If you will please refrain from snide remarks, I will discuss these issues with you. Also, no need to keep referring to honesty and dishonesty. I don’t want engage in moralizing over social theory.
Here are some of the passages of Hayek that I consider consistent with Misesian praxeology:
Hayek speaks of…
“…the system of tautologies----those propositions which are necessarily true because they are merely transformations of the assumptions from which we start…”
“I have long felt that the concept of equilibrium itself and the methods which we employ in pure analysis have clear meaning only when confined to the analysis of the action of a single person and that we are really passing into a different sphere and silently introducing a new element of altogether different character when we apply it to the explanation of the interactions of a number of different individuals.”
“What is relevant is not whether a person is or is not in equilibrium but which of his actions stand in equilibrium relationships to each other. All propositions of equilibrium analysis…are propositions about the relations between actions. Actions of a person can be said to be in equilibrium in so far as they can be understood as part of one plan. Only if this is the case, only if all these actions have been decided upon at one and the same moment, and in consideration of the same set of circumstances, have our statements about their interconnections, which we deduce from our assumptions about the knowledge and the preferences of the person, any application. It is important to remember that the so-called “data,” from which we set out in this sort of analysis, are (apart from his tastes) all facts given to the person in question, the things as they are known to (or believed by) him to exist, and not, strictly speaking, objective facts. It is only because of this that the propositions we deduce are necessarily a priori valid and that we preserve the consistency of the argument.”
“…the sense in which we use the concept of equilibrium to describe the interdependence of the different actions of one person does not immediately admit of application to the relations between actions of different people.”
“The situation is, however, different with plans determined upon simultaneously but independently by a number of persons…”
“The data which here are supposed to be objective facts and the same for all people are evidently no longer the same thing as the data which formed the starting-point for the tautological transformations of the Pure Logic of Choice. There “data” meant those facts, and only those facts, which were present in the mind of the acting person, and only this subjective interpretation of the term “datum” made those propositions necessary truths. “Datum” meant given, known, to the person under consideration. But in the transition from the analysis of the action of an individual to the analysis of the situation in a society the concept has undergone an insidious change of meaning.”
(Hayek, “Economics and Knowledge”)
These are the passages where Hayek makes the argument you are referring to in your quote.
I’ve bolded the passages I consider particularly important.
As I understand Misesian praxeology, it is exactly as Hayek is describing it.
There are two ways to conceive of "the interaction of many people. We can suppose that the interaction of many people is an objective fact, or we can suppose that the interaction of many people is a datum of the individual’s action “known to (or believed by) him to exist, and not, strictly speaking, [an]objective fact.”
As Hayek correctly notes, if the interaction of many people is considered an objective fact, then it lies outside the domain of the Pure Logic of Choice, because the Pure Logic of Choice only applies to data that are present in the mind of the person concerned.
But if the interaction of many people is considered a datum in the mind of the person concerned, then by Hayek’s own account, the Pure Logic of Choice applies. Then, the propositions we analytically derive from this data are… “necessarily true because they are merely transformations of the assumptions from which we start…”
All that is necessary is to suppose that “the interaction of many people” is a datum in the mind of the person concerned. Once we do that, we are simply extending Misesian praxeology to include not only data of the market, but data of social interaction. This is perfectly consistent with what Hayek writes above. And this is why I read Hayek as confirming rather than contradicting Mises’s vision of praxeology as a general formal science of human action that extends wider than economics, catallactics, and market transactions.
I’m not making “snide remarks”, you are ignoring the context of Hayek’s own ideas (e.g. “Economics and Knowledge” was written partially to persuade Mises that economics was empirical, and not a priori) thus your hermenutics is disdainfully dishonest.
Furthermore, I will simply not debate you if you are not being honest for in everything we do there is and must be moral dimension; it is completely right for me to call you out on not understanding the context of Hayek’s ideas before you start to interpret him in an ad hoc fashion. I’m only interested in proper interpretation, not twisting quotes in order to support an antecedent conclusion.
Yet he never states that these assumptions are a priori, and the fact that he refers to them as “presumptions” rather than “axioms” leads me to the analysis that he is also speaking of empirical principles here.
This does nothing to support any interpretation of Praxeology.
This is clearly in support subjectivism in economics (which Praxeology is not the only advocate for), not aprioristic analysis.
Hayek has stated that he does believe the Pure Logic of Choice is a priori, but that once economics advances beyond a single person it becomes empirical.
Well, you must be understanding one wrong for 1=/=2.
You are interpreting Hayek without a sound knowledge of his views on the use of reason, so honestly I’m not responding any further. Read Hayek on Hayek if you want any difficulties you have allieviated, but you’re trying to get Hayek to agree with Mises’ rationalistic methodology despite the fact he has written contra rationalism throughout his entire life.
You can, but you’d be talking nonsense, so not my problem.
Why would they deny it?
He was one, actually, and I mentioned the book because it is one area Long claims that the differences between Mises and Hayek are exaggerated, and I am going to be frank, between you and Long I will definitely go for his word on the matter, rather than someone who has read Hayek once or twice and suddenly thinks he knows all there is to know on the matter. And yes, of course there’s more than one way to conceive of rationalism.
Its implications as applied to observed phenomena.
First, regarding Hayek’s views on a priorism, Steven Caldwell does a great job of explaining this in his biography. He notes the difference between Hayek’s understanding of what it meant and Mises’, the former believed that the tautologies that could be derived from ones knowledge of their own mind said were meaningless until applied to the real world, Mises believed we could say something meaningful by simply beginning with the action axiom and logically deducing it’s implications with a few empirical assumptions. It’s also worth pointing out the more mundane fact that Hayek was always very hesitant to criticize his teacher, who had already (I believe) cut off relations with Fritz Machlup for intellectual disagreements (he also treated Harbeler poorly). And finally, as has been pointing out, both Popper and Hayek influenced one another, especially towards the end of the latter’s life.
It’s not necessarily completely wrong to point out that Hayek was in favour of a priorism but without a whole lot of qualifications it’s likely to generate a lot of confusion.
Adam, first let me point out that part of what I’m saying is that a priorism really isn’t anything particularly unique to Austrian economics. Look at Varian’s intermediate textbook, he begins with two simple principles (people are maximisers, people don’t stop until equilibrium), makes some assumptions concerning preferences being will behaved and continues to elaborate a great deal of consumer choice theory. Perhaps these assumptions are unrealistic, incomplete or just wrong, but there’s no way to tell without reference to the empirical world.
Now, you write “The event, qua social event, is, for the observer, his “theory” of that event.”, this is true and very much in agreement with his work in TSO. In fact, I agree with this point that was made by Weber (who Mises greatly admired) when he said that we cannot look at facts “objectively”. As far as the observer, in the case the economist, goes, he must use his theory to explain social events and in doing so must make reference to the subjective beliefs of the actors. But, the point of economics is not some sort of applied epistemology but to explain social events, and if one’s theory is unable to do this it must be revised or rejected. As an normative statement, Mises’ methodology is undesirable, as a positive statement of how science occurs (even amongst Austrian economists) it is wildly inaccurate, nobody begins with the action axiom, they begin by “looking out the window”, so to speak.
