Kinsella on Liberty Podcast, Episode 156.
The slides for this lecture are appended below; links for“suggested readings” for the course are included in the podcast post for the first lecture, episode 153.
Lecture 4: EPISTEMOLOGY, METHODOLOGY AND DUALISM; KNOWLEDGE, CERTAINTY, LOGICAL POSITIVISM
The Social Theory of Hoppe, Lecture 4: Epistemology, Methodology, and Dualism; Knowledge, Certainty, Logical Positivism
Mises Academy, Aug. 1, 2011
STEPHAN KINSELLA: … and methodology and epistemological dualism, the Austrian approach. So if you recall, last time we talked about argumentation ethics and libertarian rights, and as I said, the midterm will be posted shortly. And some of you may be interested in the IP talk I gave at Mises University on Wednesday, which I have a link to here on the slide two. And Hoppe also gave two – he has several lectures, but two of them are particularly relevant for tonight actually. The science of human action and praxeology as a method of economics are both great. They cover a lot of what we’re going to talk about tonight, actually.
So we’re going to talk epistemology and methodology and dualism, which are the Misesian approach, and related aspects of logical positivism and knowledge and certainty. And I’m just going to outline here the readings I had suggested that you read with certain pages of A Theory of Socialism and Capitalism, Hoppe’s pamphlet, “Economic Science and the Austrian Method.” I have my ragged old copy here from years in the past. I don’t know what the current version looks like, notes, so this is my favorite copy, and another paper from EEPP and another journal article on rationalism.
And then there are some supplemental readings if you want to go further. But we’re going to try to cover as much as we can here. So let’s start off talking about what we’re talking – the subject of our lecture is the economic science and the methodology appropriate economic science or the discipline of economics. So what do we mean by the word science? I mean when I was in college and growing up, the word science to me meant what most people think of it now as technology, gadgets, gizmos, physics, theories, chemistry, things like this, things that are testable.
This is actually sort of a fairly new twist on the word science as caused by the rise of positivism and empiricism and what we might call scientism. It’s a much older term of course. You see the little diagram on the right of some spooky government agency, the Information Awareness Office, but they have the all-knowing eye on top of the pyramid looking at the earth and the motto, Scientia est Potentia, which means knowledge is power. So you see the word science there, meaning just general knowledge. In the Lionel Robbins, famous sort of proto-Austrian economist, at one point, wrote a treatise in 1932, very influential treatise until the ‘50s probably called “The Nature and Significance of Economic Science.”
So you can see the word science is being used for even economics, although nowadays, most people would restrict it to the technical or natural sciences. Back in the US Constitution in 1789, in the clause authorizing patent and copyright, look at how the words are arranged here. This is the power granted to Congress to promote the progress of science and the useful arts by securing for limited times to authors and inventors the exclusive right to their writings and discoveries.
So I’ve got in red here the words that pair together: science, authors, and writings. Now, most people would think science has to do with inventions and inventors and discoveries. But no, that’s the useful arts like artisan crafts, machines, things like this. Science meant just the general field of human knowledge, and in particular here, it was referring to artistic creatings of authors like novels or paintings, things like this. So the word science is a general broad term.
Now, we’re going to talk today about epistemology and the nature of economic science. Epistemology – I don’t want to be too basic here, but for those who don’t know, epistemology is a term that used to confuse me when I started reading it in high school and college. It mystified me. But basically, it’s just the study of knowledge. It’s a branch of philosophy, and it’s what Hoppe actually specialized in, which is one reason we’re bringing it up. Now, as Hoppe lays it out, the modern concept of science that I just explained as a narrow idea of science as being technical and causal knowledge, the natural sciences like physics and chemistry, is a fairly modern occurrence.
It started in maybe the 1950s with the rise Popper’s thought and empiricism. Okay, so as Hoppe lays it out, you can think of the big battles or the big divisions in philosophy and epistemology as the rationalist versus the skeptics. Okay, the rationalists were Plato, Kant, and now Mises you can think of some of the big ones there. The skeptics or the empiricists were Hume and now Popper. You can think of him as a good representative.
Now, Hayek and Robbins are interesting, Friedrich Hayek and Lionel Robbins. Well, Hayek was a student of Mises and was very much influenced by him early on. And Lionel Robbins, also in the 1932 treatise I mentioned, was extremely influenced by Mises’ epistemology. But they were colleagues of Karl Popper, the sort of arch-positivist, at London School of Economics, LSE. And so over time, they actually came to adopt some of Popper’s methodology and epistemology and to sort of veer away from the museum type of framework.
We’ll go into some detail in a few minutes. But the basic idea here – by the way, I’ve got like 55 slides. There’s a lot of material here. I don’t think we’ll get to all of it. I might lecture most of the class and try to cover as much as we can, and if I don’t finish next class in the first, say, 30 minutes, we’ll try to finish up and then get to the economic stuff next time.
Okay, good. I will be very basic then, Jock. That’s fine. By the way, I am collecting questions to send to Hoppe. I talked to him last week about this. He is on board. So I have some questions to send to him, and if anyone has any more questions for Hoppe that we don’t address, say, between – by the end of next class, go ahead and send them to me. And I’ll submit them to Hans for any answers he wants to give, and then we’ll go over them on the sixth and last class.
Anyway, so the basic idea of the skeptics, or the empiricists, was they believe that all propositions or statements of knowledge can be divided into two types. They’re either analytical, or they’re empirical. So this is their basic view. Analytic means a statement like all bachelors are married. It’s basically a statement that’s almost true by definition. So they think that analytic statements say nothing really real about the world. They don’t give you any new information. They’re just manipulation of formal rules.
Or the statement can be empirical. But if it’s empirical, or another word for that is synthetic—you’ll sometimes hear analytic and synthetic used—empirical statements say something about the way the world is. But it only says things about the way the world happens to be, and the only way we can find out these things is to use the scientific method. That’s to test or to try to falsify these statements. So they view any statement that is not something that’s testable as unscientific. Okay, so this is the basic view of the empiricists, influenced heavily by Hume and lately by Popper.
Now, there are several words you’ll see used a lot. It took me a while to sort of grapple with all these, and you don’t really need to know a lot of the nuances and distinctions because they’re not always used carefully by critics of these views or by the adherence of these views themselves. But most of them are related to each other and are sometimes used as synonyms for each other. And I will use some of them as synonyms in this lecture tonight.
So let’s start off with empiricism. So empiricism – the idea is the only testable or falsifiable statements are meaningful or scientific. You say testable or falsifiable because the older view was that you had to be able to formulate a statement so you could test it. So like you could say I propose that there is a relationship between mass and gravitational attraction of a certain equation. And therefore, let’s go test it with an experiment and see if the results confirm my theory.
Now, Popper put a different twist on this, and he said, well, you’re not really confirming it. You’re trying to falsify it, so basically, every bit of scientific knowledge, according to the empiricists is always contingent, never, ever finally certain, and always subject to falsifications. So all you can say is that, so far, we haven’t falsified this theory. Now, one thing to note: Karl Popper called his own theory critical rationalism. Hoppe’s view, and I agree with him, is that this is a misnomer. It’s a mislabel. He wasn’t a rationalist in the sense of Kant.
