 This is Jeff Deist, and you're listening to the Human Action Podcast. Ladies and gentlemen, once again, you have found yourself listening to the Human Action Podcast. Today we're joined in studio by our Vice President of Academic Affairs, Dr. Joe Salerno, and we're talking about praxeology, the method of economics, or at least the Austrian method of economics. And Joe, it's great to see you. Thank you. Good to see you, Jeff, and thank you for having me on. Well, I want to start with a couple of overarching thoughts for you. First and foremost is that, in many ways, maybe praxeology and method are the most controversial elements of Austrianism or Massassian economics. And second, there seems to be this innate human desire to look at things, systems, branches of thought, and want to pick and choose like a buffet. In other words, perhaps you don't want to choose praxeology in the whole of Austrian economics. So start with that. Is this the most controversial branch of Massassian thought? Yes, I think it definitely is. Although Mises himself has written on it in numerous works beginning in 1928, a book came out of Epistemological Problems, which embodied his essay from 28 to 33. And then in Human Action, he went through and developed it even more systematically. And then he went back to it again in 1956 in his last great treatise, Theory and History, and then had some final thoughts, very deep thoughts and very important thoughts on it in his Ultimate Foundation of Economic Science in 1962, which was his last real book. So for Mises, it wasn't controversial. Mises saw what he was doing in developing a method of economics as simply extending what economists for the most part had been doing up through the 1930s, including the classical economists such as Nassau Sr. and J.B. Sey. They all were operating in a deductive manner. And ultimately, although they didn't know it, it was based on human action. So it's controversy of maybe today, in the 21st century. Yes, I mean, I think the controversy started in the 1930s when mathematical economics began to come in, at least in the English-speaking world. And when we also had positivism, which developed earlier in Germany, but then developing and transferred to the English-speaking world. But it's so interesting that the positivists and the empiricists of today know so little about the history of economic thought. It's almost like they just assume, well, everyone knows that this is the method of economics. And they simply don't know what economics was 100 years ago or 150 years ago. So part of the reason for that is that all history of economic thought courses have long disappeared in graduate programs. They started being phased out in the late 60s as mathematical economics began coming in and the model of physics began coming in so that you never really had to read Galilei or any of these other earlier natural scientists. So the economists and the heads of economics programs began to ape physics in that respect, dismissing prior thought. So you've written a lot about the history of Austrian economics, the sociology of Austrian economics. And one thing you mentioned in a particular essay is that praxeology or an understanding of and at least this tacit approval of this approach is at the heart of what it means to be an Austrian. In other words, just some vague subjectivism or methodological individualism is not sufficient. In order to be an Austrian, one has to be a praxeologist. So can you explain this? Yes. So I wasn't so much saying that you had to be conversant with the methodology in a sense that you needed to be someone who could advance the methodology. What I meant by that was that you had to be fully comfortable using the method of the praxeological method to actually develop economic theory if you wish to work in the area of theory rather than let's say applying it Austrian theory. So that was all I meant by that. And you can see it in Mises and especially Rothbard. In their economics proper, their economics theory, for example, in man economy and state, Rothbard doesn't write a lot about praxeology in that book, but he uses the method to develop from human action the theoretical deductions that make up the body of economic science. So to you, the essence of Austrian economics, let's just say, is economic theorems arrived at through this process of praxeological deduction. And that's at the heart of what we think of as Austrian economics. Yeah, that's the core of Austrian economics. It allows us to find in the social world the laws of cause and effect. Carl Menger, who was a proto-praxeologist and the founder of the Austrian school, the first few lines of his great work on principles was that all phenomena are subject to the law of cause and effect. And that's how we get cause and effect into economics. And I'll talk more about that in a little while as we go on. But when we use the term method, do we mean the method of learning economic science, the method of applying it? Is it a research method? And how do we use the term method? Yeah, it's a research method in today's language in the sense that you need a number of axioms starting with the human action axiom that people consciously apply means to achieve ends, which has arrived at really introspectively. We all look inside ourselves and we treat other people as if that were true. Even natural science, because they have to have repeatability of experiments in order to establish scientific laws, treat others. Other scientists who are repeating these experiments as human beings with means and ends and costs and benefits and so on. So this is the core of