Once again, Hayek’s work in TSO is in accordance with this. We observe the empirical world with a pre-existing theory of how it works (by variouspathways and connections) as we learn and observe our new knowledge will create new pathways and alter our beliefs.
To give you an example, if we assume that central planners have complete information and computing ability, we would predict that socialism would be just as efficient in delivering resources as capitalism would. A quick look at some footage of the USSR would clearly contradict this.
To those who defend a priorism, I have a relatively simple question. Let us begin with two sets of assumptions, axioms and whatever else and deduce economic theory from this. The two yield different and contradicting conclusions, how do you decide between them other than by examining which theory does a more satisfactory job of explaining social events and which theory begins with more realistic assumptions? If all that Austrians are trying to say is that they start with more realistic assumptions then I see no need to dispute this, to say that the theory must be immune to various pieces of evidence is quite something else.
I’m not sure I agree with you that the point of economics is not some sort of applied epistemology. For the sake of argument, I think I will maintain in our discussion here that yes, Austrian economics is indeed a sort of applied epistemology. The law of marginal utility for example.
Maybe we can just agree that what Austrian economics is, depends on who we ask.
“…nobody begins with the action axiom, they begin by “looking out the window”, so to speak…”
Giles, “Looking out the window” is a goal-directed activity.
You just wrote: “…nobody begins with the action axiom, they begin by acting…”
“The most obvious idea for solving the above (the theoretical) problem is to investigate the types and typical relationships of phenomena as these present themselves to us in their “full empirical reality,” that is, in the totality and the whole complexity of their nature; in other words, to arrange the totality of the real phenomena in definite empirical forms and in an empirical way to determine the regularities in their coexistence and succession.”
“This idea has also led in all realms of the world of phenomena to the corresponding orientation of theoretical research, the realistic-empirical one. It has done this not only for the reason that, as said, it presents itself to us as the most obvious one, but for the reason that the purposes which theoretical research serves seem at the same time to be attained most simply and completely by means of this orientation of research.”
"How could we now solve the above problems more simply, more suitably, and yet at the same time in a more complete way than by arranging in strict types the phenomena of the real world as they are presented in their empirical reality and by obtaining their strictly typical relationships—“laws of nature”?
“Close examination, however, teaches us that the above idea is not strictly feasible. Phenomena in all their empirical reality are, according to experience, repeated in certain empirical forms. But this is never with perfect strictness, for scarcely ever do two concrete phenomena, let alone a larger group of them, exhibit a thorough agreement. There are no strict types in “empirical reality,” i.e., when phenomena are under consideration in the totality and the whole complexity of their nature. … The desire to determine strict categories of empirical forms comprising “all empirical realities” (according to their full content) is therefore an unattainable goal of theoretical research.”
“So also with respect to the second problem of theoretical research: the determination of typical relationships, laws of phenomena. If the world of phenomena is considered in a strictly realistic way, then laws of the latter signify merely the actual regularities, determined by way of observation, in the succession and the coexistence of real phenomena which belong to certain empirical forms. A “law” obtained from the above point of view can in truth only state that in reality, regularly or without exception, phenomena belonging to the empirical form C have followed the concrete phenomena belonging to the empirical forms A and B, or that they were observed coexistent with them. The conclusion that phenomenon C follows phenomenon A and B in general (that is, in all cases, even those not observed!), or that the phenomena under discussion here are in general coexistent, transcends experience, the point of view of strict empiricism. From the standpoint of the above manner of consideration it is not strictly warranted. …even the inductive method perfected by Bacon was only able to increase the guarantees of the absoluteness of the laws gained in the above way (empirical induction); it was never able to offer absolute guarantee of it. Strict (exact) laws of phenomena can never be the result of the realistic school of thought in theoretical research even if this were the most perfect conceivable and its fundamental observation the most comprehensive and most critical.”
"The scientific knowledge to which the above orientation of theoretical research, the empirical-realistic, can lead, merely in consideration of the methodological presuppositions of the latter, can only be of two kinds:
(a) real types, basic forms of real phenomena, within the typical image of which, however, a more or less broad scope is given for particularities (also for the development of the phenomena!), and
(b) empirical laws, theoretical knowledge, which makes us aware of the actual regularities (though they are by no means guaranteed to be without exception) in the succession and coexistence of real phenomena.
“If we derive from what has been said its practical application for theoretical research in the realm of economic phenomena, we arrive at the result that, as far as the latter are brought into consideration in their “full empirical reality,” only their “real types” and “empirical laws” are attainable. Properly there can be no question of strict (exact) theoretical knowledge in general or strict laws (of so-called “laws of nature”) in particular for them, under this presupposition.”
“Not only in the realm of the ethical world, and of economy, but also in that of natural phenomena, the realistic orientation of theoretical research can only lead to “real types” and “empirical laws.” And in the above point of view, at any rate, no essential difference between the ethical and the natural sciences exists, but at most only one of degree. The realistic orientation of theoretical research excludes in principle, rather, in all realms of the world of phenomena the possibility of arriving at strict (exact) theoretical knowledge.”
“The realistic-empirical orientation of theoretical research, as we saw, offers us in all realms of the world of phenomena results which are formally imperfect, however important and valuable they may be for human knowledge and practical life. They are theories which give us only a deficient understanding of the phenomena, only an uncertain prediction of them, and by no means an assured control of them. From the very beginning, too, the human mind has followed another orientation of theoretical research beside the one discussed above. It is different from the latter both in its aims and in its approaches to cognition.”
"The aim of this orientation, which in the future will call the exact one, an aim which research pursues in the same way in all realms of the world of phenomena, is the determination of strict laws of phenomena, of regularities in the succession of phenomena which do not present themselves to us as absolute, but which in respect to the approaches to cognition by which we attain to them simply bear within themselves the guarantee of absoluteness. It is the determination of laws of phenomena which commonly are called “laws of nature,” but more correctly should be designated by the expression “exact laws.”
“It may accordingly be admitted that the results of the realistic orientation of theoretical research in the field of economy cannot exhibit complete rigor. But from this it by no means follows that no regularities at all in the nature and connection of phenomena can be observed from the realistic point of view in the realm of the world of phenomena under discussion here. It does not follow that their determination is not of great significance for the understanding of economy and the prediction and control of its phenomena.”
“Both the exact and the realistic orientation of theoretical research are therefore justified. Both are means for understanding, predicting, and controlling economic phenomena, and to these aims each of them contributes in its own way.”
“There is scarcely any need to remark that the nature and significance of the exact orientation of research is completely misunderstood in the modern literature on national economy.”
Menger, Investigations into the Method of the Social Sciences, Book 1, Chapter 4
I just want to interject quickly with a quotation. I will post the entire section, but the line that I boldfaced is the most relevant.
[quote=“Ludwig von Mises, “Human Action”, Section 2.3, “The A Priori and Reality”, boldfaced and underlined text added by I. Ryan”]
Aprioristic reasoning is purely conceptual and deductive. It cannot produce anything else but tautologies and analytic judgments. All its implications are logically derived from the premises and were already contained in them. Hence, according to a popular objection, it cannot add anything to our knowledge.
