Hayek and Praxeology Revisited

Economics Economics Questions
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This post discusses Hayek’s relationship to praxeology, his argument against it, and the problem with his argument.

Two of the most important factors that inhibited the study of praxeology in the last sixty years were Hayek’s explicit argument against praxeology (see below) and Rothbard’s theoretical paradigm in which praxeology is reduced to a method of economics (market study), with the implication that the realm of interpersonal actions is to be studied by other disciplines (objective ethics, natural rights, argumentation ethics, etc.). [Regarding Rothbard’s paradigm----praxeology in economics/normative theory in interpersonal action----compare with this passage from Human action: “Until the late nineteenth century political economy remained a science of the “economic” aspects of human action, a theory of wealth and selfishness. It dealt with human action only to the extent that it is actuated by what was—very unsatisfactorily—described as the profit motive, and it asserted that there is in addition other human action whose treatment is the task of other disciplines.” (p.3, emphasis added)]

The study of praxeology was inhibited, and continues to be inhibited, because two of Mises’s most influential students either explicitly argued against Mises’s conception of praxeology, or, advocated praxeology, but only as a method of market study.

Hayek’s argument against praxeology (which he called the “Pure Logic of Choice”) is relatively simple. The Pure Logic of Choice, as Hayek understood it, entails an analytical relationship between 1. the object of an actor’s action, and 2. the actor’s action. Here is the key passage from Hayek’s essay “The Facts of the Social Sciences.”:

“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 purposes 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 or 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 used to buy something with, and that the third can be understood—and perhaps many other things.”

Hayek’s conception of praxeology or the Pure Logic of Choice is a kind of conceptual analysis. If we say the object confronting the actor is food, we can analytically conclude that the action associated with that object will be eating. If the object confronting the actor is money, we can analytically conclude that the action associated with that object will be buying or selling, etc. Thus, Hayek conceives an analytic or logically necessary relationship between 1. the object that we, as social scientists, assume confronts an actor, and 2. the action the actor will perform, based on the assumption of the object that confronts that actor. We can see that the analytic relationship Hayek conceives is between an object appearing to an observed or studied actor, and the action that must, by conceptual analysis, “accompany” that object.

Hayek then makes the following point. The market is comprised of the interaction of a number of people. When we study the market, we study the relationship between of a number of people, NOT an individual actor and the relationship between his action and the object of his action.

Here are the relevant passages from Hayek’s essay “Economics and Knowledge.”:

“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.”

“…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.”

To get a clear idea of Hayek’s point, let us consider ourselves social scientists looking at a local marketplace from the top of a nearby building. We see many people in the marketplace interacting—buying, selling, talking, eating, etc… To each of these individual actors, the Pure Logic of Choice, as described above, applies. If one actor has food, the action analytically associated with this is eating; if one actor has money, the action analytically associated with this is buying, etc.

But this method of analysis does not apply to the relationship between actors. If one actor has food, this doesn’t say anything about the action of a second, different actor.

Thus, the Pure Logic of Choice (praxeology) does not apply to study of the market.

This argument of Hayek’s constitutes the fundamental difference between the Misesian and the Hayekian conception of economics. The fundamental proposition of Hayekian economics is that market study can only be empirical, not a priori. In other words, praxeology is inapplicable to market study:

“What I see only now clearly is the problem of my relationship 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)

As Hayek’s argument against praxeology is relatively simple, so is it simple to see the flaw in Hayek’s argument. We may ask, when a marketplace is the object of the actor’s action (when the actor observes a market, or when he walks in a market, or when he buys in a market) why can’t we draw an analytical conclusion from this object of the actor’s action? Or, when a price is the object of the actor’s action (when the actor observes a price, or asks a price, or pays a price), why can’t we draw an analytical conclusion from this object of the actor’s action? In short, why can’t we arrive at analytical conclusions regarding any social object or social phenomenon or any market object or market phenomenon, by understanding them to be objects of an actor’s action, and drawing analytical conclusions from these objects as Hayek indicates?