He was a logical positivist and an empiricist. It’s sort of like the word liberal, how the word liberal has been hijacked in the United States by the left, by the democrats, in the last 100 or so years so that the word liberal now means the opposite of what it used to mean and what it still means in Europe, which means to refer to sort of progressive, pro-property rights, pro-enlightenment, classical liberal values. Any case, now, there’s a related doctrine called logical positivism. This is related to the empirical view. The view is that all a priori assertion or propositions are merely analytic. An a priori proposition is something that you don’t need evidence to confirm. So what they would say is these are all analytic. So basically, they said the laws of logic can’t tell us anything about the real world.
Now, monism means one, only having one method, trying to treat all the sciences by the same model, and the model would be the model that they think is valid, which is the scientific method, which is used in physics and chemistry, etc., that is, coming up with hypotheses, formulating hypotheses, and trying to come up with a way to test this hypothesis to see if you can falsify it. And until you do, it can be held a tentative causal law or hypothesis that has not yet been falsified.
And we’ll get into this later, but this has to be contrasted with the Misesian approach of dualism, meaning we believe there are two separate realms of study or knowledge, not just one. Now, scientism is closely related to monism. Scientism is the view – it’s basically the tendency to try to analyze the humanities, the social sciences, like economics, trying to use the methods of the natural sciences for that. So that would be, again, because you believe that there is only one true science, that is, things that can be falsified and hypothesized along the lines of the scientific method.
So scientism would be what we would – is a derogative term or a pejorative term that we use to describe people that try to use inappropriate methods of the natural sciences for fields of study that should be – that should have other ways of analyzing them, namely, economics. Now, again, skepticism – this is a quote from Hoppe describing what they believe, and remember, we talked about the origins of the skepticism, and they’re skeptical of knowledge that’s not empirical.
So they believe that nothing can be known with certainty to be impossible in the realm of economic phenomena. How could you know anything is impossible if all your knowledge is empirical, and you just have to hypothesize laws and try to falsify them? You could never get any kind of hard, absolute law of economics, what Mises would call apodictic, A-P-O-D-I-C-T-IC, apodictic, which means a priori or just absolutely certain or laws that you don’t need to test to verify. You can know that they’re absolutely correct.
Finally, we have something you’ll see Mises discuss a lot, sort of a predecessor to empiricism and positivism called historicism. This was a view of the economist before they became systematic and started thinking about causal laws, which they were doing in Mises’ day before Mises and until positivism became ascendant in the mid-1950s, let’s say. It was the idea that we have to look at history like a literary text, like a novel, and we have to give it subjective interpretations.
There are really no objective laws at all. Now, this leads to a sort of relativistic point of view, which is related to and similar to in some ways, empiricism and positivism, but we don’t need to concern ourselves with it here too much except to know that Hoppe and Mises are strong critics of all of these things and for similar reasons. Now, the ultimate problem as Mises points out, and Kant too, but maybe in different language, with empiricism and positivism is that it is a self-contradictory idea because it claims to be a statement of knowledge about the way the universe is. It says the universe is such that you can – there can only be two types of statements, that is, analytic or empirical.
And the analytic ones have no formal – they have no content. They don’t say anything. And the empirical ones are hypothetical, always tentative and contingent, never, ever confirmed. As an example of that, let’s say you posit the law of gravity is the inverse square, and there’s a certain coefficient attached to it, and it’s related to mass. Well, you can test it. You can never test it down to infinite precision, and you can never know whether tomorrow the results might be off because of some previously hidden or unknown variable that wasn’t being revealed previously. So you can never know for sure that any [indiscernible_00:15:32] is really a law, like the law of gravity is just what we know so far. So far, we haven’t found that exception to it.
Okay, so the problem with this very idea, the monist view of empiricists and positivists is that the statement itself, by its own content, has to either be analytic or empirical. It means one or the other. This is what they’re [indiscernible_00:16:01] so let’s take them one by one. Is this statement itself is analytic? If it’s analytic, then it doesn’t have any content. It doesn’t say anything about reality, so we have no [indiscernible_00:16:14].
If it’s empirical, then it’s not a law. It’s just a current hypothesis that could be falsified. And furthermore, where is the evidence for it? So you see, it’s pretty easy to see that the very foundational principle of positivism is completely incoherent and self-contradictory. I have yet to hear a good defensive by a positivist. They just brush it aside and ignore it, almost anti-intellectual.
Okay, let’s go to slide eight. This is a quote from Mises by the way, in one of his best books, The Ultimate Foundation of Economic Science, where he talks about logical positivism. And he says, like at the end here where I have bolded the obvious objection to it is that this proposition itself – that there are no synthetic a priori propositions is in itself a synthetic a priori proposition because it could not be established by experience. You can never look around the world and see that the world’s structure is such that there are no synthetic a priori propositions. So it’s just a proposition with no evidence for it. So – and, by the way – but it claims truth, which it claims to be true. So it’s got to be synthetic a priori.
Now remember, the positivists say that there are only two types of propositions: analytic or empiricist, and the empiricist is always hypothetical and tentative. So they do not admit that it’s possible to have a priori knowledge that is also synthetic. Now, I’m going to turn to Kant now to show – to contrast this. Oh, before we do that, let me mention one other thing. Well, let me mention before that, just to make sure it’s clear, the essence of the Kantian position – we’ll get to this in a minute – and the Misesian position and the Hoppian position is that synthetic a priori knowledge is possible. That is, you can have knowledge that is about the real world. That’s what synthetic means. You can call it empirical if you want, that is, a priori.
That is, it’s not analytic in that it’s empty of content because it’s synthetic, and it’s not empirical in the hypothetical testing sense. In other words, we don’t have to test it to know that it’s true. It’s a priori, and I’m going to get in a minute to a definition of a priori and its opposite a posteriori.
Now, let me mention this now on slide nine. Despite the fact that formally economists now will say that they’re positivists, influenced heavily by Milton Friedman, by the way, who was an arch positivist. They don’t really follow their own methodology. They claim to be positivist, but quite often, they will balk at studies that seem to be counterintuitive and go against what Misesians would say are laws of economics, not just hypothetical laws. In other words, theoretically, according to the positivist methodology, if you want to formulate, say, the law of supply and demand or the idea that a minimum wage causes unemployment, you would have to say, well, I propose the law is that the higher the minimum wage, the more there will be unemployment, and then let’s go test it and gather some data.
But if they actually did that, if they raised the minimum wage to a high level and they found that it had increased employment, most economists that claim to be empiricists would think something was wrong with the result and they would redo it, or they will look at the data. So they have an intuitive feeling that they have these laws that are guiding their empirical studies. But they just can’t go all the way and use that as the main method. But thankfully, most of them actually are not really positivist in all of their reasoning.
John said – now John is an economist: A positivist – John McGinnis I mean – a positivist economist would conclude that labor in some situations is a Giffen good so that its demand goes up with its price. Well, I think we could find some examples that would work. How about inflating the money supply? And a lot of these are ceteris paribus laws too, right John? We’re saying that, all things being equal, if you – but I agree. The Giffen good might be kind of an exception, or we have to work around that for our example, but we can think of lots of other examples.
Anyway, now, another problem with the entire positivist program or approach is that falsificationism itself, even – this is the subtle twist added by Popper, it doesn’t make any sense either. So the idea is that if you have a hypothesis, let’s say this worked for a while, like Newton’s laws of physics, and then it was superseded by some of the Einsteinian and other modern physics ideas: relativity and quantum mechanics, etc.