All geometrical theorems are already implied in the axioms. The concept of a rectangular triangle already implies the theorem of Pythagoras. This theorem is a tautology, its deduction results in an analytic judgment. Nonetheless nobody would contend that geometry in general and the theorem of Pythagoras in particular do not enlarge our knowledge. Cognition from purely deductive reasoning is also creative and opens for our mind access to previously barred spheres. The significant task of aprioristic reasoning is on the one hand to bring into relief all that is implied in the categories, concepts, and premises and, on the other hand, to show what they do not imply. It is its vocation to render manifest and obvious what was hidden and unknown before.[22]
In the concept of money all the theorems of monetary theory are already implied. The quantity theory does not add to our knowledge anything which is not virtually contained in the concept of money. It transforms, develops, and unfolds; it only analyzes and is therefore tautological like the theorem of Pythagoras in relation to the concept of the rectangular triangle. However, nobody would deny the cognitive value of the quantity theory. To a mind not enlightened by economic reasoning it remains unknown. A long line of abortive attempts to solve the problems concerned shows that it was certainly not easy to attain the present state of knowledge.
It is not a deficiency of the system of aprioristic science that it does not convey to us full cognition of reality. Its concepts and theorems are mental tools opening the approach to a complete grasp of reality; they are, to be sure, not in themselves already the totality of factual knowledge about all things. Theory and the comprehension of living and changing reality are not in opposition to one another. Without theory, the general aprioristic science of human action, there is no comprehension of the reality of human action.
The relation between reason and experience has long been one of the fundamental philosophical problems. Like all other problems of the critique of knowledge, philosophers have approached it only with reference to the natural sciences. They have ignored the sciences of human action. Their contributions have been useless for praxeology.
It is customary in the treatment of the epistemological problems of economics to adopt one of the solutions suggested for the natural sciences. Some authors recommend Poincar?'s conventionalism [23]. They regard the premises of economic reasoning as a matter of linguistic or postulational convention [24] . Others prefer to acquiesce in ideas advanced by Einstein. Einstein raises the question: “How can mathematics, a product of human reason that does not depend on any experience, so exquisitely fit the objects of reality? Is human reason able to discover, unaided by experience through pure reasoning the features of real things?” And his answer is: “As far as the theorems of mathematics refer to reality, they are not certain, and as far as they are certain, they do not refer to reality.”[25]
However, the sciences of human action differ radically from the natural sciences. All authors eager to construct an epistemological system of the sciences of human action according to the pattern of the natural sciences err lamentably.
The real thing which is the subject matter of praxeology, human action, stems from the same source as human reasoning. Action and reason are congeneric and homogeneous; they may even be called two different aspects of the same thing. That reason has the power to make clear through pure ratiocination the essential features of action is a consequence of the fact that action is an offshoot of reason. The theorems attained by correct praxeological reasoning are not only perfectly certain and incontestable, like the correct mathematical theorems. They refer, moreover, with the full rigidity of their apodictic certainty and incontestability to the reality of action as it appears in life and history. Praxeology conveys exact and precise knowledge of real things.
The starting point of praxeology is not a choice of axiomsand a decision about methods of procedure, but reflection about the essence of action. There is no action in which the praxeological categories do not appear fully and perfectly. There is no mode of action thinkable in which means and ends or costs and proceeds cannot be clearly distinguished and precisely separated. There is nothing which only approximately or incompletely fits the economic category of an exchange. There are only exchange and nonexchange; and with regard to any exchange all the general theorems concerning exchanges are valid in their full rigidity and with all their implications. There are no transitions from exchange to nonexchange or from direct exchange to indirect exchange. No experience can ever be had which would contradict these statements.
Such an experience would be impossible in the first place for the reason that all experience concerning human action is conditioned by the praxeological categories and becomes possible only through their application. If we had not in our mind the schemes provided by praxeological reasoning, we should never be in a position to discern and to grasp any action. We would perceive motions, but neither buying nor selling, nor prices, wage rates, interest rates, and so on. It is only through the utilization of the praxeological scheme that we become able to have an experience concerning an act of buying and selling, but then independently of the fact of whether or not our senses concomitantly perceive any motions of men and of nonhuman elements of the external world. Unaided by praxeological knowledge we would never learn anything about media of exchange. If we approach coins without such preexisting knowledge, we would see in them only round plates of metal, nothing more. Experience concerning money requires familiarity with the praxeological category medium of exchange.
Experience concerning human action differs from that concerning natural phenomena in that it requires and presupposes praxeological knowledge. This is why the methods of the natural sciences are inappropriate for the study of praxeology, economics and history.
In asserting the a priori character of praxeology we are not drafting a plan for a future new science different from the traditional sciences of human action. We do not maintain that the theoretical science of human action should be aprioristic, but that it is and always has been so. Every attempt to reflect upon the problems raised by human action is necessarily bound to aprioristic reasoning. It does not make any difference in this regard whether the men discussing a problem are theorists aiming at pure knowledge only or statesmen, politicians, and regular citizens eager to comprehend occurring changes and to discover what kind of public policy or private conduct would best suit their own interests. People may begin arguing about the significance of any concrete experience, but the debate inevitably turns away from the accidental and environmental features of the event concerned to an analysis of fundamental principles, and imperceptibly abandons any reference to the factual happenings which evoked the argument. The history of the natural sciences is a record of theories and hypotheses discarded because they were disproved by experience. Remember for instance the fallacies of older mechanics disproved by Galileo or the fate of the phlogiston theory. No such case is recorded by the history of economics. The champions of logically incompatible theories claim the same events as the proof that their point of view has been tested by experience. The truth is that the experience of a complex phenomenon–and there is no other experience in the realm of human action–can always be interpreted on the ground of various antithetic theories. Whether the interpretation is considered satisfactory or unsatisfactory depends on the appreciation of the theories in question established beforehand on the ground of aprioristic reasoning[26].
History cannot teach us any general rule, principle, or law. There is no means to abstract from a historical experience a posteriori any theories or theorems concerning human conduct and policies. The data of history would be nothing but a clumsy accumulation of disconnected occurrences, a heap of confusion, if they could not be clarified, arranged, and interpreted by systematic praxeological knowledge.
"There is one rule of cognition for the investigation of theoretical truths
which as far as possible is verified beyond doubt not only by experience,
but simply by our laws of thinking. This is the statement that whatever
was observed in even only one case must always put in an appearance
again under exactly the same actual conditions; or, what is in essence the
same thing, that strictly typical phenomena of a definite kind must always,
and, indeed in consideration of our laws of thinking, simply of necessity,
be followed by strictly typical phenomena of just as definite and different
a type. Phenomena A and B must under the same conditions always be
followed by the strictly typical phenomenon C in so far as A and Bare
thought of as strictly typical and the succession of phenomena under discussion
here has been observed even in only a single case. This rule holds
true not only of the nature of phenomena, but also of their measure, and
experience not only offers us no exception to it, but such a thing simply seems inconceivable to the critical mind.
A further rule of cognition likewise highly significant for the exact orientation of theoretical research is only a correlate of the above statement.
This is the statement that a circumstance which was recognized as
irrelevant only in one case in respect to the succession of phenomena will
always and of necessity prove to be irrelevant under precisely the same
actual conditions in respect to the same result.
If, therefore, exact laws are at all attainable, it is clear that these cannot be obtained from the point of view of empirical realism, but only in this
way, with theoretical research satisfying the presuppositions of the above
rule of cognition.