If we say an actor possess food, and from this we may analytically arrive at the action eating, then when the actor visits a market, why may we not analytically arrive at the action shopping? And when the actor considers a price, why may we not analytically arrive at the action purchasing?

By the terms of Hayek’s own conception of praxeology it would seem this analytical method should be applicable to the objects or phenomenon of the market, and this would constitute “a priori” analysis of the market.

Furthermore, this same procedure should be applicable to other social objects and social phenomena such as language(s), law(s), the family, etc.

One other important aspect of Hayek’s critique should be noted. Recall that when Hayek describes the procedure of the Pure Logic of Choice, he does so in terms of a third person narrative. 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, that the second can be used to buy something with, and that the third can be understood—and perhaps many other things.” (emphasis added)

Hayek here refers to a hypothetical actor whom the scientist observes or studies. The question is, what about the case when it is the social scientist himself who interacts with the the object or phenomenon in question? Let’s say that the social scientist visits a farmer’s market or pays a price for something in this same market, or pays interest on a loan. Since the market, the price, the loan, and the interest, appear to the scientist as objects of his own action, what prevents the scientist from drawing analytical conclusions about action from these objects which appear to him? Is there something which requires that the social scientist only studies the relationship between the objects and actions of other people? What prevents the scientist from studying the relationship between his own actions and the objects of his actions?

Thus, there are two problems with Hayek’s critique of praxeology:

  1. Hayek doesn’t explain why the Pure Logic of Choice can’t be applied to study of the market, by considering market phenomena as objects of action (visiting a market, paying a price, etc.) and then drawing analytical conclusions from the concepts of those objects.

  2. Hayek doesn’t explain why the social scientist can’t draw analytical conclusions about the relationship between his own actions and the objects of his actions.

As should be clear, these are problems in the application and understanding of Hayek’s own conception of praxeology. Above, we assume that Hayek’s conception of praxeology is valid and/or is the same as Mises’s, and we simply ask “if praxeology applies to objects a, b, and c, why doesn’t praxeology apply to objects x, y, and z?” And we ask “if praxeology applies to the objects of A’s action, why doesn’t praxeology apply to the objects of B’s action?” Hayek agrees that it is possible to draw analytical conclusions from objects a, b, and c, by considering them objects of the action of actor A. We simply ask why we can’t draw analytical conclusions from objects x, y, and z, by considering them objects of the action of actor B? We’re asking why Hayek’s principles don’t apply to objects and persons besides the specific ones Hayek uses to illustrate his principles?

It should be noted though, that Hayek’s conception of the Pure Logic of Choice is not identical to Mises’s conception of praxeology. Hayek’s Pure Logic of Choice is a kind of conceptual analysis. Misesian praxeology is not concerned with conceptual analysis per se; it is concerned with the formal structure of action. These two things are not necessarily the same. As Mises conceives things:

“Praxeology is not concerned with the changing content of acting, but with its pure form and categorial stucture.” (Human Action, 3rd rev. p. 47)

Thus, as soon as we differentiate the object of action “food” from the object of action “money,” (as Hayek does in the Pure Logic of Choice) we are, according to Mises, referring to the changing content of action, and have therefore left praxeology proper.

This shows that Hayek understands praxeology to be something different than Mises.

Aside from the questions about the application of Hayek’s Pure Logic of Choice, there are serious questions about the knowledge which it could possibly attain.

Recall, for example, that Hayek claims:

“we can, from the concepts of the objects, analytically conclude something about what the acitons will be”

Is this simple proposition necessarily true? Can we analytically conclude the action of the individual based on the concept of the object that confronts him?

If we say that an actor possesses food, does this mean that the actor will perform the action of eating? Can’t an actor possess food but not eat the food? Let’s say an actor possesses a ball. Must he throw the ball? If an actor possesses a ball, may we “analytically conclude something about what the actions will be”? The answer seems clearly to be no. Perhaps we can analytically conclude that if an actor possesses a ball, that he possesses a sphere, and that he possesses an object having an internal volume, etc., etc. Here we have conceptual or tautological analysis, but we have not thereby established a necessary relationship between a particular object and a particular action that an actor possessing that object must perform.