If you have something that has actually been working successfully for a while and you falsify it, the idea that you just jettison this theory, as Hoppe argues, is totally insane because you wouldn’t throw it away unless you had a better theory to replace it. It was better in every single case because if your old theory works better in some circumstances, you would still use it. Even though it didn’t work in some cases, you wouldn’t get rid of it altogether, so there’s actually something wrong even with the idea of falsificationism.
Now, there’s another thing here too. There is the idea that there is a type of apriorism in the physical sciences. In other words, the Misesian view, and I’ll get to this in a few minutes, is that we use apriorism, that is, a type of deductivism, for the economic laws, for the study of human action. And we would use the scientific method, which is hypothesizing causal laws and doing testing for the natural sciences. But as Hoppe explains, there – you don’t even use the scientific method exclusively even for the scientific – for the causal realm.
In other words, there’s even a priori assumptions even there. So for example, in the old days, the rationalists, who believed in certain knowledge, would claim that we can know for certain that geometry is Euclidean and an a priori thing that we know. We don’t have to test it to know that this is true. But when the empiricist view became dominant, then in relativity and things like this, and when non-Euclidean geometry was discovered, then the empiricist view sort of took over.
And so now, most people would say, well, the Euclidean geometry is not really an absolute law of the universe. It’s just one possible geometry. And in fact, the universe is really a 10-dimensional blah, blah, blah. In other words, they’ve given up on the idea that geometry is a priori. But there are some theorists, philosophers, and others who believe that there’s a type of apriorism in physics itself.
So for example, the idea that if you want to verify, let’s say, a non-Euclidean geometry, hypothetical law that you propose, how would you do that? You would do it by using, say, a lens and the telescope, but the lens is constructed with three-dimensional Euclidean geometry principles. So it’s almost like you’re presupposing the validity of Euclidean geometry and the very attempt to deny it, so you can see something similar here to the laws of praxeology itself.
Let’s go on now. So this is called proto physics by a guy named – what is his name? Lorenzen, Dingler, Karnbartel, and some others. So what they believe, and I don’t know if I accept this, but there’s something to it I believe, and Hans Hoppe thinks there’s something to it. He doesn’t talk about it in a lot of detail, but basically what he talks about is how a lot of the basic notions of geometry and physics are embedded in our concept of human action, manipulating our physical bodies in this three-dimensional – apparently three-dimensional world.
And you can see the bottom quote here. Lorenzen says this: Geometry, chronometry—which is time—and hytometry—which is classical mechanics but without gravity—or a priori theories, because they make empirical measurements of space, time, and materia possible. They have to be established before physics in the modern sense of the fields of forces, since the fields of forces can begin. So he calls them proto physics. So these are sort of a priori assumptions of physics themselves. The point here is that there could be some a priori assumptions, even of the natural sciences.
And by the way, there are some political implications of empiricism, which we’ll just briefly mention here. As Hoppe mentions in one of his papers, when you see empirical results of the failure of socialism, let’s say, when East Germany imploded, and Soviet Russia imploded in the late 1980s. How could the advocates of socialism not admit that it had been refuted, right? Well, because they’re empiricists.
Okay, so basically, they said that you can’t know anything a priori about reality with certainty, and no experience can ever prove anything definitely or not. So what they say is they say, well, maybe there’s a reason. Maybe socialism failed for other reasons. Maybe it wasn’t socialism. Maybe we did socialism the wrong way. So in other words, it gives them an excuse to keep tinkering around.
Let me go to the next page here, slide 15. So here’s another example. They would say you can’t know for sure, as an economic law, that inflation would cause higher prices, right? So you would have to test it. Or you can’t know that the minimum wage would cause higher unemployment, all things being equal. You can’t know that socialism would ruin the ability to calculate, as Mises demonstrated in 1921 I believe. And therefore, socialism would just cause mass impoverishment. They would think you can’t know these things a priori.
So they would want to – let’s try it. Well, let’s put a minimum wage in place and see what happens. And it looks like – oh, thanks Danny. It was 1919 that Mises socialism pamphlet was published. So in other words, the empirical mindset gives permission to the state to keep trying things and to never get rid of them when they’re obvious failures because they can explain it by any number of variables because nothing is certain.
It’s all just hypotheses. Someone has a question here. Jock: Wouldn’t all imaginary numbers be a priori assumptions that are fundamental to mathematics and physics. I don’t understand what you mean by imaginary numbers being a priori assumptions. Mathematics, I think in a sense, is held to be an a priori type of study. And it’s part of the experience of human action, what it means to count. We count when we do things.
But I think – I mean imaginary numbers is just a – it’s a mathematical trick to allow us to manipulate frequencies in the frequency domain. It’s sort of like a transform. So I just think it’s a mathematical trick that works. It’s like a formula that works. But I don’t know how to answer that. I don’t know. Imaginary numbers are implied in some a priori way. I could ask Hoppe what he thinks about that. That might be a good question.
Okay, Tito says, can we say that empirically, mathematics isn’t science? It doesn’t follow the scientific method. Well, that’s what the empiricists will say, yeah. I do think an empiricist would say that mathematics doesn’t say anything about the universe as such. It’s just manipulation of symbols. It’s basically analytical. So I agree, but I think they’re wrong. I think that math is a type of science. Of course it is.
Now, let’s turn to the Kantian approach, at least as a variant that Mises has adopted and incorporated into his economics. Now, I put realist in parentheses here because – we’ll get to this in a minute. A lot of people especially some modern libertarians, namely, objectivists, Ayn Rand followers and Ayn Rand herself, are strong critics of Kant. In fact, they think he’s one of the – I think the most evil man that’s ever lived or something like that. It’s my understanding Kant was actually a fairly good liberal in the classical liberal sense in the actual policies he recommended, so it’s just his pure epistemology and metaphysics and philosophy that the Randians hate. But the basic idea here – and by the way, this is not dissimilar from Rothbard’s more Aristotelian view.
It just has a different conceptual breakout and different names, different labels and words, but we’re going to stick here with the Mises and Hoppe, more Kantian terminology. So basically, they say you can classify every proposition two ways. First, you can classify it as analytic or synthetic. And the analytic again is more like a definitional – something is true by definition. Like all bachelors are unmarried, or synthetic, which says something about the world. That’s just something that happens to be true. And then you could also classify every statement as either being a priori or a posteriori.
What this means is prior means before. Posterior means after. What that means is a priori means you can know it’s true logically and even chronologically before you test it to verify it. That means you don’t have to test it to verify it; a posteriori means you can only verify that it’s true by looking after the fact after you formulate it to test it or to compare it to some kind of evidence. Now, the view of the empiricists is that there is no such thing as a statement that is both synthetic and a priori.
Okay, there’s only analytic statements, and those are a priori. And all synthetic statements are a posteriori or empirically verifiable. So that’s their view. The Kantians say no. You can have synthetic a priori statements. Antonio Lopez asks about the Kelley book. I’m going to get to Kelley in a few minutes, but I think you’re talking about The Evidence of the Senses: A Realist Theory of Perception, which is a really good book, but it’s just a defense of realism. But I don’t think it takes a – I don’t remember what its position is on the analytic, synthetic, and a priori/a posteriori divisions.
