Austrians, what is "utility" exactly?

Economics Economics Questions
21

@StrangeLoop

Indeed, in Robbins’s analysis he is (obviously) ignorant of future developments in the physical sciences. The approach suggested in the paper, however, is (literally) ignorant of what it means to be SCIENTIFIC regarding economics. As is so common in economics, the author Mr. Camerer has a FUNDAMENTAL problem with his analysis----namely, that he is satisfied to adopt an empiricist methodology. To wit, he adopts and seeks to improve upon the basic (empriricist) structure of the welfare economics of Vilfredo Pareto. This IS NOT SCIENCE. And therefore, its conclusions ARE NOT USEFUL.

No. This reasoning is a direct consequence of your fatally flawed epistemology. Economics DOES NOT DEAL WITH CONTENT OF ACTORS’ ENDS. Instead, economics deals with the FACT OF actors’ ends—that is, with the FACT that actors priortize their ends (i.e. prioritize their satisfactions) because of (a) the scarcity of means; and (b) insatiable wants. Economics takes this as its starting point, and is concerned only with the logical consequences of choosing and acting accordingly. The specific content of an actor’s various ends HAS NO BEARING. What Mr. Camerer is doing is NOT economics—it is an exercise in superficiality and futility, masquerading as a scientific advancement of human knowledge. What it amounts to, however, is an assault on human knowledge and yet another grotesque misunderstanding of economics.

22

It is not concerned with the behaviour of anything. You could replace humans with mice or chairs, the praxeological arguments would supposedly be the same.

23

This is just assertion. Why can’t economics study that?

24

It is not concerned with the behaviour of anything. You could replace humans with mice or chairs, the praxeological arguments would supposedly be the same.

What? The axiom it supposedly stems from is that all human action is rational. Who knows if mice act rationally or instinctually?

25

My “fatally flawed epistemology” is nothing more than the hypothetico-deductive method–you know, that epistemology that got you healthy the last time you visited the doctor, that epistemology that safely ships goods through the air via planes, that epistemology that charts how choices are neurophyisiological phenomena.

To demonstrate just once weakness in your “fatally flawed epistemology,” answer this question: how do you know it is a “fact” that an “actor” has an “end”? What is an “end”? Is it psychological? And, if so, how is it that not an empirical foundation?

Quite frankly, the more Austrians claim that elements of their worldview cannot, ever, be measured, the more I doubt the existence of those elements. How’s this for an axiom: whatever is, is measurable.

If we concede that neural mechanisms are most responsible for human behavior, then it is a sad version of economics that ignores that fact.

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If we concede that neural mechanisms are most responsible for human behavior, then it is a sad version of economics that ignores that fact.

Fantastic post. The fact is that any theoretical framework that fails to incorporate scientific insights from other fields is going to be severely deprived. Whether these insights be in terms of what exactly “utility” means or systematic biases humans have in terms of time preference (multiple time preference schedules).

Thing is, I thing that Mises was correct in the criticisms that he was making, but economic science has advanced since then. Sticking to his word like gospel is as anti scientific as one can get.

27

To demonstrate just once weakness in your “fatally flawed epistemology,” answer this question: how do you know it is a “fact” that an “actor” has an “end”? What is an “end”? Is it psychological? And, if so, how is it that not an empirical foundation?

Mises discusses praxeology’s axiom, that humans act rationally, between pp. 11–29 of the Scholar’s Edition of Human Action. Mises’s axiom of human action, or that all human action is rational, stems from the fact that all human action is purposeful (which implies that all human action has certain ends). Now, there are Austrians who do believe that this axiom itself is empirical, including Murray Rothbard. Mises, on the other hand, holds praxeology to be entirely a priori (including the axiom of human action). Who you agree with depends on who is more persuasive to you, I guess. Nevertheless, from that axiom, further conclusions a a priori, knowing that they are logically implied from that axiom.

Hayek’s methodology was not as strict, although Hayek’s methodology was developed well before Mises developed praxeology. Hayek’s own methodology was more “scientific”, in the sense that he agreed that empiricism could not prove theory, but it could disprove theory (if the theory does not agree with the facts at all, for instance). I tend to agree with Hayek, because I know that logical deduction’s precision depends entirely on the precision of the person doing the deducting, and so empirical evidence has the capability of showing errors in one’s logic.

Quite frankly, the more Austrians claim that elements of their worldview cannot, ever, be measured, the more I doubt the existence of those elements.

What elements are you talking about? Measuring utility is different from measuring the quantity of money in an economy. If you are talking about utility, I don’t see how anybody could come to believe that utility is cardinal (“I value that apple at exactly 10.34 utils, although that orange over there has 10.57 utils…”).

If we concede that neural mechanisms are most responsible for human behavior, then it is a sad version of economics that ignores that fact.

I don’t think there are a lot of Austrians who disagree that our rational behavior is shaped by our biology.

28

To be honest, I don’t know how these advancements in neuroscience question the Austrian-economic position on utility. It seems to me that one could directly link the Austrian-economic position on utility to those neural systems:

  1. The hedonic system refers to utility (satisfaction) per se.
  2. The “wanting” system refers to seeking utility/satisfaction and thus provides the motivation for the Austrian-economic concept of “human action”.
  3. The learning system connects the first two systems.

So what’s the problem here? I guess the only thing I’m wondering about at this point is the meaning of “separable” in the quote above. :stuck_out_tongue:

I’m confused by this. First off, how can one want what one doesn’t even like? Second, how does the identification of hedonic, “wanting”, and learning systems in mammalian brains lead to that possibility? Third, what do you (or the paper) mean by the mice “wanted goods more” and “derived less satisfaction from them”?