praxeology. So we were speaking off Mike earlier and you mentioned that Mises had already been an economist for many decades, had already written a couple of substantive books before he ever developed fully his theory of the proper method for economics, which he lays out at length towards the beginning of human action. So talk about all this. He thought it was important to be an economist for a while before you started talking about how to be an economist. Yeah, that's exactly true. He had already written two great treatises, The Theory of Money and Credit and Socialism, before he put pen to paper to write about methodology, which he began writing essays in 1928 and by 1933 he had written a number of essays on methodology proper and by then he was a middle-aged economist who had done a lot of original work in economics itself. And the fruits of those efforts were the epistemological problems of economic science, which he then developed even further in 1940 in the German language edition of human action and then 49 in the English language edition. And very strikingly what Mises pointed out was that one really must be a scientist to cogitate and think about and write about the issues of method. You have to be a scientist first. So, for example, he compares Galileo, the first name, to Francis Bacon and says that really the person who most advanced scientific method in the natural sciences was Galilei, not Bacon. And he says the same thing about Newton versus Kant, that it wasn't the epistemologist Kant that really furthered the method, but it was Newton who actually did the science. So, things began to change in Austrian economics. In the 1970s and 80s there was a lot of interest in praxeology and rightfully so. The Austrian revival was well underway and Hayek had done work in praxeological type methodology and had won the Nobel Prize. And we began to see very young people, graduate students, trying to write on these things. For example, I won't name names to protect the guilty, but there were three graduate students at George Mason in the early 1980s who hadn't written anything substantive in economics. And they wrote a paper dismissing equilibrium as useless for developing economic science. There was also another paper by a graduate student and a young professor at George Mason in which they dismissed the use of the ERE in economics. Now, these people hadn't done any science. They weren't the Newtons. They weren't the Galileo's. There were just people speculating about these things. And the ERE is the evenly rotating economy. It's sort of an heuristic tool. It's an equilibrium tool at the Austrians' hues and it's much more, it's better specified than the normal mathematical equilibrium, at least better specified for the purposes of Austrian research. But as a layperson, it would seem to be that method, of course, is going to affect everything. Method is going to affect even conclusions. So if you don't get method right, you're arriving in a very different science. You're on a completely different track. Yeah, I agree. So that is why I think it's important to begin to do science based on the science that your mentors have done and to try to develop the body of thought that they've handed down. And in our case, that's Mises and that's Rothbard and Kersner and of course Hayek. But if methodological problems crop up, they should crop up and be addressed during the course of your research. In other words, your research, if there are any holes in the praxeological method, it will be revealed by doing real research. And that's what Mises found, that Bumbavirk and Manger, his teachers, had actually not thought all the way through certain problems in economics which were methodological. And that's when he began to develop methodology further than they had or even the classical economists had. So by the 1940s when Mises more fully developed his concept of praxeology, he opens human action part one and right away in chapter two, he spends a hundred odd pages on what he calls the epistemological problems of the sciences of human action. So this is right at the beginning at the core of his most important book. Yes, I think what he's doing there is not saying that you need to put methodology first. But what he's doing there is he's condensing and just setting out the method that he perfected, but that had been the method of economics from the classical school all the way up until the 1930s. And so in effect, he's filling in what was left out of economic treatises proper. So even though his then goes on to be a treatise on economic theory, he puts that first. Now Rothbard, since Mises already set that out, in man and economy and state, you don't see methodology being put first. You see the method being used and very successfully, I might add, in developing the whole architectonic, which is a whole structure of economic theory. So when Mises goes on about the action axiom, first of all, give us a summary of what that is. And second of all, do you think he saw that as a codification, something he reluctantly had to point out that ought to have been a baseline for economics? Or do you think he viewed that as a correction to the current vogue of the time? I think when Mises spoke about the so-called... Well, he never used the term action axiom. I think that was Rothbard's term. But the basic law of human action, or what he would call a category of human action, because he thought it was a category of human mind, which we'll talk about. But when Mises did that, I think, first of all, what he meant, he simply meant that people act not rationally necessarily. I mean, a drug addict who