I do know that it’s a standard Randian line to deny that the analytic-synthetic dichotomy even makes sense. I think they’re wrong. I think it makes perfect sense, and it’s a good way to look at to categorize statements. In any event, the key Kantian view for our purposes is that synthetic a priori knowledge is possible. And again, this is why empiricism is self-defeating because their very denial of synthetic a priori knowledge itself has to be synthetic a priori to be true and to be relevant, which is contradictory. If it’s analytic, then it’s just formal and empty. If it’s merely synthetic and empirical, then it’s not a final law. It’s just a hypothesis.
Okay, now, let’s talk about David Kelley and Ayn Rand and Kant because this is a subject of interest. It interested me greatly when I was younger and learning all this. And I actually was a big Kant sort of hater for a long time because of because of Rand. So there are statements in Kant that you could interpret in an idealist way instead of a realist way. A realist way would mean we are what we think we are, what we appear to be. We’re human beings with bodies living in this world, having the characteristics that we sense and that we understand by conceptual means and with our minds.
Now, the Randians are realists as well, and I think their epistemology in this regard is pretty much compatible with the Misesian realist view. But the Randians despise Kant because they believe he’s an idealist. That is, he thinks we can never know the world as it is, that we can only see some transformed version of the world or basically, we can never see the real world. So we’re always hampered in our ability to know reality. Now, he does have a comment, and David Kelley sort of marks it in this clever comment.
Okay, so Kant says that the standard traditional view is that knowledge that we have has to conform to things in the world for it to be valid knowledge. But he says that under that supposition or that premise, we’ve been unable to establish the validity consciousness. Well, we won’t get into that why. But Danny asks do I mean the Rothbardian realist point of view? I’m not sure what you mean. No, I meant the Misesian. Mises is a realist, and so his Hoppe.
And they have a Kantian – they basically take a realist interpretation of Kant. In other words, you could think of Kant as having two sets of followers now. This is crude, but you can think of the idealists, and that might include the critics too, the critics who believe Kant was an idealist, and the people that interpret Kant in a realist way. I don’t really care what Kant really was. All I care about is the current ideas that we’re promoting, and the Misesian interpretation of Kant is realist and so is Hoppe’s. So anyway, Kelley says, why don’t we make an analogy with driving a car? So he’s making fun of Kant.
Hitherto it has been supposed that our steering must conform to the road, but we hadn’t been able to prove the validity of steering. So maybe we should make the experiment that we would have more success with the problems driving by assuming the road must conform to our steering. So he’s sort of mocking the idea that reality has to conform to what our brain imposes on it, which is the Kantian idea of categories. Now, let me let me say what – Hoppe admits that this – that there is some murkiness in Kant’s epistemology that has given some excuse to some of this critics to interpret him in this idealist way. Now, Hoppe says, so it’s been a common quarrel of Kantianism that it might imply a type of idealism.
But he says – you can see the bolded part here in the first paragraph: I do not think such a charge against Kant is justified, but some of his formulations have given this charge some plausibility. Then he repeats the statement that Kelley criticized: So far it has been assumed that our knowledge had to conform to observational reality. But instead, we should assume that observational reality conforms to our knowledge. Now, my view, and I’ve even read Kant in the original German. My view is Kant was a realist, and he did not mean that we are changing reality with our mind, but that we have to form concepts and we have to organize our perceptions in a certain way, and that’s the only way we can understand it.
In any case- and by the way, there are some books out there that talk about the realist tradition of Kant. I’ve got one of them listed here. And I’ve got a blog post here: “Mises and Rand (and Rothbard)” where I talk about this, and we’re going to talk about this in a few minutes. Rothbard himself – now remember, Rothbard was Aristotelian realist, similar to Rand. He says that Randians were going to be upset by Hoppe’s system because it was grounded on the satanic Emmanuel Kant and his synthetic a priori.
But he thinks the Randians could be mollified if they understand that Hoppe was influenced by a group of German Kantians, that is, the Continental Kantians that were not like the Americans. The Americans are more idealistic, but the American philosophers who are influenced by Kant, but apparently there’s a continental tradition or European tradition that is a more realist interpretation of Kant. Again, Lorenzen, who is the guy who was the one pushing the proto physics ideas like I mentioned earlier, which is definitely – it may be going too far with apriorism, but it’s not unrealist at all.
So what Hoppe’s view is that one of Mises’ great contributions, which is not really fully appreciated, is that he basically reformed and improved and put Kantian epistemology on a more sound footing by clearing up some of the confusing language and by making very clear how it’s rooted in praxeology. So when Mises came up with praxeology as this sort of rigorous structure of human action, a way of understanding human action, it clarified a lot of the previous problems with Kantian epistemology. So, in other words, what you do is you have to realize that all of our mental categories are really grounded in the category of action. And that means that all of the a priori categories of action have to be realistic, and the reason is because action – look at the bottom part – action is how the mind and reality make contact.
Let me go to the next slide and talk about this a little bit further. So what he’s saying is action – remember, action is a human being who employs means. Now, remember, means is a scarce means to achieve an end, and an end would be some situation in the world, in the universe that you would not obtain unless you perform the action, something you prefer to the situation that would obtain if you didn’t act, something that you’re hoping to relieve some felt uneasiness that you have.
And the means that you choose is causally efficacious. This is important. In other words, you believe that there’s a set of causal laws in the universe that exist out there and you believe the means are selecting will operate in accordance with these causal laws to achieve the end that you want. So all your action and all the categories that come from action in the means and even the laws of logic, etc., which I’ll get into in a minute, have to do with acting with a physical body in reality with a means that is causally related to the ends you’re trying to achieve.
So you can see how all action is in contact with reality. So this is the Hoppian view and the Misesian view or Hoppe’s explanation of the significance of Mises’ achievement. So basically, he would say that action is itself an a priori notion, the action axiom that humans act. And action is a link to reality because it’s the interaction of our physical bodies with the external world with means. And knowledge, when we have knowledge, knowledge is knowledge of people that are actors who are acting in the world.
Knowledge is a tool of action. That is what it is. Knowledge would have no purpose if we couldn’t act, and you couldn’t act without knowledge because knowledge, remember, is what informs and guides our choices. So when we act, we select an end and we select a means. How do we do this? We have to have knowledge about what ends we might like or what are possible to achieve and what means can be used to achieve these ends. So knowledge is something that is an essential part of action. It guides action in interacting with reality.
By the way, Hoppe’s PhD dissertation, which is in German, but the English translation of the title would be “Acting and Knowing.” I mean this was what he was specialized in from the beginning. And I don’t know if I talked about this already, but according to Hoppe’s story, he goes into this story in his first lecture I mentioned above on economic science and Austrianism. He came to basically the same conclusions as Mises on praxeology on his own, and then when he read Mises, he saw that it was all laid out and systematized and was just brilliant.
But it confirmed the way he was going. So basically, Hoppe had discovered – Hoppe had discovered praxeology on his own through philosophy, not through economics. Antionio Lopez says, the essay “The Analytic-Synthetic Dichotomy by Peikhoff, right. That is the standard Randian criticism of the idea that there – that knowledge can be divided into either analytic or synthetic, which I think is not a – I mean, look. You can classify action into jogging and not jogging if you wanted to. So all human action is either jogging or not jogging.
Now, you might say that division is not very useful, not very interesting, doesn’t produce very much, doesn’t help you figure out a problem. But there’s no logical reason you couldn’t divide action into jogging and not jogging. And there’s also no reason you can’t divide propositions into analytic and synthetic in my view. I’ve read that essay a long time ago, but I don’t think it’s correct. I think if Rand had realized that there was a realist interpretation of Kant and that’s what Mises was doing, maybe she wouldn’t have been as hostile to Kant or would have realized that the idealist tradition of Kant was more of what her target should have been, not a realist interpretation of Kant.