How about looking at it analytically instead of synthetically? “What one chooses” therefore is logically equivalent to “one’s highest preference”.

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subscribed…reading paper now

this should get interesting!

30

Argh. Nevermind. My apologies. This assessment of the linked paper was based on an inaccurate understanding of Paretian welfare economics. It now seems to me that using Pareto’s structure is NOT necessarily a fatal blow to one’s analysis.

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I’d like to know what advancements are there.
I believe neuroscience may one day render praxeology obsolete, but that’s not anytime soon.

32

But that’s simply a definition created ex nihilo. The problem, from the original paper that sparked my discussion, is that one’s highest preference might not translate into one’s choice (what is “preference,” for instance?). Once again, these all are not-too-subtle psychological terms, so Austrians are being quite hypocritical to claim they have divorced themselves from the natural sciences.

To understand what a “preference” is and what determines choice behavior, in my opinion, is an open-ended question bound by empirical investigation; the Austrian, in essence, believes he can lock himself in a room and discover all of economics purely from introspection.

33

I believe your opinion is entirely fair and reasonable; considering praxeology a second-best approach that deserves our attention until worthy replacements actually appear is sensible. I would challenge that opinion, though, on the grounds that neoclassical economics is still better than an entirely aprioristic methodology, and that the tadpole-like condition of neuroeconomics is already more advanced than praxeology.

For evidence of current technologies available: http://sds.hss.cmu.edu/media/pdfs/loewenstein/NeuroeconomicsInform.pdf.

34

Knowing what produces a mouse’s behavior is an empirical question, and once the neuroarchitecture is properly understood, your question will be answered.

Knowing that human action is rational is, likewise, dependent upon empiricism. I have been thinking through a criticism of Austrian economics, and it’s still somewhat mediocre (and perhaps trite), but I think it hits upon an important weakness: consider the somnambulist.

You are watching a TV screen that is split vertically; both sides of the screen appear identical. On both sides, a man walks to the fridge, pulls out a sandwich, and microwaves it for 30 seconds. The Austrian will clearly impose a praxeological explanation onto both scenes. However, what if the man on the left-hand side was only sleepwalking? What if he were a somnambulist? What then? The final judgment depends upon further empirical verification.

Infosar as Austrian praxeology demands “conscious,” deliberate, purposeful action by a thinking man, the somnambulist is disqualified; yet, insofar as Austrians want to explain the external world, they cannot simple presuppose all human behavior works according to “self-evident” axioms.

35

I lol’d.

36

Thank you. This is the best rebuttal to this stuff I have seen so far. Clear, concise, razor sharp.

37

Would you consider yourself a Popperian falsificationist, then?

It seems to be that you believe this:

  1. Theories are conjectures and should be logically consistent.
  2. Data is used to disconfirm conjectures, not to confirm them.

I consider the critical rationalist philosophy to be an intelligent one (although I am more of a Bayesian); would you count yourself in that camp?

I don’t see how people can’t!

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However, what if the person making all these threads is sleepwalking? What if he were a somnambulist? What then?

39

StrangeLoop:

I would like to challenge you to a friendly debate. For the topic, here is an appropriate statement from Mises:

“An honest man, perfectly familiar with all the achievements of contemporary natural science, would have to admit freely and unreservedly that the natural sciences do not know what the mind is and how it works and that their methods of research are not fit to deal with the problems dealt with by the sciences of human action.” (The Ultimate Foundation of Economic Science, p.56)

I will argue that on epistemological grounds, natural science cannot provide a satisfactory, non-contradictory account of consciousness, and that therefore, an essentially non-naturalistic approach to the phenomena of consciousness is required.

In other words, I will argue that in principle, it is not possible for the natural sciences to solve the problems dealt with by praxeology. The epistemological framework of natural science precludes a satisfactory and non-contradictory account of the phenomena of consciousness.

If you accept, I’ll make an opening post and try to show how and why this is so.

Adam

40

Knowing what produces a mouse’s behavior is an empirical question, and once the neuroarchitecture is properly understood, your question will be answered.

Mises doesn’t argue that all sciences should employ an a prior methodology.

Knowing that human action is rational is, likewise, dependent upon empiricism.

This is not necessarily anti-Austrian, as I’ve already explained.

However, what if the man on the left-hand side was only sleepwalking? What if he were a somnambulist? What then? The final judgment depends upon further empirical verification.

Mises distinguishes between instinctual and rational behavior. Also, it seems as if you are conflating what empiricism really is. Theory alone can’t make events happen, it explains which have ocurred. You can’t divorce reality from “empiricism”, and nobody claims you can; if you could, then Austrians could predict exactly how society will unfold.

…they cannot simple presuppose all human behavior works according to “self-evident” axioms.

You need to read a dedicated treatise, such as Human Action, because this is not what Austrians claim. Austrian praxeology begins from rational human action, but does not presuppose that all action is rational (as I said before, there is a distinction between instinctual and rational action).

Would you consider yourself a Popperian falsificationist, then?

I, unfortunately, haven’t read anything by Popper, yet. I am more interested in economic theory, independent of methodology, now; once I read Mises’s Theory & History perhaps I’ll read something by Popper. I know Hayek’s methodology from what he writes in Monetary Theory and the Trade Cycle.

I don’t see how people can’t!

You measure the exact utility if every possible action you can possibly take? If you say yes, I will call you a liar. Cardinal utility divorces itself from the individual; it is an attempt by third parties to measure utility to model relationships (and this itself helps highlight the superiority of causal realism over mechanistic positivism).