is conscious and is acting to obtain drugs and to get high is acting in a way that everyone else acts. And what is that with purpose, acting proposively? And then Mises used analysis to analyze a little further. It means that you're using means, the paraphernalia, the money you used to buy the drugs and so on to achieve your ends, that is, to get high. Whether or not those ends are responsible, moral, self-destructive is beside the point for the economist. It's purposeful. It may be even irrational. From an ethical point of view, there is, I believe, a rationality in ethics. But that's not what we mean by the action axiom. Any action by a conscious actor can be explained by this action axiom. And there's a lot of implications that immediately follow. But a lot of his critics, including critics at the time when the book came out, would say, this is pretty thin. I mean, everyone knows that humans act. And how did economics get to a state by the 1940s where this had to be reasserted as a starting point? Well, part of it was mathematical economics, which came into vogue in the early 1930s. It was transferred from France and Italy and Switzerland via Valras and Pareto. And then the people who adapted it to... And by the way, it was interesting, Hayek really brought Pareto to the attention of English-speaking economists when he came to the London School of Economics. So I mentioned earlier that method brings up a lot of other topics. And Mises goes through a lot of concepts in this section on epistemological problems, realism and reason, and polylogism and time, uncertainty about the future value scales, marginal utility cooperation. All of these things are flowing from that axiom. And so we're really getting a mini-course in economics in just this first section of the book. Yeah, and also in logic. So what Mises points out is that once you introduce means and ends, it means, and people aiming at ends, it means that they're not perfectly satisfied logically. And if you're not perfectly satisfied, that means that there's scarcity in the world, there's scarcity of means, the things that will be used by you to bring about satisfaction. And once that is admitted, there's the phenomenon of cause and effect that people, if they really want to achieve ends, they have to know what particular phenomenon brings about another particular phenomenon, and that's the law of cause and effect. And time preference, the fact that people are acting now, that people are trying to bring these ends into the present, or as close as possible to themselves, by acting today rather than tomorrow, brings in the law of time preference. And then the fact that means are scarce, means that people have to choose between what ends, many of which would satisfy them, but only a few of which they can attain because the means are scarce, what ends to choose. And that brings in value scales. So you can see means is logically infers from this lone concept of purposeful action all of these other basic concepts of economics. So that means prexiology is obviously a cousin of logic here. Yes. And what strikes me, though, is if you read the beginning of his book, the first, again, the first hundred out of pages, think about different all this is from the first hundred out of pages of a typical micro course in a textbook in College Freshman today. I mean, this is a different science. It's totally different. In the textbook that you would look at or that you would teach from as a professor today, you would almost immediately introduce the student to models, models which have some independent variables and some dependent variables. So you introduce them to the model of supply and demand in which the supply and the demand are independent variables and then the price is the dependent variable. So you squeeze human action out of it. I mean, it's a mixed bag because they do, in fact, introduce scarcity and they do introduce opportunity cost. So they have learned some of the lessons from the classical and Austrian economists. But we shouldn't kid ourselves. For example, Noah Smith, Noah Opinion, the famous Twitterer who writes for Bloomberg was just writing something the other day about how, you know, hearkening back to this attack on Mises as a literary economist. There are plenty of people today who think that economics ought to be written literally in formulas, that it ought not to consist of text and words, that in other words, Mises' view of all this didn't hold and it's not what resonates today. Yeah, well, once again, once mathematics was introduced and once economics began to envy physics and see itself not as what used to be called a moral science or a science of human beings, but a science of quantitative phenomena like prices. And at that point, it's very hard to separate, to disentangle the math from the meaning, the meaning of words. Yeah, no, it's absolutely true. And again, in this same section, Mises takes pains to distinguish social sciences from physical sciences. I mean, he writes at some length about the difference. And so in other words, even in the 1940s, he felt that it was necessary to distinguish strongly between the two. So there was already a problem. Yeah, yes, he thought there was. What he pointed out was that in social science that any quantitative variables, a price, for example, is an event, it's a complex event like World War I. In other words, there were different people at a certain date that had different values and they came together in something called the market and they interacted and exchanged and a price emerged from that on that date among these different people. That is