In any case, I want to talk really quickly about – just go over some things here. So, again, we’re talking about the realist version of Kantian epistemology, which upholds the possibility of synthetic a priori knowledge and which the positivists – the logical positivists deny. Okay, now, Mises based his version of this on his insights into praxeology, as I said, and dualism, a more sort of more rigorously circumscribed dualism than Kant had. And if you think about the structure of human action, as outlined in Mises’ praxeology, we employ means to achieve ends.
Now, the end is what your goal or purpose is, so this is what human action is about. This is what makes it action versus behavior. So that is the field of teleology or teleology, the study of human purpose. And this is one of the two realms of study – of human knowledge, things we can know about human purpose, purpose of conduct. And then action also employs means, and these means are causally efficacious. Our bodies and the means we employ interact with the world in a causal way to achieve something, some physical result that we wouldn’t otherwise obtain. That presupposes causality. That is what the scientific method and the natural scientists study.
So ends and means lead to different ways of studying what they’re aimed at, purposes and goals. Teleology studies those. Causality studies how you can get things accomplished. Now, there’s a parallel here to the idea of human behavior versus action. This whole praxeological breakdown presupposes that there is action, and that human action is something distinct from behavior. Behavior would just be the motion of human bodies, looking at a human body like a car or like a cloud of quarks following the laws of physics versus looking at it as you look at yourself as an actor having goals and choice and purpose, and trying to think of these other humans as an actor because if you can usually understand them and what they’re going to do and why they’re doing something if you understand them as actors rather than mechanistic, meat clouds of quarks anyway with our current technology.
I will go quickly over the next few slides because it was not essential for this lecture. I think I’ve talked about it already previously. But you could view the Misesian epistemological framework as a way to justify compatibilism. Compatibilism is the idea that both free will and determinism or causality are true at the same time in some kind of way. It’s a way out of this dilemma a lot of people have that it seems like how can we have free will if there’s causal laws.
And on the other hand, if you have free will, wouldn’t that break a causal law? They seem like they’re contrary to each other. The view of Mises and Hoppe is that if you had a god or a prime mover or a supercomputer that had all knowledge and could predict the motion of human particles and bodies, maybe you could see that freewill was an illusion. But the point is, from my point of view, when we understand people as actors, we are presupposing that they’re acting and that they have choice. Action implies choice, so it’s a necessary and unavoidable illusion if it’s an illusion.
I’m going to skip these here. So let’s talk about these two realms of knowledge, the teleological and the causal realms of knowledge. And again, I mentioned earlier the structure of human action implies this. Now, what makes them different is, number one, their realms of knowledge of different phenomena. We’re talking about what causal laws exist that govern the interaction of existing physical things in the world. That’s the causal realm. So we’re trying to understand what these causal laws are.
And on the other hand, we’re trying to understand human action, why someone did something, etc. Now, because the nature of the subjects are different, we have different ways of validating this knowledge. That’s what makes them different realms of knowledge. So the empiricists are right we believe, that causal theories, that is, what they would call scientific theories – we call them natural science or causal theories – are always hypothetical. You can never know for sure that a given physical law – you can never verify it. You can never finally confirm it.
Now, the Randians would say you can have what they call contextual certainty, but I believe they’re sort of cheating with this contextual certainty stuff because they meant you could still be wrong, but you have reason to act like you’re right or something like that. I mean, look, we can all treat gravity like it’s established because it’s a reasonable thing to do. But, theoretically, there’s no logical reason why there couldn’t be an exception to the law of gravity discovered tomorrow.
I mean we could start floating off the surface of the Earth tomorrow. We have no a priori reason to think that that can’t happen. So that is causal theory, and because they’re causal, the way to determine what causal laws are is we come up with hypotheses, and we do an experiment, and we gradually improve our knowledge over time. This is correct, although it’s never certain. See, we don’t have direct access to the causal laws. We can assume there are some causes, but we never know exactly what they are.
We don’t have any kind of direct perception of causes. In this respect, Hume was correct when he said we can’t see causes, but we do have direct knowledge of the ultimate causes in teleology. We know – I know why I am building a mousetrap. It’s because I want to catch a mouse. I mean I know exactly what my goal is, and I know why I do it. I have introspection. I have internal knowledge of my action, aspects of my action. So the knowledge of that is going to be different. This gives us knowledge of the structure of human action or praxeology, and that is a priori. Every part of that is undeniably true. You would contradict yourself in the attempt to deny it.
So let’s go over a few examples. These are from Hoppe’s Economic Science and the Austrian Method, what he would call a priori knowledge. So whenever two people, A and B, engage in voluntary exchange, they must both expect to profit from it. It’s hard to deny that this is what it means to engage in exchange, and they must have reverse preference orders for the goods and services exchanged so that A values what he received from B more highly than what he gives to him. And B must evaluate the same things the other way around. See, this could not be – this could never be falsified by experiment.
I mean this is what it means to trade. If I give you $1 for a candy bar, I give it to you because I value the candy bar more than the dollar. That’s why I gave it to you. And vice-versa, you value my dollar more than the candy bar you’re selling to me. So that’s what he means by the reverse preference orders, and that they both expect to profit from it, to be better off.
So let’s not go through all the examples here. You can read them later. But the point is, these are examples of a priori knowledge. Now, they’re if-type statements. If someone does this, then this is the case. They make assumptions about there might be exchange. To the extent they hold true, they’re really solid, deductive knowledge that can’t be denied, and you don’t – not only do you not need to test it, but you could never even, in principle, falsify it. How could you ever falsify this first sentence?
Rick is challenging the second bullet here. The second bullet says, whenever an exchange is not voluntary but coerced, one party profits at the expense of the other. And he says – Rick says, you forget that I know better what it’s good for you than you do, so the second bullet is not necessarily true. Well, I think it is necessarily true because “at the expense of” is talking subjectively from the point of view of the coerced actor. And if he has to be coerced, that shows that you prefer not to do it. Oh, I don’t know. Maybe he was being sarcastic. Sorry Stephen. I have to ask because a lot of people are not.
Okay, so you can go through these. These are pretty good examples topics as the Ricardian law of association, increasing the supply of money, making the purchasing power of go down, minimum wage laws causing unemployment, etc. Now, as I mentioned before, the difference is in how they’re validated. And Hoppe has a quote here. He says, look – he gives an example of a triangle. He goes, if you really try to test these different a priori laws by – let’s test them in nature.
Let’s test them with an experiment or with data to see if they’re true or see if we can falsify them. It’s as if you wanted to establish the Pythagoras theorem by measuring the sides and angles of an actual physical triangle. And if anyone tries to do that, they’ve just intellectually confused. I mean the laws of geometry are not established by getting a ruler out and measuring an actual angle.
Another difference would be when you’re looking for a causal law, you’re looking for a general time-invariant law that persists across time and that is a type of law that describes a class of entities in the world. It’s not a unique isolated thing. You’re looking for a law. But human actions are all unique. They’re all unique in space and time and subjectively. So that has implications for probability theory and for the certainty of predictions, which we may have time to get to.