Thus we can see that conceptual analysis is not necessarily identical to studying the formal or categorial structure of action. The study of concepts is not identical to the study of action.

One of the fundamental pillars of Hayekian social thought is Hayek’s contention that study of the market cannot be a priori. But Hayek seems not to have realized the implications of his own conception of the Pure Logic of Choice. He didn’t realize that the method of logical analysis he envisioned could easily be applied to the market and it’s various objects and phenomena (prices, interest, etc.).

The Rothbardian paradigm is one in which praxeology is advocated as a “method” of economics, while normative theorizing is advocated as the method for treating other forms of human action such as interpersonal and political relations.

The combined effect of the teachings of both scholars has been the emergence of two competing social-scientific paradigms, each teaching that praxeology is a kind of “method” that only studies a particular part or sub-set of human action. For Hayek, praxeology studies only the logic of individual action, but not the market. For Rothbard, praxeology is a method of economics (of market study) but other disciplines study other forms of human action.

Ironically, both thinkers, in conceiving that formal exact science is inapplicable in important areas of human conduct, diverge from the vision not just of Mises, but also of Menger. Menger’s Investigations into the Method of the Social Sciences is largely devoted to the proposition that formal exact science is valid in all realms of human phenomena, “economy” being but one of the realms of human phenomena. Thus, Mises’s idea that economics is only one branch of praxeology can be traced back to Menger’s vision of praxeology which he called the “exact approach to cognition.”

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Thanks for sharing that with us, it was most interesting.

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You should write more about this. If you could, could you also state more about Rothbard’s position? Both its reasoning and implication?

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Congrats to Adam for having Hayek and Praxeology published on the Mises Daily.

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Congrats!

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Fuck yeah! Gonna read this in a bit.

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Indeed - congrats!

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Thank you all for your encouragement.

In response to comments by Jonathan Finegold http://www.economicthought.net/blog/?p=3180 I’m posting some additional context here.

To understand what Hayek writes in “The Facts of the Social Sciences” it is important to realize that he begins by arguing that social phenomena cannot be defined in physical terms.

Though all the social phenomena with which we can possibly deal have physical attributes, they need not be physical facts for our purposes.

Are the human actions which we observe, and the objects of these actions, things of the same or a different kind because they appear as physically the same or different to us, the observers—or for some other reason?

Take such things as tools, food, medicine, weapons, words, sentences, communications, and acts of production—or any one particular instance of any of these.

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.

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.

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 possess 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 common attributes which the elements of any of these classes possess are not physical attributes but must be something else.

…whenever we interpret human action as in any sense purposive or meaningful, whether we do so in ordinary life or for the purposes 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 or intentions of the acting persons…

In the first six pages of his essay, Hayek seeks to establish that social phenomena cannot be defined in physical or objective or “real” terms, but must be defined in terms of intentions of the acting persons, which means: in terms of the intentions of the person to whom the object or entity or phenomenon appears.

Hayek is thus arguing for a subjective, as opposed to an objective, conception of social entities and social phenomena. In arguing that social phenomena must be defined in subjective terms (in terms of the intention of the acting subject), Hayek is simply extending the subjectivist line of thought, the same line of thought Mises was employing.

It is illusory to believe that it is possible to visualize collective wholes. They are never visible; their cognition is always the outcome of the understanding of the meaning which acting men attribute to their acts. We can see a crowd, i.e., a multitude of people. Whether this crowd is a mere gathering or a mass…or an organized body or any other kind of social entity is a question which can only be answered by understanding the meaning which they themselves attach to their presence. And this meaning is always the meaning of individuals. Not our senses, but understanding, a mental process, makes us recognize social entities. (HA, 3rd rev. p. 43)