completely different than the price for the same product that would emerge the next day because there are different people, their volitions have changed, your value scales have changed. So Mises pointed out that these are, even though they look the same, the quantities of money that are exchanged for per unit of a good, that they're different from one another because they're heterogeneous events. So that was the key. There were no homogeneous events in the social sciences that you could measure, that you could find constant relationships between and so on. Yeah, he says here at page 39 of the scholar's edition, a lot of you have, the sciences of human action differ radically from the natural sciences. All authors eager to construct an epistemological system of the science of human action according to the pattern of natural sciences air lamentably. So he wasn't pulling any punches here but again I think most people today think of science as something where you create a hypothesis and you test it and you revise it and they don't distinguish between natural and human sciences. Yeah, that's the criterion of falsifiability. I mean, you can come up with these tentative scientific laws but yet they're subject to change if they're falsified in the future and new, broader laws possibly that cover more phenomena are then developed as a result of some tests that these laws did not stand up to. And of course this is a common criticism of Austrians, right? Is that if a proposition, let's say, is not falsifiable then it's some sort of dogma. But even that statement in itself is contradictory because is it falsifiable? Yeah, right. To say that anything that is not falsifiable is not science or that you can't arrive at any knowledge without developing falsifiable statements is itself a non-falsifiable statement. So it's sort of the boomerang principle it comes back at the person who proposes it and destroys the proposition. And we all know again in order to have natural science and to develop the idea of falsifiability or verifiability you have to have human minds interacting. You have to have human minds that can carry out repeat experiments. And also this very importantly points out it's important that if you want to have natural science before you can even have it you have to have in your mind which is non-falsifiable the idea that there's cause and effect that if you bring A and B together then there'll be a regularity and a succession of events that will bring about C and this will always occur. Now where did we arrive at that law of cause and effect and the idea of regularity? Well Mises says it's a law of thought it's a category that's already in the human mind he follows Kant. Rothbard uses a different vocabulary he's more of a Thomistic philosopher Rothbard says no it's a law of reality the mind is created or the mind develops in such a way that it is able to learn about and use the law of cause and effect which it observes in reality but in any case the vocabulary is a little bit different between the two but you see that without cause and effect and regularity and a number of other things that are this is where our priority comes in that are prior to experience you really couldn't even have natural science let alone science of economics But if we don't have prior thought or prior understanding or knowledge and if we don't have any theory then what would words be what would data and empirical knowledge be in the form of words to an illiterate or in the form of numbers to an enumerate person in other words we have to I'm sure physical scientists would agree that we have to filter all of this through something. Well yeah I mean Mises pointed out that without the law of cause and effect accumulating data would mean absolutely nothing if we didn't have this prior idea that certain things are going to regularly follow other things now and in the future then just accumulating data means absolutely nothing it's meaningless so I think that's a very important insight that used to be called the philosophy of nature which was prior to physical sciences in other words there had to be a philosophy of nature and this is a Thomistic discipline and it yields you these insights for example that look there's no real silver in the world there's only pieces of things that all have similar properties in the sense of cause and effect and of what they're composed of and then we come up with the idea of silver it's a category so you have to have the difference between the individual and the species already in mind before you can do science there's so many things that are wrong with the positive approach to even natural sciences well so he develops this more fully as he gets into later life as you mentioned in the 1950s he produces theory and history and then in the early 60s really his last full length the ultimate foundation of economic science we're going to link to that you can read it for free by the way online so talk about his further development in theory and history and then let's talk about the ultimate foundation of economic science I think the most important has been called by Rothbard one of Mises greatly neglected works and it's a treatise and it's a treatise on the difference between the method of history and the method of a prioristic human sciences like economics and Mises pointed out that the difference was that in history we're no longer dealing with just formal means and ends and costs we're no longer dealing with just the structure of action that any human being demonstrates what we're dealing with are concrete means and concrete ends so we have to have something called