I’ve mentioned earlier there are different categories of action, and I think in the last class or the one before that, someone asked whether laws of logic, etc. were actually part of praxeology. And that is the Hoppian, and I think Misesian, view as well. So the first is the basic law – those basic categories of action: values, ends, means, choice, preference, cost, causality, scarcity, all these things. They’re implied in what it means to act. If you understand what human action is, you could never deny that there’s such a thing as ends and means.
You couldn’t deny that there’s choice. You couldn’t deny that there’s profit and loss. Profit means when you achieve what you aimed at. Loss means when you didn’t. You can’t deny that there’s time. You can’t deny causality because the means you’re selecting are presupposed to be causally efficacious at achieving your end. You can’t deny scarcity because means are necessarily scarce, as Mises says.
By the way, something that helps you achieve an action that is not a means, not a scarce means, or it’s called sometimes general conditions of human action, or you could call them free goods, like the knowledge that we use could be looked at as a free good, but it’s not a scarce means. But scarce means are always employed in action if only your human body, which is a scarce means. But as Hoppe points out, there are other things, logical primitives like “and” and “or”, “is” and “is not” and numbers and counting. They all have a basis in praxeology because – and they’re not just arbitrary, analytic statements. They’re not just empty.
They’re not merely a convention, as the empiricists might say. They’re actually based on the reality of human action, like having to choose between things, this or that, for example, combining actions to achieve – to reach an end. Like it takes two or three steps to reach a given result. That’s additive or repeating or counting etc. So all these concepts are rooted in praxeology or human action itself, and even the basic laws of logic like the law of identity and contradiction.
Now, empiricists would have to say that the law of identity and the law of contradiction, which is that nothing can be A and not A at the same time, in the same way, empiricists would say, well, that’s just a convention. It’s an empty statement. But I mean what’s the alternative? See, when the empiricist says that’s just an arbitrary convention, he’s implying that it could be something else. Well, that itself implies the law of non-contradiction, and by the way, this is similar to the arguments Rand makes in defense of law of contradiction because he’s saying that X is true as opposed to it being false.
So he’s setting truth and falsity opposed to each other. He’s saying that the opposite of what is true is not true. He’s implying and he’s presupposing the law of non-contradiction in the very attempt to deny it. And also, of course, causality is implied in action. We never know the exact causes. We never know the exact physical laws in the world. But we have to presuppose that are some causes. Otherwise, we couldn’t act. There would be no reason to act if you can expect that – you expound through your knowledge some way of affecting things in the world to achieve what you wanted. Everything would be random or chaotic.
So the action axiom itself, praxeology. Economics is a type of applied logic, and the action axiom itself is an a priori true synthetic proposition. And again, the things you can derive from this, like the law of exchange that we talked about earlier, what Hoppe thinks is and which I agree is the most important economic law of all, the law of diminishing marginal utility. The Ricardian law of association, price controls, quantity theory of money can be logically derived from the action axiom.
So that’s why they’re not the same epistemological type as those in the natural sciences like saying, I think there’s a fourth physical force, the strong nuclear force that has the following characteristics and the interrelationship between subatomic particles following this mathematical law. That is one type of proposition, but these others are not because you couldn’t even imagine testing them or falsifying. So this leads us to the unique Misesian view of what the nature of economic analysis was.
Now, as I mentioned, until, say, the mid part of the 1900s, the 1950s, it wasn’t that unique. It was sort of the predominant mode of economic analysis. In the beginning of Hoppe’s Economic Science and the Austrian Method book, he goes into the history of a lot of thinkers before Mises who said basically the same thing as Mises, maybe not in as rigorous a way. But they had the same idea, Cairnes and Lionel Robbins and many others. But now, the Austrians are basically the lone voice, holding this traditional view of economic reasoning, the nature of economic science because of the rise of positivism and empiricism.
And if you remember earlier, I mentioned one of the political dangers of empiricism is that it gives the government warrant or permission to do experiments. We got to just keep trying one new social program or one policy after the other, and if it fails, we can’t say that it shows any economic loss, just maybe we didn’t get it right. We didn’t get the variables right. Well, of course, this is one reason positivism has risen is because the state likes it because it gives the state permission to interfere with the economy and to control to control our lives.
Why don’t we take – it’s one past the hour now. Unless anyone’s strongly objects, we have – I’d like to make some more progress. So instead of stopping for questions, I’d like to keep lecturing. I’ll take a – let’s take a five-minute break starting now. Come back at seven past. Smoke them if you’ve got them. I’ll see you at seven past the hour.
Danny says, I don’t think empiricism lends to government intervention any more than it does to government de-intervention. Well, I don’t know. The argument is that it does give ammunition to statists because it gives the state permission to tinker. This is one reason the economics profession is coddled by the state – I mean it’s just an argument. Hoppe makes the argument, and it makes sense to me. He does make it – in this article I quoted on the earlier slide on the political dangers of empiricism.
There’s a link to an article of Hoppe’s. He also talks about it in his recent speech at Mises. I can’t remember which one, but one of the two I linked, but that’s his view. Well, so Danny says, by the same reason, you could say rationalism is statist because they could derive a priori justifications for intervention. Well, I don’t think they could because socialism is not justifiable, so actually, they could not. In any case, I don’t see a question here, so let me let me go on here.
So given what we’ve talked about so far, here’s how Hoppe says you need to look at the nature of economic analysis. So it says that all economic propositions which claim to be true, you have to show you can deduce them by formal logic, from incontestably true material knowledge regarding the meaning of action. So in other words, you have to reason deductively from the human action axiom itself, from the categories of praxeology.
Again, as opposed to the empirical idea that we hypothesize laws similar to the way physicists would do and then test them. We don’t test these. We logically make logical deductions from certain basic, incontestably true, basic starting points. So the first part of economic reasoning is this. There’s three parts according to Hoppe. Number one, you have to understand the categories of action and what it means to change these things like values, preference, knowledge, means. What happens when they change?
Number two, you have to describe a given world where these categories of action have a concrete meaning, where you identify particular people of actors, with definite objects, and with certain goals. Okay, now, this gets back to – I’ve talked about this in my speech. Economics consists of you have your basic laws. Then you introduce contingent assumptions or facts to make the analysis interesting.
So for example, you would say, well, we’re not just actors. We happen to be humans, so let’s assume that the humans are actors, and they usually cooperate and that they have certain laws that protect private property rights that regulate how they use scarce resources, and that they live in an economy that is advanced and has money. So if you make these assumptions, then it makes your analysis more interesting. Now, it makes your analysis contingent. The result that you deduce are only true in a world in which those assumptions hold, but since they do hold in our world, that’s why we do those.
And then finally, you logically deduce the consequences of performing some action in that kind of world, or you say what would change if something else changes in certain way. So, as Hoppe says here: Provided there is no flaw in the process of your deduction, the conclusion that you reach must be valid a priori because it would go back to nothing but the indisputable axiom of action. Now, if the situation and the changes you introduced into it are fictional or assumptional, that is, you introduce some contingent assumptions which turn out to not be true, or they just happen to be true in some worlds like a Robinson Crusoe world.
That’s a world with only one or maybe two men, or a world that doesn’t have homogenous factors of production, etc. Then those conclusions would only be true of that possible world. But if you can identify the assumptions that you make as real, then the conclusions are a priori truth. Now, we’ll get to this in a minute, but this does not mean that Austrians believe in infallibility, like say the pope believes in infallibility. We’re sometimes accused of this, but you’ll see in a minute that Hoppe expressly denies this, and I think he is correct.