But the way by which theoretical research arrived at the above goal, a
way essentially different from Bacon’s empirical-realistic induction, is the
following: it seeks to ascertain the simplest elements of everything real,
elements which must be thought of as strictly typical just because they
are the simplest. It strives for the establishment of these elements by way
of an only partially empirical-realistic analysis, Le., without considering whether these in reality are present as independent phenomena; indeed,
even without considering whether they can at all be presented independently
in their full purity. In this manner theoretical research arrives at
empirical forms which qualitatively are strictly typical. It arrives at results
of theoretical research which, to be sure, must not be tested by full empirical reality (for the empirical forms here under discussion, e.g.,
absolutely pure oxygen, pure alcohol, pure gold, a person pursuing only
economic aims, etc., exist in part only in our ideas). However, these results
correspond to the specific task of the exact orientation of theoretical research
and are the necessary basis and presupposition for obtaining exact laws.
In a similar way exact research solves the second problem of the theoretical
sciences: the determination of the typical relationships, the laws of phenomena. The specific goal of this orientation of theoretical research
is the determination of regularities in the relationships of phenomena which are guaranteed to be absolute and as such to be complete. We have
already demonstrated that laws of this kind are not attainable in respect to the full empirical reality of phenomena, and, indeed, because of the
not strictly typical nature of real phenomena. Exact science, accordingly, does not examine the regularities in the succession, etc., of real phenomena
either. It examines, rather, how more complicated phenomena
develop from the simplest, in part even unempirical elements of the real
world in their (likewise unempirical) isolation from all other influences,
with constant consideration of exact (likewise ideal!) measure. It does
this without taking into account whether those simplest elements, or complications
thereof, are actually to be observed in reality uninfluenced by
human art; indeed, without considering whether these elements could
be found at all in their complete purity. In this case it is also aware that
a completely exact measure is not possible in reality. Science starts out,
however, with these assumptions, since it would never be able otherwise
to reach the goal of exact research, the determination of strict laws. On
the other hand, with the assumption of strictly typical elements, of their
exact measure, and of their complete isolation from all other causative
factors, it does to be sure, and indeed on the basis of the rules of cognition characterized by us above, arrive at laws of phenomena which are not only absolute, but according to our laws of thinking simply cannot be thought of in any other way but as absolute. That is, it arrives at exact laws, the so-called “laws of nature” of phenomena."
Investigations into the Method of the Social Sciences, Book 1, Chapter 4
More on Mises and Hayek on the subject of empiricism in social science.
From the book Hayek on Hayek:
“Let me get to the crucial point. What I see only now clearly is the problem of my relation to Mises, which began with my 1937 article on the economics of knowledge, which was an attempt to persuade Mises himself that when he asserted that the market theory was a priori, he was wrong; that what was a priori was only the logic of individual action, but the moment that you passed from this to the interaction of many people, you entered into the empirical field. Curiously, while Mises was very resentful of any criticism by his pupils…he took my critique silently and even approved the article as if he had not been aware that it was a criticism of his own views. I cannot explain this.”
I find this passage by Hayek amazing. Given what Hayek states here, I believe I can provide a plausible explanation.
Hayek is referring to his 1937 article “Economics and Knowledge.” This article along with another article appearing in Individualism and Economic Order, ("The Facts of the Social Sciences), are important essays in the field of formal-logical social science.
In “Economics and Knowledge,” the point Hayek makes is that praxeology (what he refers to as the Pure Logic of Choice) is a discipline that is able to arrive at necessary truths (exact laws, a priori propositions, etc…) only because it is a discipline that uncovers necessary relationships in individual action:
“It is important to remember that the so-called “data,” from which we set out in this sort of analysis, are…all facts given to the person in question, the things as they are known to (or believed by) him to exist, and not, strictly speaking, objective facts.”
Regarding the Pure Logic of Choice,…“There “data” meant those facts, and only those facts, which were present in the mind of the acting person, and only this subjective interpretation of the term “datum” made those propositions necessary truths.”
So Hayek is basically providing an essential statement of the research program of the Pure Logic of Choice, which is the same thing as Mises’s praxeology, and Menger’s theoretical exact science.
Next, Hayek makes the second half of his argument. His argument is that once we begin analyzing the interactions of many people, we depart from the analysis of the relationships of the actions of a single person, and thus enter into another theoretical field altogether. In Hayek on Hayek, he clearly states that this other field is the empirical field. (see bolded in Hayek’s passage above)
Here are some of the important passages:
“I have long felt that the concept of equilibrium itself and the methods which we employ in pure analysis have a clear meaning only when confined to the analysis of the action of a single person and that we are really passing into a different sphere and silently introducing a new element of altogether different character when we apply it to the explanation of the interactions of a number of different individuals.”
“All propositions of equilibrium analysis, …are propositions about the relations between actions. Actions of a person can be said to be in equilibrium in so far as they can be understood as part of one plan. Only if this is the case, only if all these actions have been decided upon at one and the same moment, and in consideration of the same set of circumstances, have our statements about their interconnections, which we deduce from our assumptions about the knowledge and preferences of the person, any application.”
“…the sense in which we use the concept of equilibrium to describe the interdependence of the different actions of one person does not immediately admit of application to the relations between actions of different people.”
These are the passages where Hayek hammers home the point that the Pure Logic of Choice does not apply to the interactions of a number of people.
Hayek later writes that Mises, after reading this article…“approved the article as if he had not been aware that it was a criticism of his own views. I cannot explain this.”
I submit that Mises may have thought Hayek’s article was an argument that there was danger in a trend Hayek perceived—in the economics profession generally—consisting in the attempt to apply the concepts of methodological individualism to an analysis of society.
It may have been that Mises didn’t think this criticism was aimed at him, because he believed his system was based on strict methodological individualism. If that was the case, then he may have interpreted Hayek’s essay as a warning to the economics profession generally, that the Pure Logic of Choice was a method applicable only to the actions of an individual; a method only applying to an analysis of those “facts given to the person in question, the things as they are known to (or believed by) him to exist, and not, strictly speaking, objective facts.” This method, Hayek seems to be arguing, cannot properly be applied to the analysis of the actions, and the interactions of those actions, of a number of people. And thus, Hayek can reasonably be interpreted as arguing that formal analysis should be kept to those phenomena interpretable in terms of the actions of the individual.
In other words, Hayek’s article can be interpreted as an argument that assumes the desirability of the approach taken in the Pure Logic of Choice, and is arguing against the misapplication of this approach by the economics profession generally.
In that case, Mises wouldn’t have interpreted Hayek’s article as a charge against himself: That though he (Mises) believed he was practicing formal-logical social science based on methodological individualism, he was unknowingly addressing a realm (the market) that is only approachable by empirical social science.
This is a plausible explanation why Mises, according to Hayek, acted as if he was unaware that the article was a critique of his, Mises’s views.
Mises didn’t believe he was departing from methodological individualism in his analysis. Thus he didn’t realize that Hayek intended the article as a claim that Mises was analyzing a realm that is only analyzable in terms of empirical science.
This leads us to the point Hayek says he was making; that only the logic of action is a priori, and not the theory of the market. What about this claim taken on its own? Are market phenomena only analyzable in terms of empirical science?