understanding and so he developed a discipline called phymology which is really literary psychology so for example this can give you information about the future phymology can give you information about people's future reactions for example I'm fully confident that when I go home today the furniture in my home will not all be gone and my wife will have disappeared I'm confident of that because I know what Mises is called her character based on contact with her based on my knowing her value scales or knowing parts of her value scales I know that she won't act in that manner well that can be, the entrepreneur uses the same thing to apply to consumers today and in the future no one thinks that by next year soccer or European football in the United States will replace American football as the most popular sport and no entrepreneur would bank on that so these are the types of insights, a brilliant book these are the types of insights that phymology can yield you and why it's used both by the historian to look backwards and find out why Caesar for example did cross the Rubicon and by entrepreneurs to find out why for example people before cell phones were there why people would want cell phones and you mentioned it's a bit of a lost book and you called it a treatise why do you think that is was Mises unhappy with the reception of the book yeah well it was not really read from my own experience I remember in the at the inception of what we call the Austrian revival in 1974 when a number of economists got together to hear the great three great Austrians at the time, Marie Rothbard Israel Kerser and Ludwig Lachman speaking in Vermont at a seven day conference that book wasn't discussed much everyone was talking about human action, theory of money and credit socialism but the book was just never and I think I know the reason for this but it was no one really read it as deeply and was as interested in it and I think the reason why was because it was really on the method of history and though there was some economics in it or references to the method of economics but since the Austrian revival was mainly among economists I think they weren't as quite interested in history so when Tommy publishes the ultimate foundation of economic science he's really in a lot of ways doubling down on what he put forth in human action and also on what some of his critics have said and you can find this right off the bat on page three he says he wants to achieve anything in praxeology must be conversant with mathematics, physics, biology, history and jurisprudence so he's talking about these other branches of knowledge as being important but he says once again economics has been led astray by the vain idea that economics must proceed according to the pattern of the other sciences so he's not mellowing on this later in his career not at all so talk about that first of all address where he talks about praxeology praxeologists has to be conversant with all these other sciences well yeah those are cognate sciences I mean we have to we have to know mathematics we have to know logic in particular because praxeology is the logic of action history just gives us an idea of the types of things that are important for praxeology to address in other words look in history you don't see a lot of instances of barter so history is useful for showing us that really what we should be focusing on is the history or the theory of the monetary economy history doesn't show us a lot of examples of cooperatives a cooperative economy or household economy but it does show us that the market economy is important so praxeology takes its cue from history in that respect in deciding what phenomena to investigate praxeologically so do you think we should take this book as his fullest and final exposition of praxeology should we accord it more weight because it's later in life later in his career no I think the fullest exposition of praxeology comes in human action but this book should be read in conjunction with human action and actually in conjunction with theory and history because what it does is he doubles down in his criticism of positivism so this book is really a critique of positivism and there's a very nice introduction by Israel Kursner to the book that points this out and it's in this book and it's a very short book in which Mises ties epistemology and method to human freedom I mean he goes through the steps to show that if you choose the wrong method your science is going to be all screwed up you're going to be really turning into a social engineer because people who reject these laws of cause and effect in the sphere of human action are inevitably people who want to formulate new utopias so it's a great book it's very difficult to describe it and it seems to be sort of disjointed as you had mentioned before but it's really not there's an overarching theme and the theme is in order to have human freedom you have to be a conversant with the correct methodology of the social sciences and you have to admit that the social sciences have an autonomous existence from the physical sciences well he does tie it together with politics for example he talks about the cult of science and managed socialism in other words how bad method leads to bad policy and he sort of reiterates some of his points here from socialism devil's advocate question as you mentioned it's a thin book very readable for a lay person if a lay listener is not going to read theory and history and perhaps has not yet tackled human action is this a reasonable one-off substitute for understanding correct theology I think I would have to say yes and