I’ve quoted Mises as saying that economics should teach a person two things: Predict the future, and what to do about it.
Menger on economics:
t**o reduce the complex phenomena of human economic activity to the simplest elements that can still be subjected to accurate observation, to apply to these elements the measure corresponding to their nature, and constantly adhering to this measure, to investigate the manner in which more complex phenomena evolve from their elements according to definite principles.
The goal of scholarly research is not only the cognition, but also the understanding of phenomena. We have gained cognition of a phenomenon when we have attained a mental image of it. We understand it when we have recognized the reason for its existence and for its characteristic quality (the reason for its being and for its being like it is)
Furthermore Jaffe on “Megerian Man”:
Man, as Menger saw him, far from being a lightning calculator, is a bumbling, erring, ill-informed creature, plagued with uncertainty, forever hovering between alluring hopes and haunting fears, and congenitally incapable of making finely cali- brated decisions in pursuit of satisfactions. Hence Mengers scales of the declining importance of satisfactions are represented by discrete integers. In Mengers scheme of thought, positive first derivates and negative second derivates of utility with respect to quality had no place; nothing is differentiable.
If this is a major view of Mises, I would count it as a strike against him vs Austrian Economics and into a more “Walrasian” / traditional marginalist nature. To predic the future and tell peoplewhat to do about it seems insane.
Menger is describing how it’s done, Mises why it’s done. They do not disagree.
As for Jaffe, what he says about man is nothing Mises would disagree with. I don’t see the relevance.
To predict the future and tell people what to do about it seems insane.
Just for the record, the Mises quotes I found on this topic are here. I’ll copy-paste a modified version for your convenience.
Praxeology, the a priori science of human action, and, more specifically, its up to now best-developed part, economics, provides in its field a consummate interpretation of past events recorded and a consummate anticipation of the effects to be expected from future actions of a definite kind.
This is the reason why history cannot predict things to come and why it is an illusion to believe that qualitative economics can be replaced or supplemented by quantitative economics. [Meaning that qualitative economics CAN predict stuff].
The predictions of praxeology are, within the range of their applicability, absolutely certain.
Economics can predict the effects to be expected from resorting to definite measures of economic policies. It can answer the question whether a definite policy is able to attain the ends aimed at and, if the answer is in the negative, what its real effects will be.
Economics too can make predictions in the sense in which this ability is attributed to the natural sciences. The economist can and does know in advance what effect an increase in the quantity of money will have upon its purchasing power or what consequences price controls must have. Therefore, the inflations of the age of war and revolution, and the controls enacted in connection with them, brought about no results unforeseen by economics.
…the public’s interest in the studies labeled as economic is entirely due to the expectation that one can learn something about the methods to be resorted to for the attainment of definite ends. The students attending the courses of the professors of “economics” as well as the governments appointing “economic” advisers are anxious to get information about the future,…
Bottom line, Mises says very clearly that economics [meaning of course Austrian economics, what other kind is there] is great both for accurately predicting the future and prescribing what to do about it.
I won’t deny that Mises (I am not qualified to argue this one wy or the other) thinks econ can predict the future - I just think it detracts from what Menger’s overall vision of what economics is, is and is probably a diversion from what economics should be doing.
Economics too can make predictions in the sense in which this ability is attributed to the natural sciences. The economist can and does know in advance what effect an increase in the quantity of money will have upon its purchasing power or what consequences price controls must have. Therefore, the inflations of the age of war and revolution, and the controls enacted in connection with them, brought about no results unforeseen by economics.
I’m confused here: economics is not a natural science, it has no need to incorporate darwinism or anything else, I don’t know why one would want to compare the two as it is apples and oranges - it is concerned with “exact laws”. Even so (and besides the point), a doctor (who utilizes natural sciences) doesn’t even know these things.