[The praxeological point of view] makes possible the construction of chains of reasoning that are purely formal, in the sense that they refer to goods, services or factors of production only abstractly; they depend for their validity not on the specific objects with which human action may be concretely concerned, but only on postulated attitudes of men towards them. (Kirzner, The Economic Point of View, p. 179)

What Hayek is arguing in “The Facts of the Social Sciences” is that social phenomena are subjective in nature. It is important to realize that the principles Hayek enunciates are to be understood as applying so social phenomena generally. And thus these principles apply to things such as ‘emergent orders’ or ‘spontaneous orders.’ If this were not the case, Hayek would argue that class X of social phenomena can only be defined in terms of the intentions of the acting persons, while class Y of social phenomena can be defined in some different way. But Hayek does not make this argument. He argues that social phenomena in general are not objective (physical) in nature, but are subjective (intentional) in nature. They are functions of the intentions of the acting person.

Here are some passages from John Searle’s Minds, Brains and Science indicating the same situation regarding social phenomena:

In order for something to count as a marriage ceremony or a trade union, or property or money or even a war or revolution people involved in these activities have to have certain appropriate thoughts. In general they have to think that’s what it is. So, for example, in order to get married or buy property you and other people have to think that that is what you are doing.

‘Money’ refers to whatever people use and think of as money. ‘Promise’ refers to whatever people intend as and regard as promises…..[people] must have certain thoughts and attitudes about something in order that it counts as money and these thoughts and attitudes are part of the very definition of money.

The defining principle of such social phenomena set no physical limits whatever on what can count as the physical realization of them. And this means that there can’t be any systematic connections between the physical and the social or mental properties of the phenomenon. The social features in question are determined in part by the attitudes we take toward them. The attitudes we take toward them are not constrained by the physical features of the phenomena in question. (p. 78-79)

I provide these passages from Mises, Kirzner, and Searle, in order to establish that the insights Hayek arrives at in “The Facts of the Social Sciences” are insights that inevitably result from subjective analysis. In his essay, Hayek is extending and elaborating subjectivist thought.

In regard to the social entity which is the market, we have to clarify whether we are referring to the concept of a market, or to a concrete market that one can visit or participate in (such as a farmer’s market or Amazon). When we write ‘study of the market’ do we mean study of the concept ‘market’ or study of markets in their concrete form?

If we mean study of the concept ‘market,’ then this is a kind of conceptual or a priori analysis of the market. If we mean study of markets in their concrete or particular forms, then to study such markets someone (some actor) must locate and identify them. Hayek argues that social entities (and this includes markets, families, languages, and laws) cannot be defined in physical terms, but can only be defined in terms of the intentions of the actors concerned. This means that the thing which is a ‘market,’ and which actor A locates or visits or shops in or studies, is not a feature of the thing’s physical attributes, but a feature of A’s intentions. Then Hayek has argued that we may establish an analytical relationship between A’s intentions and the object of A’s intentions.

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 purposes 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 or 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 used to buy something with, and that the third can be understood — and perhaps many other things.

This is an analytical relationship between two non-identical phenomena: 1) the intention of the actor, and 2) the object that confronts the actor. For example, if I am in a market, then the number I observe will be a price. If I am in an art gallery, then the number I observe will be artistic symbolism. If I am in a math class, then the number I observe will be an equation. The market, the art gallery, and the math class, cannot be defined in physical terms, but must be defined in terms of my intentions. These are loose illustrative examples. The point Hayek argues is that what the object (X) in front of the actor “is,” is a function of his intention (Y). The relationship between X and Y is an analytical (a priori) relationship that derives from a subjective fact; the intention of the actor regarding his current situation.

To understand the problem in Hayek’s analysis, we first have to clarify whether the ‘market’ we are referring to is the concept ‘market’ or a particular market that I may visit or participate in. The same applies for any other social entity or phenomenon: families, languages, laws, etc. Are we talking about the concept ‘family,’ or a particular family we may visit or be a member of? Are we talking only about conceptual analysis? Or are we talking about the actual social entities that we may personally observe, visit, and participate in? I think we have to guard against the concept of social entities that “exist” but that have no conscious participants, or social entities that are not consciously apprehended any actor.