no yes in the sense that you get a sense of what he's talking about and you see the connection between method and freedom but if you want to do economics and want to understand Austrian economics you really do have to read his more substantial works on methodology and say if you read the ultimate foundation of economic science on our site you will know more about praxeology than most of your neighbors how's that? I'm there that's right well the other thing that I want to mention about this book is he has a short but devastating little critique of macro in this book and he talks about he attacks the different method of macroeconomics this fetish for aggregates what he's saying is that macroeconomics seeks to come to conclusions about what kind of policy works to stop inflation or to prevent recessions by focusing on these what we might call macroeconomic aggregates in a sense of total investment in the economy total spending in the economy what's called aggregate demand and these are these aggregates that are bumping against one another causing certain effects but as Mises points out these aggregates are composed of actions of individuals and to understand the movements of the aggregates to even know if the aggregates make any sense because some of them don't even make any sense for example GDP doesn't make any sense you're trying to add up apples and oranges literally apples, oranges, tablet computers cars and so on in order to know if that makes any sense what it's doing don't make sense you need to focus on methodological individualism that is focus on individual action and then their interaction in the market then the aggregates fall out of that they don't it's the market that drives things and individual choices that drives things and the aggregates are sort of just the outcome so in that sense focusing on things like GDP is putting the car before the horse by all means or a total spending by the way which is used today to talk about how we should run monetary policy by targeting a nominal GDP figure or targeting total spending in the economy is something that is wrong because it's really spending doesn't drive prices spending doesn't cause prices to go up or down it's the other way around people value different things versus money and when money prices arrive at then the spending occurs but the spending occurs afterward it's an outcome spending doesn't cause anything to happen well I want to talk also about Murray Rothbard's defense or explication of a priori methodology in economics and as you mentioned earlier although praxeology infuses man-economy state he doesn't really discuss it per se at length in that book he did happily have an article called in defense of extreme a prioriism it's not too long we will link to it and let's start with what you mentioned earlier which was that Rothbard leaned more heavily on Aristotle and Aquinas in his understanding of a prioriisms whereas Mises leaned on Kant so discuss the difference a little bit here as I mentioned before for Rothbard things like what he called the action in the magazine and marginal utility and these various other categories that we use in developing economic science they were laws of reality he believed that the human mind is capable of grasping reality and part of reality is action of human beings so the human mind can grasp this idea of cause and effect through through experiencing the real world not through history but just through general experience so there's a few axioms that are self-evident to the human mind that was Rothbard's point they were not necessarily innate in the human mind they didn't compose the human mind but they were learned by the human mind whereas Kant and Mises Kantian approach were sort of categories built into the human mind but ultimately it doesn't matter as I said before it's a difference in vocabulary not in meaning as you mentioned this is almost a distinction without a difference so Rothbard brings it up to us he says well we experience things we observe them through our senses and as a result there's kind of a sliver of empiricism inherent in that in fact it's empirical not in a positive sense but in the common sense sense that is to say that for example human beings prefer leisure to labor or to say that there's a variety of natural resources and difference in the world as well as different skills among the population those are self-evident and they can be used in building up economic theory or in taxiological economic theory these are insights that are broadly empirical even the action that people use means to achieve ends is empirical in the sense that look our minds exist in the world of reality and we are looking inward through introspection we come up with the means and ends but also by dealing with other people in our everyday interactions we can see that we treat them and we do use means to achieve ends that's how we get them to do what we want we when we exchange with someone we're giving them means in our minds that are more valuable to them than what they're going to seed over to us in the exchange well Joe what I love about this article and just maybe 10 short pages he really helps us understand Mises and all of what we've been talking about up till now in this conversation and he actually lays out a definition sort of a four part test a definition of a praxeologist so let's just run through this real quick and get your thoughts on it first of all it's someone who understands axioms and premises they're absolutely true and that the theorems and conclusions deduced from those axioms are therefore absolutely true and that there's not only no