Hayek says: “the moment you passed from this [the logic of individual action] to the interaction of many people, you entered into the empirical field.”
There is at least one important problem with this claim of Hayek’s.
In his essay “The Facts of the Social Sciences,” the following passages appear:
“…in discussing what we regard as [other people’s conscious actions], we invariably interpret [their action] on the analogy of our own mind: that is, that we group [their actions], and [the objects of their actions], into classes or categories which we know solely from the knowledge of our own mind.”
“We thus always supplement what we actually see of [another person’s action] by projecting into that [person]a system of classification of objects which we know, not from observing [other people]****, but because it is in terms of these classes that we think ourselves.”
“The claim to which I have referred follows directly from this character of the first part of our task as a branch of applied logic. But it sounds startling enough at first. It is that we can derive from the knowledge of our own mind in an “a priori” or “deductive” or “analytic” fashion, an (at least in principle) exhaustive classification of all the possible forms of intelligible behavior.”
“If we can understand only what is similar to our own mind, it necessarily follows that we must be able to find all that we can understand in our own mind.”
(bold and brackets added)
If we take every bracketed phrase above and replace it with a phrase referring to the market or a market aspect or the interactions of a number of individuals, we can see that Hayek may have overlooked something.
If the market is a social phenomenon (and if we are involved in social science, we assume it is), then why do we interpret other people’s actions in terms of our own mind, but not the market or market processes or the actions of a number of people ?
Hayek writes that the categories with which we interpret other people’s actions are categories we know solely from our own mind.
And he writes that in observing other people we…“[project] into that person a system of classification of objects which we know, not from observing other people, but because it is in terms of these classes that we think ourselves.”
But then, when we observe the market, or market processes, or the interaction of a number of people, and, in so far as these are social phenomena, then why do we not interpret these things also in terms of categories we know solely from our own mind?
And with regard to these phenomena, why do we not “project into them a system of classification which we know, not from observing them, but because it is in terms of these classes that we think ourselves” ??
We can see this situation more clearly if we simply omit reference to the particular social content in Hayek’s passages:
“…in discussing what we regard as [ ], we invariably interpret [ ] on the analogy of our own mind: that is, that we group [ ], and [ ], into classes or categories which we know solely from the knowledge of our own mind.”
“We thus always supplement what we actually see of [ ] by projecting into that [ ]a system of classification of objects which we know, not from observing [ ]****, but because it is in terms of these classes that we think ourselves.”
Hayek has to explain why we can put some social phenomena inside the brackets (the actions of another person), but not others (the interactions of a number of people).
It would seem that we either do what Hayek describes (project our categories of thinking onto observed data) for all social phenomena, or for no social phenomena.
Otherwise, Hayek must provide an explanation why we project the categories we know solely from our mind onto other people and their actions, but not onto social phenomena besides those. Why do we project the categories we know solely from our own mind onto other people and their actions, but not onto the market, market phenomena, and the interactions of many people ??
Let’s assume that indeed we do this-----project the categories of our own mind onto all social phenomena.
Then with respect to these phenomena (including the market, market processes, and the interactions of many people) do they not then become, as Hayek writes in “Economics and Knowledge”:
“…facts given to the person in question, ..things as they are known to (or believed by) him to exist, and not, strictly speaking, objective facts.” ??
That is, when the acting individual interprets social events (social events as such), by means of a classification system which he knows, not from observing those social events, but because it is in terms of these classes that he himself thinks, then aren’t such events “data,” and “facts present in the mind of that acting person” ?
Then, with respect to those data (that are, strictly speaking, not objective facts, as Hayek reminds us) doesn’t our subjective interpretation of these data make the propositions about them necessary truths ??
We have now taken social phenomena such as market processes and the interactions of many people, and have conceived them in terms of the categories by which the individual actor conceives them (because it is in terms of these classes that he himself thinks, as Hayek reminds us). These social phenomena (market processes, interactions of many people, etc.) are now data of the individual actor’s action. Now, the tautological transformations of the Pure Logic of Choice apply to these data just as they apply to any data of the individual’s action.
Thus, we have passed into another field (market processes, the interactions of a number of people, etc.), while staying within the analysis of an individual and his actions.
And thus, when Hayek writes: “the moment you passed from this [the analysis of the action of the individual] to the interaction of many people, you entered into the empirical field,” …this is not entirely accurate.
The interaction of many people can be formally analyzed by considering such a phenomenon a data of the individual’s action.
Hayek didn’t understand why Mises could approve his article, seemingly unaware that the article was a critique of Mises’s a priorism.
But generally speaking, Hayek’s two articles are consistent with both Misesian praxeology and Mengerian theoretical exact science.
Hayek intended his article as a critique of Mises, based on a mistaken assertion that social phenomena aside from the actions of an individual must be approached empirically.
But he failed to consider that these social phenomena too could be considered data in the mind of the acting individual, and that therefore, the Pure Logic of Choice could apply to these data as it does to any data present in the mind of the acting individual.
For these reasons, Hayek’s two essays “Economics and Knowledge” and “The Facts of the Social Sciences” are important contributions to the Misesian and Mengerian research program, and not essays that undermine or contradict that program.
Below is a recently written and condensed version of my argument that Hayek was wrong in claiming, contra Mises, that the theory of the market is empirical and not a priori. A longer essay version of this argument is available. To obtain a copy, please e-mail. adamknott at the domain praxeology dot com.
Here’s what Hayek says about the relationship between his theory and Mises’s theory:
“What I see only now clearly is the problem of my relation to Mises, which began with my 1937 article on the economics of knowledge, which was an attempt to persuade Mises himself that when he asserted that the market theory was a priori, he was wrong; that what was a priori was only the logic of individual action, but the moment that you passed from this to the interaction of many people, you entered into the empirical field.”(emphasis added)
(Hayek on Hayek, p.72)
So above, Hayek is referring to his essay in Individualism and Economic Order. (see page 35):
“I have long felt that the concept of equilibrium itself and the methods which we employ in pure analysis have a clear meaning only when confined to the analysis of a single person and that we are really passing into a different sphere and silently introducing a new element of altogether different character when we apply it to the explanation of the interactions of a number of different individuals.”(emphasis added)
Hayek is making a distinction between the market process, which he says can only be approached empirically, and the logic of individual action, which he says is a priori. He is saying that Mises believed that the theory of the market was a priori. Hayek is saying this is wrong; the theory of the market is empirical.
To understand the point I’m making, and where I believe Hayek went wrong, we have to take both essays from Individualism and Economic Order: “Economics and Knowledge” and “The Facts of the Social Sciences”
In “The Facts of the Social Sciences,” Hayek outlines his concept of the Pure Logic of Choice:
“From the fact that…we have to define both the objects of human activity and the different kinds of actions themselves, not in physical terms but in terms of the opinions or intentions of the acting persons, there follow some very important consequences…we can, from the concepts of the objects, analytically conclude something about what the actions will be. If we define an object in terms of a person’s attitude toward it, it follows, of course that the definition of the object implies a statement about the attitude of the person toward the thing. When we say that a person possesses food or money, or that he utters a word, we imply that he knows that the first can be eaten, the second can be used to buy something with, and that the third can be understood—and perhaps many other things.”