The relationship in question is not a causal relationship but an analytical relationship. The relationship Hayek is talking about is a tautological-type relationship of the same general nature as the proposition that if four are present to the actor, so are two twos present to the actor.

[The Pure Logic of Choice 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…

…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.

(“Economics and Knowledge”)

If the ‘intention’ of the actor is that he is dealing with four of something, then by tautological analysis we may analytically conclude that he is dealing with two twos of something. If the intention of the actor is that he is dealing with two twos of something, then by tautological analysis we may analytically conclude that he is dealing with four of something.

If we assume that a person is in a market, then we may analytically conclude the presence of prices. If we assume the presence of prices, we may analytically conclude the presence of a market. If we assume that a person is in a family, we may analytically conclude the presence of siblings. If we assume that a person is with his siblings, we may analytically conclude the presence of a family. This is what Hayek is arguing. He is talking about analytical relationships, not causal relationships, and he calls this the Pure Logic of Choice.

Hayek agrees that this analytical method applies to the relationship between the object food and the action eating; between the object money and the action buying; and between the object ‘word’ and the action understanding. Then why doesn’t this analytical method apply to other social entities which an actor may intend to observe or participate in?

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I want to preface this by saying that most of the article went way over my head.

However, if you will allow me, I’d like to offer up this thought: You say that we could treat shopping as the object of action. But doesn’t this go against the Austrian methodology of breaking actions down into their smallest bits. Just as when we choose between steak and burgers we are not choosing between the two classes of objects but between individual units of the two, when we buy specific objects we are not merely shopping, but we are, well, buying the specific objects. Shopping seems like a term that has too much aggregation.

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Wheylous:

“You say that we could treat shopping as the object of action.”

Maybe you could provide the relevant quote as a point of reference?

Adam

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Some additional explanation…

The method of praxeology is methodological individualism. This means that the strength of praxeological insights and propositions derives from fixed relationships in the mind of the perceiving actor. As both Mises and Menger held, and as Hayek also understood, in exact science the relationship between A and B is a necessary one ultimately because A and B are necessarily related in human thought. An illustrative example that gives you a general idea of this kind of exact or praxeological knowledge would be the proposition that in walking toward a location (phenomenon A) I necessarily walk away from a different location (phenomenon B). This proposition applies to an action (walking), and states a necessary accompaniment or necessary entailment such that if we suppose or assume that an actor walks toward one location (phenomenon A), we may conclude that he walked away from a different location (phenomenon B). This is considered a priori knowledge and not empirical knowledge because the relationship in question is not established by walking to locations many times and verifying whether in each instance a location was walked away from. Rather, as Menger wrote, that one could walk toward a location and not walk away from any “simply seems inconceivable to the critical mind.” Mises holds that a priori propositions or exact laws are mental in nature. We may call these relationships “laws of subjectivity.”

Hayek understands that the praxeological laws Mises is concerned with are mental in nature and are discovered by methodological individualism. We can also call this method “individual subject analysis” or simply “subjectivism.” It is the method of considering all phenomena from the point of view of the individual actor.

Here are the key passages from “Economics and Knowledge” where Hayek demonstrates his understanding of this method:

“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.”

“…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.”

What Hayek is saying, and correctly so, is that the kind of analysis Mises is practicing has to do with the necessary relationships of “subjective facts”. Meaning, the relationship between A and B is only a necessary one (as Hayek writes, is only a priori valid and necessarily true) because A is a subjective fact (a fact in the mind of the actor concerned) and if A is present for the actor, then we may deduce that B is also present for the actor. Hayek explains this idea in “The Facts of the Social Sciences” in the following way:

“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 used to buy something with, and that the third can be understood — and perhaps many other things.”

Here Hayek describes three relationships between an object of action and an action:

  1. Food / Eating
  2. Money / Buying
  3. Word / Understanding

The idea is that on the assumption of a subjective fact (we assume an actor has food), we may analytically conclude that in some sense, the action eating is implied. If we assume the actor has money, we may analytically conclude that in some sense, the action buying is implied, etc.