I will skip over this quickly. This just some background for what I just mentioned. I’ve got some citations here to Rothbard on what praxeology is and what the nature of economic analysis is. Also, this is some stuff from Hoppe and Mises where they talk about explicitly introducing assumptions into empirical reality to try to make your analysis interesting. Otherwise, it would just be a boring, fairly trivial analysis of human action in general, but it wouldn’t take you anywhere.
You have to assume that there’s money or barter or a Crusoe economy or political – government intervention in the economy. You can do that. You could analyze the effects of government intervention in a free-market economy etc. You could assume a free-market economy. You could assume a stateless society. You can assume a state, and that would lead you to make a public choice-type analysis. You could make some assumptions and analyze gain theory. You can make some assumptions about war being present and analyze how people would act in war, etc., different types of applications of praxeology.
So I mentioned earlier, if you can assume there’s a Crusoe economy, just one person on an island or maybe two and catallactics is what Mises calls the economics of the market economy, that is, assuming private property rights and maybe money existing, etc. I mentioned earlier that one thing interesting about Hoppe’s approach is that he derived sort of his own version of praxeology on his own, which is impressive. But he did it from philosophy. Rothbard recognized this in one of his articles. He wrote: Hoppe has proven to be productive and creative, partly because he’s the only praxeologist as far as I know who arrived to the doctrine originally from philosophy rather than from economics.
So he brings certain philosophic credentials to task, and this might explain the power of Hoppe’s thinking because he has a fresh approach to this and a unique approach and was brilliant enough to come up with his own version of praxeology on his own. Now, when he read Mises, of course he learned more, and it was already formalized and systematized. But he was already heading in that direction when he stumbled across Mises.
Another thing to notice here is that – so empiricists, not only do they deny the scientific character of economic laws because they’re not – that is, a priori economic laws because they’re not testable. But they also deny that normative discourse, that is, discussion about what rights there are, what is right and wrong, what rules there should be, they deny that has a set scientific character as well. It has to be totally descriptive and value-free. Now, Mises actually also has the same view. Mises restricts his analysis of economics to what he calls the value-free or wertfrei economic phenomenon.
But as we discussed in the last lecture Hoppe, himself has tried to, and he believes he succeeded in, extending a type of praxeological analysis to the domain of ethics and norms. Rothbard himself believed this. I think I had part of this quote last time. There’s a quote from Rothbard here, commenting on Hoppe’s achievement in argumentation ethics, how Hoppe starts from standard praxeological axioms.
Now, notice Rothbard is using the word axiom like Ayn Rand does to mean some kind of uncontestable truth. The Kantian would say that’s an a priori proposition, anyway, the basic laws of action like every human acts, employs means to arrive at goals. And he uses this to arrive at an anarchist-Lockian-political ethic, his argumentation ethics. So this is Rothbard’s opinion that the field of praxeology has been extended.
Danny says, Mises never uses the term action axiom, by the way. That’s interesting. I’m not surprised because, again, axiom is used normally by people to refer to an assumption of like an artificial system, like a mathematical system or something like that, not used in the Randian sense to talk about things that we know that they’re fundamentally true because their denial is self-contradictory. That’s what Misesians would call a priori – categorical a priori knowledge.
Okay, slide 40. Look at the second quote here. So Rothbard even suggests that it would be interesting for someone to research whether you can extend it even further, take this axiomatic approach. Well, it’s – again, it’s the argumentation ethics approach he’s talking about extended into other spheres of ethics. So not only does he think Hoppe has established in extending praxeology to political ethics, but he thinks that maybe that approach could go farther, and maybe others can take it farther, and no one has yet as far as I’m aware of, or at least not too far.
Okay, now, I mentioned earlier that sometimes Misesians or Kantians will be accused – or people that believe in a priori knowledge will be accused of claiming infallibility. But this is actually just simply not true. As Hoppe says, it doesn’t imply a claim of being infallible. All it means is that you think there are different methods of validating different types of knowledge. There’s one method for validating what you think is a given causal law where you do experiments.
You hypothesize law and you do an experiment to falsify it or to test it, or you reason deductively from things that you can establish as a priori true in the first place. But it doesn’t mean you can’t make a mistake in either realm of human reason. You can always make a mistake. And Hoppe gives an example here. He says, one of his spoils is Deirdre McCloskey, says that rationalism assumes infallibility. And she says something like, even in a pure science like mathematics, some allegedly watertight arguments have turned out to be wrong.
And so she says, well, if you thought you were infallible before, apparently you’re not infallible, so there’s something wrong with apriorism. But, but as Hoppe says, this only shows the argument previously thought to be a priori was not. In other words, someone made a mistake. Rothbard has a similar comment not related to Hoppe. But he just says, no one is omniscient or infallible, and that’s a law of man’s nature. There are some other interesting articles for anyone who wants to read further. You can take a look at the two here. I have linked one by Barry Smith and one by Steven Yates. Both talk about a fallibilism and the Austrian approach. Barry Smith is more of an Aristotelian, I believe, but he still is very familiar with the Misesian-Austrian approach.
Okay. Now, we talked about the nature of knowledge of the causal realm and nature of knowledge of human action. So these causal laws, we have gradually evolving and improving scientific knowledge, knowledge about causal laws, which you gradually refine over time. Humans learn things. They learn more, but these laws are never exact. They’re never 100%. Newton’s laws seem to be exact until more accurate laws of physics replace those. But you can still use Newton’s laws for certain phenomena that are not too relativistic in speed, etc. And they work they work pretty damn well. But to be able to predict the future, you’d have to take into account causal laws and also the fact that there are a bunch of humans out there acting.
Okay. Now, you can know some things about the structure of your human action and every action, but you don’t know exactly what the action will be. In fact, you can never predict what people will do in the future because they have choice and also because you don’t have direct access to their minds. And you don’t even know what you’re going to do in the future. You can never predict what you’re going to do in the future. But Hoppe, in his article on uncertainty, makes the point that we have to draw a middle ground, and I have a slide coming up on this.
Let me see if I can find it here. Yeah, right here. So the future is not perfectly predictable. It cannot be perfectly predictable because we know we can learn. If we can learn, that means that there’s something we’re going to learn in the future that we don’t know what it’s going to be. If you knew now what you are going to learn, then you would already have the knowledge. So the very possibility of learning implies the future is uncertain, but it’s not radically uncertain like some like Lachmann and others would say. We can know some things about the future.
So as Hoppe says, only a middle-of-the-road position between the two extremes of perfect knowledge and perfect ignorance is consistently defensible. Okay, so this is a very reasonable approach, and you can see what it means. So in other words, if you are a complete empiricist, you almost have to believe the future is radically uncertain because we don’t have – there are no laws we can know a priori to be true that bound what might happen.
I mean anything can happen in an empirical universe, and the universe is conceived of by empiricists. So as Hoppe explains, he can predict and with perfect certainty, that, regardless of whether he will speak or write in English or German, that as long as he will speak or write at all, all of his speaking and writing will have a certain constant and invariable logical propositional structure. He’s going to use certain expressions etc. You can make all these sort of if-laws, like if I do this or to the extent I do that, then this will follow.