So here, Hayek is showing us how he conceives of the Pure Logic of Choice. He is saying that in social science, it is not the physical characteristics of a object that give that object social meaning, but rather the attitude of the acting person toward that thing.
Then, he gives three examples of how in individual action, this analytical method applies. The attitude a person takes toward an object has a hidden implication. We can analytically conclude something about a person’s action(s) based on what social object the person believes is before him. As Hayek writes:
“When we say that a person possesses food or money, or that he utters a word, we imply that he knows that the first can be eaten, the second can be used to buy something with, and that the third can be understood—and perhaps many other things.”
This is the Pure Logic of Choice which according to Hayek is:
“…the system of tautologies—those series of propositions which are necessarily true because they are merely transformations of the assumptions from which we start.”
So going back to Hayek’s main point, and the primary point of disagreement between he and Mises. Hayek is saying that it is not the physical properties of a thing that make it an object of the social sciences, but the attitude a person takes toward a thing.
Further, once a person takes an attitude toward a thing (as a social object), this entails necessary “accompaniments” or “analytical conclusions” that can then be drawn. These analytical conclusions are the exact laws, a priori propositions, or “necessary truths” (as Hayek refers to them in “Economics and Knowledge”) that are the focus of Menger’s exact theoretical science, Mises’s praxeology, and Hayek’s pure logic of choice.
Hayek has granted that based on what the actor believes is before him (food, money, a word, etc…), we can analytically conclude something else, and these two things taken together constitute a necessary truth (a priori proposition, exact law, etc…).
Necessary truth (Hayek) is the same thing as a priori proposition (Mises).
So Hayek is saying that in individual action, Austrian analysis provides necessary truths (a priori propositions) by examining the necessary or analytical implications of the object the actor believes is before him.
What makes the object before the actor a social object is not its physical characteristics, but the attitude of the actor toward that thing.
At the same time, Hayek is maintaining, contra Mises, that the study of the market is empirical, not a priori.
But then the question we must ask is this:
If the object an actor believes is before him is a market (obviously a social object, social phenomenon, social process, etc…), why are there no analytical implications to the actor’s attitude in this case ???
Hayek has said that what makes an object a social object is not its physical characteristics. It is the attitude that an actor takes toward something that determines what kind of social object it is. Once an actor takes a certain attitude toward an object, based on this, we can form a necessary truth by analytically concluding what must also be part of the attitude the actor takes.
Hayek says the theory of the market is empirical and not a priori.
But if a market is a social object (process, phenomenon, etc.), then, per Hayek, it cannot be defined in terms of its physical characteristics. A market can only be defined in terms of the attitude of the person(s) concerned.
If this is the case, then why are there no analytical conclusions we can draw from this particular attitude a person takes?
And, if we can draw an analytical conclusion from the attitude a person takes in this case (when what is before him is a market), then why is this not a necessary truth of the same essential nature as when the person believes the object before him is food, money, or a word ?
In other words, why isn’t the theory of the market a priori, in the sense of the Pure Logic of Choice, when the person believes what is before him is a market, and we draw analytical conclusions from this, which analytical conclusions are, according to Hayek, tautological transformations from the original attitude of an actor toward a social object ?
In this sense, the theory of the market would seem to be a priori, not empirical as Hayek claimed.
If this is not correct, then Hayek or his defenders or supporters need to provide a criterion for what kind of social objects provide analytical conclusions from the attitude of the actor toward a thing, versus what kind of social objects do not provide analytical conclusions from the attitude of the actor toward a thing.
If they cannot provide a principle for distinguishing between two fundamental kinds of social objects (those from which we can analytically concluded something, versus those from which we cannot analytically conclude something), then we must assume, based on what Hayek argues in “Economics and Knowledge” and “The Facts of the Social Sciences” that not only “simple” social objects such as food, money, or words, have analytical implications that constitute necessary truths, but also more “complex” social objects such as markets, language, law, and property, have analytical implications that constitute necessary truths.
In other words, if the Pure Logic of Choice applies to the former, it applies to the latter. Or, if not, a principle is needed that tells us to which objects the Pure Logic of Choice applies, and to which objects the Pure Logic of Choice does not apply.
Absent such a principle, we must conclude that the Pure Logic of Choice applies to the market as it does to other social objects (food, money, words, etc…), and that in this sense, the theory of the market is a priori.
Rothbard considered himself broadly an Empiricist in the aristotellian tradition.I think it would be absurd of anyone to claim to exclude all empiricism altogether since no one can reason in a vacuum devoid of the senses.
I’m not sure why but alot of Austrian economists and Libertarians in general broadly seem to use Empiricism when they really mean Positivism.I’m not sure why this is though I agree if positivism was used instead it would be clearer to beginners.Sorry if that sounds nit picky .It had confused me at times.
the problem is Empiricism generally has the connotations of philosophy,John Locke the whole epistemology debate so people are confused to see Empiricism dismissed while Positivism describes a much more precise philosophy whereby Empiricism is taken to the extreme and truth/ knowledge is only seen as possible and discoverable by use of scientific experiments.
Another bugbear is the inconsistent use of the terms a priori and a posteri.
some use the former to mean knowledge or truth deduced without using experience(which I’d argue is impossible) while others use it to mean truths/knowledge which can be discovered using mostly logic and does not need empirically tested via experiments(the definition I prefer and use)
the latter is either used to mean truths deduced just from experience(impossible) or truths/knowledge gained which must be tested via experience or experiment.
Let’s say that “what is before me” is a listing of 200 different stereo headphones at various suggested prices. Clearly, a priori analysis would apply (subjective value scales, felt needs, means to satisfy those needs, etc), ie, individual action.
I take the market process to mean all of the following things taken together for all participants: subjective value scales, time preference, capital formation, time structure of production, goods produced, goods consumed, savings, and then back to the beginning to repeat the process. And, each individual participant would have the same “process” only in a “micro” sense.
If there are, for example, 52 “actors” on an island (in an economic system) we could analyze each actor’s actions in an a priori manner. Theoretically, each actor could be described using a priori analysis on the back of a playing card. Each of the 52 cards taken separately would allow such a priori analysis. Now, let’s stack the cards together to form a “deck”. Then, let’s punch a small hole through those cards and insert an imaginary tube through which each player can interact with all other players. I believe, in this analogy, that the deck of cards represents the “market process”.
If each individual card could be anlayzed a priori, and the “deck” is simply the collection of those cards, linked together, then it seems that the same a priori analysis would apply to the deck (the market process) as to the individual cards (individual actors). I don’t understand how it could be otherwise. And, it should not matter if it’s 52 players or 52 million players, the conclusion would be the same; it’s still a collection of individuals linked together.
To repeat your question, why would a priori analysis suddenly become useless, with empirical analysis suddenly taking over (as Hayek says), just because the players are linked together?
As I see it, your analogy may tend to highlight the point Hayek was making.
Your analogy envisions a number of cards, spatially related, and an imaginary tube that bridges the distance between each card, and through which each card can interact, apparently through a spatial, temporal, durable, and material process. The spatial and temporal process through which signals may be sent, then breaks the necessary or logical chain, since something may intervene in the temporal increment between a signal being sent and a signal being received between cards.
Then, a signal sent from one “mind” has no necessary connection to a signal received by another “mind” when we conceive two minds spatially and temporally related in this way. If there is no necessary connection, we have then left the domain of the a priori, of exact laws, and of necessary truths.