Hayek is demonstrating his understanding of an analytical method (a method that can draw analytical “a priori” conclusions) that can be applied to individual action.

The problem, as Hayek explains, is that this method does not apply to a situation consisting of several actors. If we assume one actor has food, this says nothing about the action of a different actor. Thus, praxeology applies to the analysis of the individual actor; applies to the relationship between the object of the actor’s action and his action. But praxeology does not apply to the market, because the market consists of a number of people.

Hayek is saying that there is “subjective necessity” (necessity within the subjective world of the individual mind) but there is no “intersubjective necessity” (there is no necessity between different minds).

Hayek then draws the conclusion that therefore, market study can only be empirical and cannot be a priori. Because there are only a priori data relationships within the subjectivity of the individual mind; there are not a priori data relationships between minds, such that if data A appears in one mind, data B must appear in another mind.

The essential problem with Hayek’s argument is that it depends on an implicit conception of an objective market outside the subjectivity of any actor who participates in it or observes it.

Hayek’s argument is effective because and to the extent that he implicitly supposes the objective existence of a market that is not the object of comprehension of any actor, participant or observer.

If he were to make reference to the market in a subjective sense, as something that is an object of apprehension of an individual, then his own conception of praxeology (the Pure Logic of Choice) would apply. That is, if an actor observes a market or participates in a market, then the market can be conceived as a subjective fact of the individual’s action, and then from this subjective fact analytical conclusions may be drawn, as Hayek explains in “The Facts of the Social Sciences.” And this would constitute a priori analysis of the market.

The same principle would hold if one were to consider a ‘price’ or an ‘interest rate’ a subjective fact of the individual’s action. From these subjective facts of the individual’s action one should, according to Hayek’s argument, be able to draw analytical conclusions.

What has happened is that when Hayek speaks of the market or the interaction of a number of people, he employs a concept of the market which is implicitly objective. He ceases to consider the phenomena which are the market and an interaction of a number of people as objects of comprehension of any participant or observer, and instead implicitly introduces an objective conception of the market and of interpersonal interaction. In other words, he implicitly assumes the existence of an entity (a market, a spontaneous order, an emergent order, etc.) that exists separate from the consciousness of any observer or participant. His argument depends on this, because if the entity in question were considered a subjective fact (something observed or given to an individual actor), then by Hayek’s own theory, a priori analysis would apply.

It is important to note that the introduction of an objective conception of social entities conflicts with Hayek’s argument that social phenomena are subjective in nature.

“If we wish, we could say that all these objects are defined not in terms of their “real” properties but in terms of 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.”

The same principle should apply to any social entity (markets, spontaneous orders, etc.), unless Hayek provides a theory that distinguishes between social phenomena that “really exist” from social phenomena that “are what people think they are.”

When an actor observes a market, or visits a market, or spends time with a family, or visits a family, these things become, for the purposes of analysis, objects given to the individual in his action. From these subjective objects (objects as they are understood by the actor concerned), analytical conclusions may be drawn according to Hayek.

12

Adam,

Are you saying that if Hayek disagrees with Misesian a priorism and also perceives the market conceptually as an object, then his criticism is self-destructing? Am I correct in thinking that the purpose of your essay here is not to justify a Misesian a priorism of the market, but to point out the inconsistency of Hayek’s criticism with his own framework?

What if one is using the Hayekian criticism of subjectivity not transferring interpersonally and one also does not accept the market to be an object to be acted upon?

Very interesting and congratulations on getting it on the Daily!

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Jargon:

“Are you saying that if Hayek disagrees with Misesian a priorism and also perceives the market conceptually as an object, then his criticism is self-destructing?”

Yes. Hayek argued that social entities are not objective in nature, but subjective in nature. (this is the first 6 pages of “The Facts of the Social Sciences”) Social entities exist as a function of the intention of the actor concerned. That is Hayek’s argument. Then, he reasoned, from the concept of the object (the subjective object, a function of the actor’s intention), we may draw further conclusions by a priori analysis. He explains this in the same essay.