need for empirical testing but that in fact you can't test these things and so he gives us this nice neat understanding of what praxeology means I mean you can't test these things because the theorems are couched in terms of things that are complex events to talk about what a recession is like talking about World War II so when you talk about a recession you're talking about a specific event you cannot look at all recessions and look at the statistics related to all these recessions and come up with the theory of recessions because historically they are different from one another however using praxeology we can see the pattern or the sequence of cause and effect in the data themselves so Austrians are not against collecting data are not against observing considering data and even getting hints about how they should develop their theory from data but what they're against is using data directly to come up with these similarities that might be called theories right and often times the attack is that we advocate extreme a prioriism which is to say blind or somehow not false a viable or that we're ignoring data and empiricism but in the sense that you're saying it data or empirical knowledge can help us re-examine the underlying theory and right yeah for example in my own work when I was considering writing an article on the financial crisis which I did finally write it struck me that there was a consumption boom during the the run up to the financial crisis as well as an investment boom and the Austrian theory really focuses on the investment boom and some people have attacked the Austrian theory both Austrians and non-Austrians like Eugman and Brad DeLong these are mainstream macroeconomists they said well why is there a consumption boom if people are if people are being misled by a low interest well there's a consumption boom because of the inflation that causes prices of assets to increase so that was the data that showed that there was this big retail boom that occurred led me to think through the Austrian theory and to develop it deductively and that is that there is a wealth effect it's called I call it a false wealth effect the Keynesians call it a wealth effect that is that when people's price of their houses go up their 401k go up in value they begin using their houses as an ATM machine and that is completely consistent with the Austrian theory and I developed the Austrian theory in that direction the Austrian theory of the business cycle that is so yeah I mean you have to know the data you have to get your hands dirty but isn't it interesting how there's sort of this presumption in favor of data uberolus today and nobody ever questions whether data can be wrong we always say well here's the data so if it doesn't match the theory then the theory must be wrong but as we all know data collection sample size everything about it is just fraught with problems it's just riddled with problems including who funds the study from there on down the foibles of the researchers themselves the limitations of our knowledge the collection methods I mean the idea that somehow the data are conclusive and then we have to reverse engineer the theory from that I think ignores all yeah that's very that's a very good point there's a great book by an Austrian Oscar Morgan Stern who was a student of Mises he later I mean he didn't agree with Mises on everything but he wrote a book called I believe it's called on economic observations in which he pointed out the problems with just the data themselves so you know as Rothbard goes further along in this article he starts with the one main action axiom with his term again as you pointed out earlier and from that he drives some postulates and these are self-evident broad not falsifiable but I think when he uses the term broad he's getting back to this distinction of how we theorize these things whether it's sort of through empirical observation or whether it's just something that's so fundamental to the human nature that we all understand it so talk about the postulates and what they mean for understanding so he says that you need something beyond the simple action axiom you know you don't want to develop a praxis Mises said you can do this but it would be wrong develop a praxeology of all conceivable worlds you don't want to do that you want to root the praxeology in premises that are true of our world and so some of the premises that are true are broadly empirical premises that consumers that people or consumers favor or value leisure above labor that's a valuable consumers good that there's diversity in natural resources and human skills that that we have a money economy and which is broadly empirical and that firms maximize profit for the most part so those are four broadly empirical postulates there are others also that you introduce into the chain of praxeological reasoning as you go along and as you want to apply to certain areas that are of interest to the economist so Mises was against developing praxeology as mental he called it mental gymnastics he said you could develop praxeology for a race of immortal beings he says you could develop praxeology he says somewhere that you could develop a race of beings that could not understand written symbols but we don't want to do that we want to develop the conditions of action that are part of our world but again just from the idea that humans act we can derive these four postulates for example the division of labor, leisure indirect exchange, firms maximizing profit without any data without any empirical work we can logically deduce he's not saying you deduce it from the action he