This is why Hayek correctly notes that the Pure Logic of Choice is an analytical discipline that only applies to the analysis of a single mind:
“I have long felt that the concept of equilibrium itself and the methods which we employ in pure analysis [i.e., a priori analysis] have a clear meaning only when confined to the analysis of the action of a single person and that we are really passing into a different sphere and silently introducing a new element of altogether different character when we apply it to the interactions of a number of different individuals.” (“Economics and Knowledge” from Individualism and Economic Order, p.34-35)(bracketed added)
If you look at the bolded parts of your passage above (“interact” and “market process”), what Hayek is saying is that as soon as we begin to talk about the spatial and temporal “interaction” of a number of people, we introduce the schema of what we might call “material processes,” thus leaving the domain of pure analysis, i.e., a priori analysis, which analysis is of an essentially different character.
This is the difference between: “and then” and “if then”
As soon as we introduce the scheme of “and then” (temporally, materially, and empirically full, durable processes), we leave the domain of the logically necessary. We leave the domain of “if then.”
This is what Hayek is saying, and I’m not sure if your card analogy overcomes Hayek’s point. It seems to rather highlight Hayek’s point.
Again, here is the essence of a priori analysis, or the Pure Logic of Choice, according to Hayek:
“All propositions of equilibrium analysis…are propositions about the relations between actions. Actions of a person can be said to be in equilibrium in so far as they can be understood as part of one plan. Only if this is the case, only if all these actions have been decided upon at one and the same moment, and in consideration of the same set of circumstances, have our statements about their interconnections, which we deduce from our assumptions about the knowledge and the preferences of the person, any application. It is important to remember that the so-called “data” from which we set out in this sort of analysis, are…all facts given to the person in question, the things as they are known (or believed by) him to exist, and not, strictly speaking, objective facts. It is only because of this that the propositions we deduce are necessarily a priori valid and that we preserve the consistency of the argument.” (“Economics and Knowledge” p.36)
What Hayek is talking about is an analytical procedure that is based on the logical relations of the actions of an individual, and this ultimately means the logical relations of or in the mind of the individual actor.
“The data which here are supposed to be objective facts and the same for all people are evidently no longer the same thing as the data which formed the starting-point for the tautological transformations of the Pure Logic of Choice. There “data” meant those facts, and only those facts, which were present in the mind of the acting person, and only this subjective interpretation of the term “datum” made those propositions necessary truths. “Datum” meant given, known, to the person under consideration. But in the transition from the analysis of the action of an individual to the analysis of the situation in society the concept has undergone an insidious change of meaning.” (p. 38-39)
Thus, when we begin to speak or conceive of “the interaction of a number of individuals” (“the situation in society”), we have now left the analysis of the action of an individual actor, and have begun a different kind of analysis.
What Hayek is referring to is specifically the “interaction” of a number of people, when we conceive of this as some sort of signal sending between spatially related actors, and which signals span space and time. He is saying that now we have left the Pure Logic of Choice which looks at the logical relations of the actions of a single individual, as opposed to the spatial and temporal interactions of a number of people.
When we leave the domain of a priori analysis of individual action, we enter the domain of (essentially) physical “processes,” and the market “process” is one such process, when we are talking about the physical (spatial and temporal) “interactions” between various actors. Now, Hayek is saying, we are in the empirical realm. We are not in the a priori realm.
It is important to take both of Hayek’s essays into account when considering the challenge he posed to Mises. We have to look not only at “Economics and Knowledge” (which is the essay where Hayek bases his claim that Mises was wrong in asserting that study of the market is a priori), but also at “The Facts of the Social Sciences” (where Hayek lays out his conception of the Pure Logic of Choice). When we consider the important points Hayek makes in “The Facts of the Social Sciences,” we can see where Hayek has overlooked something, considering the principles he asserts in this second essay.
Here is how the Pure Logic of Choice works according to Hayek:
“From the fact that whenever we interpret human action as in any sense purposive or meaningful, whether we do so in ordinary life or for the purpose of the social sciences, we have to define both the objects of human activity and the different kinds of actions themselves, not in physical terms but in terms of the opinions and intentions of the acting persons, there follow some very important consequences; namely, nothing less than that we can, from the concepts of the objects analytically conclude something about what the actions will be. If we define an object in terms of a person’s attitude toward it, it follows, of course, that the definition of the object implies a statement about the attitude of the person toward the thing. When we say that a person possesses food, or money, or that he utters a word, we imply that he knows that the first can be eaten, that the second can be uses to buy something with, and that the third can be understood—and perhaps many other things…” (“The Facts of the Social Sciences” p.62-63)
This is the key passage. Here, Hayek puts forth his conception of a priori analysis, which is the same essential thing as Mises’s praxeology, and Menger’s theoretical exact science.
The two most important points Hayek makes are that:
It is not the physical properties of a thing that make it a social object. It is the attitude of the actor toward a thing that makes an object a social object.
When an actor takes an attitude toward an object, this attitude entails or contains “hidden” or unstated implications, as Hayek demonstrates in his examples.
There is something important that Hayek generally overlooks when he discusses these ideas. We have to realize that when we talk about the logically necessary aspect of action, the “actor” is US. In Hayek’s essays that touch on these ideas, he tends to speak from the point of view of a scientific observer (himself, or us) referring to an anonymous “actor” (some other person or other persons “over there”). But it is important to realize that if what Hayek states has validity, it applies to US, to the extent we ourselves are actors or conform to the categories of Hayek’s system.
That is, we may more accurately write Hayek’s passage in the following way:
“…we can, from the concepts of the objects analytically conclude something about what our actions will be. If we define an object in terms of our attitude toward it, it follows, of course, that the definition of the object implies a statement about our attitude toward the thing. When we say that a we possess food, or money, or that we utter a word, we imply that we know that the first can be eaten, that the second can be used to buy something with, and that the third can be understood—and perhaps many other things…”
This aspect is important, and can easily be overlooked when we read Hayek’s description of the Pure Logic of Choice.
We have to realize that if what Hayek is describing in his essay using the third person perspective is valid, then it is valid also when stated in the first person.
But it is only when his ideas are stated in the first person, and understood as first person phenomena (i.e., that what is being discussed applies to our own action), that the full impact and the full implications of his statements be comprehended.
If we keep thinking in terms of a theory that applies to that person over there, we miss the importance of what is being discussed: the logic of our own action and consciousness.
The problem that Hayek faces is very simple.
He has laid down that it is not the physical characteristics of an object before us that renders an object a social object. It is rather the attitude we take toward something that determines whether or not that object is a social object.