In his essay, he used as examples, things such as food, money, words, weapons, cosmetics, etc… He didn’t consider other social entities such as markets, prices, families, languages, laws, etc… But it is clear from the arguments in his essay that social entities, in general, are not to be defined in physical terms, but only in terms of the intentions or attitudes or opinions of the acting persons. This means that all social phenomena—not only the ones Hayek uses for his examples—are to be considered subjective in nature. And once the entity in question is subjective, it is thus a “subjective fact” subject to the Pure Logic of Choice as conceived by Hayek.

If you present these ideas to a defender of Hayek, you will probably receive a reply that contains within it statements such as “a market is” or “an emergent order is” or “a spontaneous order is”… The meaning of this is to portray the entity in question as existing objectively, independent of the consciousness of any actor who observes, or locates, or deals with that entity. The argument that Hayek’s Pure Logic of Choice does not apply to the market, or to an emergent order, or to a spontaneous order, requires that these entities be conceived in an objective sense, as existing independent of any consciousness.

However, the conception of such “objective” entities has been ruled out by Hayek in The Facts of the Social Sciences. Hayek writes that social objects:

“…can be defined only be 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.”

There is no question that Hayek argues that social entities are subjective in nature, and that this argument must apply to any social entity, on principle. If Hayek’s defenders want to argue that some social entities exist in the objective sense, contrary to what Hayek argues in his essay, I have yet to see such an argument explicitly or clearly made. Here is the same insight about social entities made by Mises:

It is illusory to believe that it is possible to visualize collective wholes. They are never visible; their cognition is always the outcome of the understanding of the meaning which acting men attribute to their acts. We can see a crowd, i.e., a multitude of people. Whether this crowd is a mere gathering or a mass…or an organized body or any other kind of social entity is a question which can only be answered by understanding the meaning which they themselves attach to their presence. And this meaning is always the meaning of individuals. Not our senses, but understanding, a mental process, makes us recognize social entities. (HA, 3rd rev. p. 43)

Thus, Mises and Hayek are in agreement that social entities are subjective in nature. We must assume this includes not only the six or seven examples Hayek provides in his essay, but all other social entities as well.

“Am I correct in thinking that the purpose of your essay here is not to justify a Misesian a priorism of the market, but to point out the inconsistency of Hayek’s criticism with his own framework?”

Yes, correct. Hayek held that a priorism was valid within the context of individual action. We can draw analytical conclusions about action by assuming a subjective fact, the situation as understood by the actor, and then discovering what is implied in this subjective fact. Hayek simply didn’t consider the case where the subjective fact that the actor confronts is a market, or a price, or a family, or a loan, etc…

He also didn’t consider the case where the person to whom the subjective fact appears is the social scientist himself.

What if one is using the Hayekian criticism of subjectivity not transferring interpersonally and one also does not accept the market to be an object to be acted upon?

We can express the first part of your question about Hayek by saying that Hayek agrees that there is a valid a priori of subjectivity, but denies that there is a valid a priori of __inter__subjectivity. From the subjective fact that X appears to actor A, we may ‘deduce’ that Y is “also present” for A. But from the subjective fact that X appears to A, we cannot deduce anything about what must also be present for actor B.

That one does not accept the market to be an object to be acted upon is the position that a defender of Hayek must maintain, in order that the market not be conceived as a subjective fact, and in turn become subject to the Pure Logic of Choice.

But we can explain this more pointedly so that the problem can be more clearly seen. Can a market be visited? Can a market be observed? Can a market be shopped in? (e.g., a farmer’s market, a supermarket, Amazon, etc.) If the answer is in the affirmative—if an actor can locate and identify a market—then I will argue that the market is a subjective fact of his action, and then the Pure Logic of Choice applies.