Economics can “debunk” or disprove a system that tries to use economic language, but that’s about it for certainty. Other than that these things are (to be generous) “reasonable applications”, like medicine. An advocacy for the market will not be anything more than having one put a “rational faith” into it - much like Karl Popper’s appeal to Liberalism.
To predic the future and tell peoplewhat to do about it seems insane.
Pretty much.
The theorems of catallactics are generally of a ceteris paribus (“other things being equal”) nature. Thus they can work for an infinitesimal time span, but any longer than that, and they don’t apply and can ostensibly fail.
I think a good analogy is global warming. An increase of CO2 may warm the planet ceteris paribus according to the Arrhenius, and a climatologist may make a prediction of a warmer climate X years from now. But unexpected natural causes (say, a drop in solar UV output, or an unexpected change in microorganism populations) could counteract the effect and actually make the planet cooler, thus making the prediction fail and ostensibly invalidating Arrhenius.
As a silly example, predictions based on “F=ma” may prove false if an unexpected meteor crashes through the roof and strikes the physicist’s apparatuses, diverting the object from its expected path. But the problem is endemic in complex sytems like economies or climates. The problem is also worsened by the fact that releasing your prediction may change other people’s behavior and could cause your prediction to fail.
For practical applications, the theorems of catallactics often just guidlines. One should also use things like thymology, prediction markets, and evidence-based forecasting principles of J. Scott Armstrong (e.g. techniques like forecast combining and judgmental bootstrapping) and possibly econometrics. This is how human beings cope with complex systems.
I’m confused here: economics is not a natural science, it has no need to incorporate darwinism or anything else, I don’t know why one would want to compare the two as it is apples and oranges - it is concerned with “exact laws”.
Mises says explicitly he is only comparing them as far as ability to make predictions. The point of the comparison is that the natural sciences are very famous for their ability to make predictions [and he is not talking about darwinism, which makes no predictions at all. According to Nobel Prize winning physicist Feynman it is not even a branch of science, which he defines as that which can be verified by experiment. But we digress]. Economics is much less famous for the ability to predict. So Mises is saying that economics has the sam eability to predict as the most famous predictor of all, natural sciences. BTW natural sciences to him means the sciences that study nature, including physics and chemistry.
Economics can “debunk” or disprove a system that tries to use economic language, but that’s about it for certainty.
He refuted that in the very section you quoted, by giving 2 specific examples of what it can predict [what effect an increase in the quantity of money will have…what consequences price controls…]
An advocacy for the market will not be anything more than having one put a “rational faith” into it…
Not really. One can prove that anything else besides a free market will impoverish people. In fact, Mises and Rothbard wrote whole books on exactly that topic.
The point of the comparison is that the natural sciences are very famous for their ability to make predictions
True, but they have their limits too: the apparent randomness of quantum mechanics, the inability to cope with chaos in N-body systems, the intractable calculations of quantum chromodynamics, the divergences that plague quantum field theory.
and he is not talking about darwinism… According to Nobel Prize winning physicist Feynman it is not even a branch of science, which he defines as that which can be verified by experiment
Then I guess the a priori principles of geology aren’t science either
So Mises is saying that economics has the sam eability to predict as the most famous predictor of all, natural sciences.
It doesn’t.
“Economics too can make predictions in the sense in which this ability is attributed to the natural sciences”
Mises adds “However, this knowledge is not quantitatively definite. For example, economics is not in a position to say just how great the reduction in demand will be with which consumption will react to a definite quantitative increase in price” - http://mises.org/epofe/c2sec8.asp. But I don’t think that disclaimer is quite strong enough. The effect might even be in the opposite direction from what catallactics would suggest. I wonder if the situation is improved in Human Action, which was published many years later.
No; in geology, they are axioms or a priori principles. Follow the links I gave.
But I don’t think that disclaimer is quite strong enough.
You are entitled to your unproven opinion, of course.
The onus is on you to prove that you can predict the future with praxeology. Not me.