Okay. So look at the second paragraph – or the first one. As long as I act, there will be goals and means and choice and costs, etc. So he can predict the general logical structure of every action he might perform. You don’t know what the actual will be, but you know some things about it. The second paragraph: I may not be able to forecast that money will actually come into existence, and it’s possibly we could revert back to barter. But if we have money, if and to the extent there is money, you can say certain things that will be characteristic of transactions that employ money. Okay, it’s an indirect medium of exchange. It permits calculation, etc.
Now, what I want to get to here was this, and I have a – I’m going to go back to slide 43. You see the link down here at the bottom. “Verstehen and the Role of Economics in Forecasting.” Or, if you’re so rich, why aren’t you smart? [Verstehen is the Misesian word for understanding.] So you’ll get this all the time. Someone will say, well, if you’re such a good economist, why aren’t you rich? If you know the business cycle is coming, why don’t you make a lot of money off of it?
Well, so Hoppe’s view is this. First of all, the future is uncertain and has to be. It’s not radically uncertain, but it’s uncertain. So knowledge of economic laws helps to bracket the possibilities out there, and so as Hoppe says, in the long run, the praxeologically enlightened forecaster would average better than the unenlightened ones. But that’s a ceteris paribus thing. In other words, he’s saying you can have two identical forecasters and one is ignorant of the law of economics and one knows economics. Then the one that knows economics knows certain things are impossible or unlikely or more likely or whatever.
So his forecast, his investment decisions would be more fine-tuned to that reality, so he would tend to do better in the long run. However, no investors are the same. Warren Buffett may not know much about Austrian economics, but he has a good knack of investing. And that characteristic may be orders of magnitude more important than knowing Austrian economics. That’s what Mises calls verstehen, the art of forecasting, entrepreneurial forecasting, the understanding. Basically, it’s being a historian of the future, trying to predict what people will do in the future or what things will – how people would act in response to how you predict the world will change, etc.
Okay. So anyway, Hoppe concludes: Praxeological knowledge has very limited predictive utility. Now, it could be that in certain times, it has relatively more enhanced predictive utility, like in recent times with this massive recession, which only the Austrians seem to be able to understand and explain with the Austrian business cycle theory, which again, is an a priori rooted theory, a theory rooted in human action. So in times like this, it could be that someone who really doesn’t – really is not usually that good of an investor could do better than normal relative to other investors, given his Austrian knowledge.
Okay, I have time to get to some of this now. I tell you what. We covered a lot today. Why don’t we do this? I will save the remaining slides starting on slide 47 for next class. I’ll cover the remaining slides before we start on the economics material. And we only have two minutes left before we officially are over. So why don’t I just open the floor to any questions if there are any?
Okay. Lucas asks, all knowledge must conform to the laws of logic, whether teleological or causal. Does this lend itself to another sort of rational monism? Well, I think all knowledge has – to be valid knowledge of course it has to be – comply with the laws of logic. It can’t be inconsistent because contradictions can’t be true. And in a way, there is a monism, and the Misesian approach is – or at least the Hoppian approach is that apriorism is the main thing. In other words, we know that there are two realms of knowledge because of a priori knowledge, the praxeology, the action axiom or the category of action. But no, I think that they recognize that there are – the very nature of human action recognizes the existence of causality and human purpose. And those things require study in different ways. It’s unavoidably so. That implies a type of methodological or epistemological dualism.
John asks: Did Mises or Rand ever interact much professionally or personally? I think they did. There is – I think he wrote her a very nice letter, which is published on the Mises website somewhere. Actually, maybe I republished it in Libertarian Papers the first year. I can’t remember to be honest. He wrote her a letter upon publication of Atlas Shrugged, praising it to high heaven. And I do believe they interacted with regard to FEE, the Foundation of Economic Education. And they interacted at cocktail parties.
I believe – the story I heard was that Ayn Rand heard at a cocktail party – I think it was Mises said something like Ayn Rand is the most courageous man in America. And when the person related that anecdote to Ayn Rand, she said, did he say man? And they said yeah, he said man. And she clapped her hands in glee. She thought that was precious. There’s another story. It’s in one of the recent books the Mises Institute published where there’s a story. She showed up at a cocktail party somewhere, like New York.
I think Henry Hazlitt wrote this up. He has in his memoirs or somewhere. Mises and Rand and Hazlitt were there, and Mises and Rand kind of got in an argument about something. And Mises just dismissed her and called her something like a silly little Jewish girl or something like that, and it really upset her. There’s another comment in that a lot of her followers say why do you like Mises so much because he’s this Kantian? And she kind of famously said, oh, leave him alone. He’s done enough. So she basically laid off of Mises. I think she realized he was a towering figure. She learned a lot of economics from him to her credit.
Tito, you might be right about the quote being the most intelligent man I knew. I think it’s the most courageous, but my memory could be failing me. Antonio Lopez asks, does Hayek disperse – by the way, John McGinnis, if you want, I’ll try to find links and send them to the class later. Yeah, there’s two sources. There’s the Hazlitt source, and there’s another source. I can’t remember who wrote the other one. Maybe it’s in that Brian – who is the guy married to Angela Keaton? Brian Doherty book, Radicals for Capitalism. He may have the anecdote in there.
Anyway, Antonio Lopez asks: Does Hayek disperse knowledge? Is that another form of dualism being the contextual knowledge manifestation of the action axiom? Well, I mean I think it depends on who you ask. Hoppe himself and a lot of the very Misesian and praxeologists like Salerno, Hülsmann, these guys, are very, very skeptical of the coherence of the Hayekian knowledge approach. And I sort of share that skepticism. To the extent Hayek’s knowledge problem was a restatement or another way of explaining the problem Mises articulated in his 1920 essay on socialism, then it’s just a more confused way of explaining the calculation problem, which is not really a knowledge problem.
It’s a formatting or a comparison problem. It’s like you can’t compare things unless there’s a common unit of measure. But it’s not really a knowledge problem. It’s just prices help you compare things because now they’re reduced to a common unit of comparison. And to the extent it was something different from the calculation problem, I think it was confused.
I think it implies that prices encode and convey information, this tacit information, etc. that’s – I think that is an overly metaphorical and non-rigorous and – I mean, look. I’m not a professional economist, but that’s my opinion. There is disagreement among Austrians about this, most of the Hoppian, Misesian, Rothbardian types—and Rothbard, by the way, had this view—economists believe that the Hayekian knowledge idea is kind of confused and takes us down the wrong end. Oh, Danny says the Jewish girl insult was debunked by Hazlitt. Yeah, you could be right. You could be right. I vaguely remember that. Anything else? Let me get to the last page. We stopped at 47. We’ll pick it up here next time.
On the last page, I have – in the next class we will talk about – we’ll finish the epistemology, and we’ll talk about just some particular economic issues, and here’s some things you can read if you’d like. There are about six or seven there. Most of them are fairly short chapters. Some of them are just blog posts, actually, and there’s some optional stuff here if you want to go even farther.
I’m glad Tito. I hope I’m not going too fast for everyone or too slow for anyone. It’s hard to judge. If there are any other questions, I’d be happy to take them. Thanks, John. And what was the – does anyone remember? What was the question we were going to ask Hans? It was somewhere up in the chat up earlier on. Maybe I will – I think it was when – I’m scrolling up now. Oh, imaginary numbers. I’ll ask him. I don’t know what an answer will be to that. I’ll see if I can add that to the list. Okay, I enjoyed it guys. So I will see you next Monday, and the midterm should be up in a couple of days. I apologize for the delay. Thanks very much, Cam.