says in addition to the action act you look around and you see the world in which people act so they act in a world of money they act in a world where there's firms that maximize profit where there's differences in skills you could develop a praxeology of a world where there's no differences in labor skills so he's saying you have to hedge it about by true empirical postulates but they're empirical in the sense that anyone who cares to look can find them they're not self evident in the same sense that the human action is self evident but they derive from it so another thing like me says Rothbard takes pains here to talk about what rational action means versus purposeful or means ends and so you brought up the idea of a junkie earlier and we could say well that's irrational that you go out and seek discourse when you're destroying your life ruining your health, hurting your family whatever it might be but we get into almost a semantic distinction here because purposeful is purposeful rational in other words in the junkies mind is perfectly rational to go score in some bad part of town at a crack house but and it advances objectives in a means ends type analysis right it does yes it absolutely does so how should we think of the term rational as it applies here well I mean when people say that it's irrational for somebody to commit suicide let's take an extreme example well I mean in the praxeological sense do they try to commit suicide by taking a banana and hitting themselves over the head with a banana or do they do it by using a firearms or using pills it's rational in that sense it's rational in the sense that they're adapting the means that they know of to the ends that they want to achieve that's all you might that's all I mean by purposeful okay so if you want to use that's why Rothbard more than Mises was against using the word rational in that sense or using it as a synonym for purposeful you thought rational should be in the sense that you used it it was more of an ethical sense for the end to denote the ends whether the ends themselves are rational but the means are always rational given the person's knowledge okay if a person really believed that hitting himself in the head with a banana would achieve his end well then that would be purposeful okay Job as we wrap up I want to talk about some other people who have contributed to the Austrian conception of method for example Hans Hermann Hoppe has a book called economic science and the Austrian method which will link to we have available in both audio and print formats give us your view of the sort of the current state of the debate or the discussion within Austrian or Austrian close circles about method is anybody writing on it researching in it is it in flux I think at least the people and economists and philosophers associated with the Mises Institute are pretty settled in the sense that they think that Mises and Rothbard have at least articulated the correct method and have used it correctly and now are concentrating more on on using it to develop economics and to apply economics and to address questions using the practical method that are of interest to the mainstream that's where we're at now Hans Hoppe has written some good things on it and David Gord continues to write book reviews in which he usually or can address these types of things so the science is settled it's like climate change well no I wouldn't say it's settled it's always economics is an open science because history continues and there's new complexes of events that come up as I mentioned the financial crisis in which we had a consumption boom so the science itself is not closed but the method that we use I think everyone's fairly comfortable with it applying the practical method to developing a theory that will explain these new events well the joke of course is that in the physical science is something like climate how could the science ever be settled if you accept positivism as the method right you could never say that I mean they don't have the regularity I mean they can't a lot of climate science and other sciences like highly theoretical physics the big bang theory these things really are not scientific in the sense of being subject to repeatable experiments I mean even the evolutionary hypothesis is just that a hypothesis so if we say we've tried a million times to put an app on a branch and it's always fallen to the ground so that explains gravity or gives us a theory of gravity but there could be the millionth and first time and it doesn't fall to the ground and then we're gonna have to rethink gravity yeah well that could happen I mean that's why the science of human action is actually more certain than physics because physics laws are always what they call local laws we don't know what's going on in another part of the universe we can never because we can trace physical phenomena or natural phenomena back to an ex god or nature or the big bang theory so we're much from a ground let's put that way with praxeology then we are even with physics well dr. jessler this has been a great conversation very edifying for me and we're gonna again post some links to that particular section in html format of mises is seminal human action a link to the murray-rothbard article we mentioned a link to the hansherman hoppe book and also a link to ludivgan mises the ultimate foundation of economic science so we hope you enjoyed it and we will be back soon with an episode based around ludivgan mises his great book bureaucracy thanks so much for listening subscribe to get new episodes every week and find more content like this on mises.org