're applying it. The uses that we're getting from our labor would be going down more and more. And if we take leisure to be a good, then as we apply more and more units of labor than the value of leisure would rise and we, so you'd have to offer more money or more desirable goods to get the person to work more. Right. So we economize labor just as we economize other material factors. Yes. Yes, that would always be the case even if we didn't take leisure to be a good. We would still economize labor in that we would use labor to achieve our most valued goals. Yeah. And next time you have surgery, you don't want your surgeon to have been up 72 hours straight, for example, just to earn a little bit of the extra surgical fees or something. So I want to conclude towards the end of this chapter with, I thought this just amazing little point that Mises makes, which is that production is not what we think of as an active creation. We think someone like Steve Jobs and the talented people around him came up with this idea of an iPhone and it was going to be this really cool tactile thing that we hold in our hands and it was going to browse and do email and work as a phone and a camera and store apps and do these cool things and no one had really thought of this, so they had sort of created it out of whole cloth. Whereas Mises says, well, production is just transforming existing elements, arranging them, combining them in new ways. So this is one of man's methods, but you're rearranging, you're not creating. So what does this mean? How should we think of production? What Mises meant there was, I mean, supposing, say, someone came up with the idea of an iPhone and he didn't do anything, that wouldn't be production. In production, you have to take physical materials and based on your idea, you would transform the physical materials into the iPhone. Production is a process taking place in the world. It's your making things and we have just limited resources. It's just certain physical quantities of various things that we have to combine to make something. So ideas aren't scarce because an idea can be used by people over and over, but the physical process is something that involves scarcity, that we have to combine these means of production into a product. When you say it reminds me of Hans Zenhold, he was to say on the other side, when a bomb drops on a building, it doesn't destroy anything, it just rearranges things. So this is the inverse of what Mises means to think when production is your arranging thing. So Zenhold could say, well, bombing is rearranging. Well, that's very Krugman-like. We could just rearrange things and then we could all get rich re-rearranging them. David, that wraps up part one. The first 142 pages of this incredible book. I hope some of you have taken the time to embark on this course of reading it with us either for the first time or perhaps the second or third time. I hope some of you have bought it at Mises.org at our bookstore and again use the code HAPOD for Human Action Podcast to get a discount there. If you need to catch up, the first 142 pages are not that tough. You can get through them in a few sittings, I think. And next week, we're going to get into part two of the book, which is actually a bit short. That's only three chapters, about 60 or 70-odd pages. Part two is called Action Within the Framework of Society. Our guest for that is going to be Dr. Bob Murphy. It's going to give you an opportunity, as we discussed, to have experts and economists like David Gordon, Bob Murphy, and Sean Rittenauer and Pair Bailand and many others to help you get through this book, to help make sense of it, and most importantly, to help you enjoy it because you're going to be a far better person as a result of having read this book and it's going to broaden you. It's going to feel good like doing something difficult like going to the gym and it's going to make you more knowledgeable about economics than 99% of the population walking around out there. So all that said, Dr. David Gordon, thank you so much. I really enjoyed speaking with you today. Oh, thanks, Jeff. It was great being on the program. Thanks a lot. Thank you.