Second, he has laid down the principle that the attitude we take toward something contains analytical implications which may be tautologically transformed to yield necessary truths (a priori propositions, exact laws, etc…)
This means two things:
What constitutes a “market” for me as an actor, cannot be due to its physical characteristics. Hayek makes this point very clearly, and in several instances in “The Facts of the Social Sciences.” Regarding the objects of the social sciences, Hayek writes:
“It is easily seen that all these concepts…refer not to some objective properties possessed by the things, or which the observer can find out about them, but to views which some other person holds about the things. These objects cannot even be defined in physical terms, because there is no single physical property which any one member of a class must possess. These concepts are also not merely abstractions of the kind we use in all physical sciences; they abstract from all the physical properties of the things themselves. They are all instances of what are sometimes called “teleological concpets,” that is, they can be defined only by indicating relations between three terms: a purpose, somebody who holds that purpose, and an object which that person thinks to be a suitable means for that purpose. If we wish, we could say that all these objects are defined not in terms of their “real” properties but in terms of the opinions people hold about them. In short, in the social sciences the things are what people think they are. Money is money, a word is a word, a cosmetic is a cosmetic, if and because somebody thinks they are.” (p.59-60))
and:
“What I am arguing is that no physical properties can enter into the explicit definition of any of these classes, because the elements of these classes need not posses common physical attributes, and we do not even consciously or explicitly know which are the various physical properties of which an object would have to possess at least one to be a member of a class. The situation may be described schematically by saying that we know the objects a, b, c, …, which may be physically completely dissimilar and which we can never exhaustively enumerate, are objects of the same kind because of the attitude of X toward them all is similar. But the fact that X’s attitude toward them is similar can again be defined only by saying that he will react toward them by any one of the actions d, e, f,…, which again may be physically dissimilar and which we will not be able to enumerate exhaustively, but which we just know to “mean” the same thing.”(p. 61-62)
Here, again, Hayek reverts to a third person perspective description.
The import of what he is saying can be more fully realized by transcribing his ideas into a first personperspective description:
“It is easily seen that all these concepts…refer not to some objective properties possessed by the things, or which we can find out about them, but to views which we holds about the things. These objects cannot even be defined in physical terms, because there is no single physical property which any one member of a class must possess. These concepts are also not merely abstractions of the kind we use in all physical sciences; they abstract from all the physical properties of the things themselves. They are all instances of what are sometimes called “teleological concpets,” that is, they can be defined only by indicating relations between two terms: our purpose,[…], and an object which we think to be a suitable means for our purpose. If we wish, we could say that all these objects are defined not in terms of their “real” properties but in terms of the opinions we hold about them. In short, in the social sciences the things are what we think they are. Money is money, a word is a word, a cosmetic is a cosmetic, if and because we think they are.”
And:
“What I am arguing is that no physical properties can enter into the explicit definition of any of these classes, because the elements of these classes need not posses common physical attributes, and we do not even consciously or explicitly know which are the various physical properties of which an object would have to possess at least one to be a member of a class. The situation may be described schematically by saying that we know the objects a, b, c, …, which may be physically completely dissimilar and which we can never exhaustively enumerate, are objects of the same kind because our attitude toward them all is similar. But the fact that our attitude toward them is similar can again be defined only by saying that we will react toward them by any one of the actions d, e, f,…, which again may be physically dissimilar and which we will not be able to enumerate exhaustively, but which we just know to “mean” the same thing.”
When Hayek habitually reverts to the third person perspective in his descriptions, he implies that the significance of his insight is that the scientific observer actor cannot construct a theory whereby social objects are defined in physical terms (for the reasons stated). Since he declines to use the first person perspective, we may overlook the full implications of what Hayek is saying. Because if social objects can’t be defined, conceived, or understood, in physical terms, this applies not only to the scientist constructing a theory, but to the scientist as actor.
Hayek is making a profound insight into the non-physical nature of the phenomenon of action, but since he keeps using the third person perspective to describe the insight, we may easily overlook the most important point: that what he is describing is telling us something about our own action.
The social objects before us are not social objects in respect of their physical properties, they are social objects in respect of the attitude we (individually) take toward them.
If or when we take the attitude that what is before us is a social object, as Hayek writes, then this attitude contains further implications which can be analytically uncovered.
Thus, we can demonstrate the problem Hayek faces simply. Why can’t we say, paraphrasing Hayek, that when what is before us is a market (or when we believe so), this implies we know that before us trade or exchange is going on? And why can’t we say, paraphrasing Hayek that when what is before us is a price (or when we believe so), this implies we know there is an exchange being suggested (or something to this effect) ?
In short, since social objects (including markets, law, language, property, etc.) cannot be defined in terms of their physical characteristics, but only in terms of the attitudes we take, then why can’t we derive analytical conclusions from all social objects, not only some limited number of social objects such as food, words, weapons, or money (the examples Hayek cites)?
If we can indeed apply the Pure Logic of Choice to all social objects, and not merely to a defined subset of social objects, then it follows that the market is one such social object, to the extent we can meaningfully refer to the market as a social object. And if we can apply Hayek’s Pure Logic of Choice to all social objects such as the market, then this is simply the proposition that the market can be approached by an a priori discipline.
These conclusions are based entirely on Hayek’s own reasoning. All we have done is to take the principles Hayek has provided in demonstrating the Pure Logic of Choice, and applied them to other social objects besides the social objects Hayek uses in his own demonstration.
Doing so suggests that Hayek was wrong when he stated the following:
“What I see only now clearly is the problem of my relation to Mises, which began with my 1937 article on the economics of knowledge, which was an attempt to persuade Mises himself that when he asserted that the market theory was a priori, he was wrong; that what was a priori was only the logic of individual action, but the moment that you passed from this to the interaction of many people, you entered into the empirical field.” (Hayek on Hayek, p.72)
Hayek simply didn’t consider that when the market is considered an object of individual action, then as such, it becomes subject to the theory of the logic of individual action.
Hayek seems to have conceived that the market was something existing outside the nexus of the action of individuals, perhaps as a process going on “objectively,” independent of the opinions and attitudes of individual actors.
But such a notion is inconsistent with his own insights regarding social objects:
“In short, in the social sciences the things are what people think they are. Money is money, a word is a word, a cosmetic is a cosmetic, if and because somebody thinks they are.”
Again, if this insight is valid, and if as Hayek writes, social objects cannot be defined in terms of physical properties, then this very same notion must apply to the market:
“In short, in the social sciences the things are what people think they are. Money is money, a word is a word, a cosmetic is a cosmetic, a market is a market, if and because somebody thinks they are.”
From this it may very well follow that “out there” in extended space (the realm of physical properties), there is nothing we could refer to as “a market” which could be the subject of “empirical” study. It could be the case that the very notion of empirically studying the market is misguided in important respects.
And it could be that as opposed to what Hayek asserted, the only way to study the market is by studying the logic of individual action as Mises taught.
“It is of primary importance to realize that parts of the external world become means only through the operation of the human mind and its offshoot, human action. External objects are as such only phenomena of the physical universe and the subject matter of the natural sciences. It is human meaning and action which transforms them into means. Praxeology does not deal with the external world, but with man’s conduct with regard to it. Praxeological reality is not the physical universe, but man’s conscious reaction to the given state of this universe. Economics is not about things and tangible material objects; it is about men, their meanings and actions. Goods, commodities, and wealth and all the other notions of conduct are not elements of nature; they are elements of human meaning and conduct. He who wants to deal with them must not look at the external world; he must search for them in the meaning of acting men.” (HA, 3rd rev. p.92)
“The only way to a cognition of [praxeological] theorems is logical analysis of our inherent knowledge of the category of action. We must bethink ourselves and reflect upon the structure of human action. Like logic and mathematics, praxeological knowledge is in us; it does not come from without.”(HA, 3rd rev. p.64)(emphasis added)