And if the catallactic predictions of a change are not quantitative, then they at least need to be qualitative, i.e. of the correct sign. Otherwise they aren’t any kind of prediction at all (e.g. “the price will be some number”).
I think there’s a big miscommunication occurring here in regards to the word prediction. The task of economics is not necessarily to predict the future but to explain the necessary effects of any economic or economically interventionist action. The difference here is that in the real world it is difficult for us to isolate a single causal factor in real time analysis. In that sense economy does not predict the future because we are not aware of futures actions, counterweighing actions or the degree of strength therebetween. It does however allow us to predict the future when an administrator declares a 50% tariff on all imports. Thanks to the study of economics we understand that our country will have lower productivity, lower wealth,and, if we initiate a trade war, lower employment. So yes, economics does allow us to predict the future insofar as we restrict our predictions to isolated causal factors. There can be no doubt that this is perhaps science’s greatest gift to man: the capability of self-governance according to reason.
Good luck in your pursuit of these fascinating subjects.
Jargon,
I agree.
And thus my point still stands.
People here are testifying that they have taken advanced economic courses, and yet have never heard that the point of economics is to foretell the future, [neither qualitatively nor quantitatively]. In fact, they have been taught that it’s “insane” to even make such a claim for economics. I wonder why they bother studying it then. Is it a Glass Bead Game to them?
Others here have university degrees and think that geology is based on a priori axioms. They think they are providing links to prove this.
I just wonder how much they paid for that education. Tens of thousand of dollars, no?
There’s nothing special about praxeology as such. Economics, in the praxeological aprioristic fashion, merely attempts to construct a coherent mental model that, when its premises hold true, yield to accurate results of what the future will hold. There is a fundamental problem at the heart of praxeology, and this is, in my mind, the only true debate over whether or not praxeology is a worthwhile methodology, and this is how individuals perceive something. We know that if an individual values something more intently than anything else, and that they believe they can bring it about, then they will pursue it, but we can never know when this will occur.
My classic example is shrimp. If you see some really cheap shrimp you might think that it’s awful shrimp and that there’s a whole lot of bad things about it. If the price increases substantially, then you might not have these reservations and you may think that the shrimp is very good. Therefore it’s possible in the real world that a price increase will lead to an increase in demand. It’s not that the strict praxeological reasoning failed, it is always true that an increase in price will, all else being and remaining equal, will not increase the amount of that good demanded (excluding weird income effects), however in the real world all else isn’t held equal. The change in price caused a change in expectations which changed demand. A single shift caused two changes. This is why behavioral psychology is the greatest possible asset to praxeology in general, as well as the biggest threat to the real application of traditional praxeological conclusions. How an individual will actually act to something narrows down the praxeological possibilities within the real world, which is necessarily anarchic and imprecise when making praxeological predications because we leave the nice models of theoretical constructions and enter into the world of flawed and nonsensical human prediction.
Just like any halfway decent model, the economic model of praxeology is true whenever its assumptions are present. The question is then always raised: are its conditions present? I can tell you with absolute certainty through my mathematical model that if a figure you are looking at is a right triangle then the length of the hypotenuse is the length of the two legs squared and added together, but this does not mean that the figure you are looking at is a right triangle.
For whatever it’s worth I think that this thread has totally been jacked from the purpose of the OP, although I can’t for the life of me decide what that purpose really was.
The economist uses praxeology to understand what happens under X conditions. Entrepreneurs can then make use of this economic knowledge and combine it with other skills in order to make it useful and applicable to the real world. Praxeology is an absolutely worthwhile methodology. It is the difference between producing a Peter Schiff and an Art Laffer. It provides a solid framework so that someone like Peter Schiff can help others navigate the market.
While there are exceptions to this, praxeology is actually pretty useless to the investor and entrepreneur by its very nature, since it’s inherent that the entrepreneur’s one is one of speculation of what conditions prevail and how this will affect certain industries, praxeology is of little use except in cases like business cycle theory. For the most part the knowledge that, for instance, an increase in the capital stock will increase productivity and living standards is relatively unhelpful to the entrepreneur at any one time. It is not utterly unimportant, but it is not a massive factor.