On the other hand, if the argument is that the “market” is a concept, and not something that can be an object of subjective action, then several questions will arise. What is the purpose of studying the concept of the market if we can’t locate or identify a market in the reality of our action? What is the source of our conviction that something called a ‘market’ exists, if markets do not appear to us in our subjectivity? What exactly is meant by “empirical study of the concept market” since Hayek maintains that market study can only be empirical?

We can only speculate about possible answers to these and other questions, because it is unlikely that much serious thought has been given to the realization that Hayek neglected to apply his Pure Logic of Choice to social objects except for the limited few he chose for illustrative purposes.

The main point is that a defender of Hayek’s position will have to argue for an objective conception of social entities, so that those entities are not subject to Hayek’s Pure Logic of Choice. But Hayek himself has argued strenuously and convincingly that social entities are subjective in nature.

Very interesting and congratulations on getting it on the Daily!

Thank you Jargon. Much appreciated.

Sincerely, Adam

14

I haven’t really developed my thoughts very well on this, but it seems incorrect to me to say that when two people go out and respectively buy item A and item B, they are both simply ‘engaging with the market’. How is it that their end is to interact with the market when it seems much clearer that they are acting to purchase a good? This seems to be purposely aggregating things where it is not necessary.

Also, Hayek states that because a priorism is only applicable between an actor and the object of his action , and does not apply to interpersonal exchange, correct? Buy why should it be, that because a priorism applies only to an actor and the object of his action that this disbars us from a prioristically analyzing the market? Is there anything about interpersonal exchange that requires two actors to value their goods of exchange in any similar way (other than having inverse preference scales, which is necessarily true for the exchange to take place)? I don’t understand Hayek’s rationale here, it seems to be kind of gimicky. Why should it be, that because a prioristic knowledge applies only to an actor and his end, we cannot a prioristically analyze systems of interpersonal exchange?

15

From Hayek’s point of view, I think you asked and answered your own question:

“Why should it be, that because a prioristic knowledge applies only to an actor and his end, we cannot a prioristically analyze systems of interpersonal exchange?”

If a priori knowledge only applies to X, why can’t we a prioristically analyze Y?

16

But in this case, is Y not just an aggregation of X’s? Isn’t it sufficient to know that in an exchange there are two or more actors, each valuing what he is trading lower than what he expects to receive? What is a system of interpersonal exchanges other than an aggregation of individual actors and their actions? It seems as though Hayek is claiming that in a system of interpersonalexchange, the two actors must share some element of valuation for the exchange to take place?

17

The goal is to demonstrate a logically necessary connection between phenomena X and Y. If X happens, then Y must happen.

Hayek held (as did Mises) that the necessary connection between A and B derived from the relationship of phenomena within the subjectivity of the individual. If person 1 observes (observing is an action) object O moving toward one location (phenomenon X), this implies that that the object moved away from a different location (phenomenon Y). But Y is not implied for person 2 who did not observe object O moving. The necessary relationship consists of the subjective fact as person 1 sees things (X), and what is implied by that (Y).

[The Pure Logic of Choice 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…

…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.

If person 1 increases his “demand” for something, person 2 need not increase his price for that thing. There is no necessity in what person 2 must do based on what person 1 does. There is no necessity between individuals, only within individuals. And the market is the relationship between individuals. That was Hayek’s point.

18

But did Mises ever claim that the increase in person 1s demand for A, necessitates the increase of price of A as effected by person 2? I would think this would be an infringement on the subjectivity/fallibility of the entrepeneur. I need to reread Human Action, but I thought that an increase in demand for A only necessitates a situation in which producers of A will generally raise the price.

19

He claimed, I believe, that credit expansion of a certain kind (phenomenon X) must necessarily lead to a slump (phenomenon Y)—a market phenomenon defined in terms of the interactions of a number of individuals. And thus Hayek’s argument that a priori analysis only applies to the logic of individual action and not to market theory applies to Mises’s theory.

20

So, in reference to your earlier point, does not the notion of actor A engaging the market, as his action, also fail to necessitate a responsive action in actor B?