Mises, Hayek, and market theory: A Priori or Empirical?

[I_Ryan]

In other words, we may see the market from the point of view of “individual action”, which he called “a priori”, by seeing the ‘market’ as objects of the actions of individuals, instead of as an entity in itself. Is that an accurate characterization of what you are saying in your post?

Based on what you are saying here and what you quoted of him, he appears to have changed his point of view at a certain point from that of individual actors to that of collections of actors making up markets, causing the method of his inquiries to change, and then declared that, at that point, the method changes. But, if we just keep the same point of view, the method does not change, I guess. I think that you were saying what I am saying here when you wrote that we need to see the market as an object of the action of the actor; that is, when you take ‘the market’ as an object of the action of an individual, you move back into what Hayek considered a point of view that is ‘a priori’. So why did he decide to change his point of view at that moment?

Either way, though, I see no reason why switching points from one of those points of view to the other is ever “incorrect” just because of that. In my estimation, we just need to try both of them out and then see what happens. I do not remember what lecture this was in; but I remember Gene Callahan discussing that he did not think that it made sense to say things like that looking just at movements in the external world are just “incorrect” methods for understanding how humans ‘behave’ but instead that they just happen to be pretty sterile at this moment in comparison to seeing it from the point of view of the internal worlds of the people involved, which is what ‘subjectivist’ economics does.[1] And that way of seeing things really made sense to me. I think that Mises held a similar view; for his ‘justification’ of his method was basically saying “it would be crazy to say that, for understanding the movements of people, the method of economics or whatever does not work and the point of view of natural science does”:

@Ludwig von Mises

Both primitive man and the infant, in a naïve anthropomorphic attitude, consider it quite plausible that every change and event is the outcome of the action of a being acting in the same way as they themselves do. They believe that animals, plants, mountains, rivers, and fountains, even stones and celestial bodies, are, like themselves, feeling, willing, and acting beings. Only at a later stage of cultural development does man renounce these animistic ideas and substitute the mechanistic world view for them. Mechanicalism proves to be so satisfactory a principle of conduct that people finally believe it capable of solving all the problems of thought and scientific research. Materialism and panphysicalism proclaim mechanicalism as the essence of all knowledge and the experimental and mathematical methods of the natural sciences as the sole scientific mode of thinking. All changes are to be comprehended as motions subject to the laws to mechanics.

The champions of mechanicalism do not bother about the still unsolved problems of the logical and epistemological basis of the principles of causality and imperfect induction. In their eyes these principles are sound because they work. The fact that experiments in the laboratory bring about the results predicted by the theories and that machines in the factories run in the way predicted by technology proves, they say, the soundness of the methods and findings of modern natural science. Granted that science cannot give us truth–and who knows what truth really means?–at any rate it is certain that it works in leading us to success.

But it is precisely when we accept this pragmatic point of view that the emptiness of the panphysicalist dogma becomes manifest. Science, as has been pointed out above, has not succeeded in solving the problems of the mind-body relations. The panphysicalists certainly cannot contend that the procedures they recommend have ever worked in the field of interhuman relations and of the social sciences. But it is beyond doubt that the principle according to which an Ego deals with every human being as if the other were a thinking and acting being like himself has evidenced its usefulness both in mundane life and in scientific research. It cannot be denied that it works.

It is beyond doubt that the practice of considering fellow men as beings who think and act as I, the Ego, do has turned out well; on the other hand the prospect seems hopeless of getting a similar pragmatic verification for the postulate requiring them to be treated in the same manner as the objects of the natural sciences. The epistemological problems raised by the comprehension of other people’s behavior are no less intricate than those of causality and incomplete induction. It may be admitted that it is impossible to provide conclusive evidence for the propositions that my logic is the logic of all other people and by all means absolutely the only human logic and that the categories of my action are the categories of all other people’s action and by all means absolutely the categories of all human action. However, the pragmatist must remember that these propositions work both in practice and in science, and the positivist must not overlook the fact that in addressing his fellow men he presupposes–tacitly and implicitly–the intersubjective validity of logic and thereby the reality of the realm of the alter Ego’s thought and action, of his eminent human character.[10]

With such a weak justification of his method, then, what justified his serious attacks against other thinkers posing the other method? Why did he not just say “well, it does not seem to be working; so I will just stick with what I am doing”? Well, first of all, he did that a lot. But, second of all, when he did not but instead decided to launch more direct attacks against those people, what justified it was, from what I have seen, one of two things: either (a) they thought that the justification for their method was more than just its expediency, which contradicts what I said that Gene Callahan was saying and what I quoted from Mises, or (b) they acted like they were doing a method opposed to what Mises was doing but they actually were not, they were smuggling in categories of action into what they pretended was just natural science. (Anyway, this passage might have been a bit of a tangent.)

So, in light of that, I do not think that it makes sense to just say “Hayek was wrong about describing markets being not a priori”. I think that it makes more sense to just point out that he changed his point of view and that his assertion that Mises was wrong, indeed, his assertion that he and Mises were in a fundamental disagreement, was wrong, and that, instead, they were just seeing things from two different points of view. But, again, why did he so strongly feel the need to switch his point of view at that moment that he thought that no other point of view existed, indeed, that he did not even switch his point of view? I have no idea.

(With this, I am still supporting a rough template of what I was trying to do in the other thread; I still think that it makes sense to see groups of people as individuals, too. Methodological individualism always holds; the question is just this, what are we considering to be the individual at this moment? By the way, I think that Hoppe was doing a similar sort of thing in this lecture. What do you think about his method in that lecture? Do you think that it makes sense? Do you think that it is similar to what I was doing in that other thread?)

(Just my tentative, disorganized thoughts about this.)

[1] I am still trying to figure out how to answer your challenges of how to define ‘internal world’ and ‘external world’ in a non-circular way; but, either way, I am pretty confident that it is an important division.