Like Mises I see economics and praxeology as being primarily a political ideology in deciding what economic system is most conducive to one’s political goals.
For whatever it’s worth I think that this thread has totally been jacked from the purpose of the OP, although I can’t for the life of me decide what that purpose really was.
Yes it has lost t’s point - and it’s kind of my fault, I posted something I shouldn’t have in my 3rd post - that entire post was not supposed to have been up, as it’s pointless (I thought I deleted the damn thing),
The main point of the thread was to prevent a soapbox going on in a fairly simple thread about what college courses people took. The secondary point was simply that if that is Mises view, I’m not so sure it could be seen as Mengers - and that’s as far as I wanted to go with that.
“The main point of the thread was to prevent a soapbox going on in a fairly simple thread about what college courses people took. The secondary point was simply that if that is Mises view, I’m not so sure it could be seen as Mengers - and that’s as far as I wanted to go with that.”
You failed.
I do agree with Dave that the two views are not at all incompatible. I think that Menger, Mises, and Hayek all generally shared the view that the exact shape of the future is unknowable. It pervades all of Hayek’s work and it really comes out in Mises with some of his later remarks in Human Action and a lot in Theory and History.
Understanding the business ciclye is very important, but it is not the only thing that is useful to entrepreneurs. Taxes and regulations are incredibly varied, not only at the federal level, but often at the state and local level too. Most entrepreneurs don’t look too deep into what the effects of these various taxes and regulations will be. They just see what the costs are to them and decide if something is worth it. The problem is, if you aren’t familiar with how things work, you can end up with bad investments. In other words, interest rates may be low, but that doesn’t mean it’s necessarily good to invest. Another example could be if you know that there is going to be a price ceiling put into effect in the near future on X good, then you might try to unload your stock at a lower price but still above the ceiling (else you can just wait for the ceiling to take effect) before the rule is put into effect.
Obviously that is a very basic example, and probably most people could figure that out without studying economics, but somehow there are a ton of people who don’t get it (they support the price ceilings). At the very least this knowledge puts you ahead of them, and if it is relevant to your profession, you can make use of it over others. Don’t forget that timing is also crucial for entrepreneurs. Remember when Peter Schiff (and Ron Paul!) predicted the housing bust? They applied basic economic reasoning (okay, do we consider the ABCT basic? It’s been explained so many times that it must be…) to predict the crash. Schiff clearly stated that it would happen in either 2007 or 2008. That is more than enough relevant knowledge for an entrepreneur looking to enter the housing market. They know that they need to stay away until after the crash and things stabalize. Everyone else who didn’t understand what real wealth is (I’m looking at you, Art Laffer) got slammed.
Also, don’t invest in municipal bonds. Stockton, California declared bankruptcy. “But it’s the government, it has to pay back it’s debt!” Yeah, of course. There are only so many options available, and while this may not have been something that only Austrians could predict, Austrian economics stresses good reasoning. That alone would help people realize that governments can in fact declare bankruptcy and screw you.
PS I’ll try to think of better examples than interest rates and price ceilings. It’s late, so I guess I’ll sleep on it and maybe I’ll have some good examples tomorrow.
…learn to use the intertubes dude…“The law of superposition (or the principle of superposition) is a key axiom”…
So from 6 links we are down to one. And that one link, if one bothers to read to the end, states very explicitly that the so called axiom is often violated by reality. Learn to read, dude.
Oh, by the way, even the very first line of that article shows it’s not “a priori”. Learn to know what words mean before you use them, dude.
When has this actually happened? Are you arguing from something imaginary?
Like Mises I see economics and praxeology as being primarily a political ideology…
Like Mises? Do you have a quote, something, anything, to back up that assertion? I provided 6 quotes in this very thread where he says the exact opposite.
