The Austrian theory of exchange modifies the classical theory of exchange in the sense that both partipants benefit from voluntary trade (as opposed to the exchange having equal value).
In every voluntary exchange, ex ante, both particapnts expect to benefit from the trade.
Go out and “test” this proposition and try to “falsify” it. Please report your results.
All participants expect to benefit or do benefit?
You have a reading comprehension problem and an uncanny ability to deviate from the matter at hand and spew nonsense. Again…
In every voluntary exchange, ex ante, both particapnts expect to benefit from the trade.
This is true a priori.
That’s a nice example. You voluntarily exchanged whatever time and effort you spent composing and posting it in the expectation of enjoying the ensuing reaction. That’s your expected benefit.
In every voluntary exchange, ex ante, both particapnts expect to benefit from the trade.
This is true a priori.
But it is not true a priori that voluntary exchanges exist.
That’s a nice example. You voluntarily exchanged whatever time and effort you spent composing and posting it in the expectation of enjoying the ensuing reaction. That’s your expected benefit.
And your post is a good example of an empirically derived conclusion.
I will repost my first comment here, because it’s very relevant to your objection.
I will repost my first comment here, because it’s very relevant to your objection.
I agree with you. But then there is nothing Earth-shattering about Mises’s approach to economics in this case. All schools of economics employ self-evident truths and analytic propositions. I don’t think any other schools of economics disagree with this axiom. They probably just thought it was so self-evident that there was no need to mention it.
Mises’s approach is revolutionary because he shows that there are neccesary truths that follow from this axiom. This is precisely what negates it from being analytical.
Mises’s approach is revolutionary because he shows that there are neccesary truths that follow from this axiom. This is precisely what negates it from being analytical.
What are some of these truths? I thought all necessary truths were analytic.
Granted, in your particular case the mild trolling angle is obvious from previous experience. But can you describe a scenario where someone voluntarily acts without expecting greater satisfaction than would result from not acting?
Granted, in your particular case the mild trolling angle is obvious from previous experience. But can you describe a scenario where someone voluntarily acts without expecting greater satisfaction than would result from not acting?
I’m sorry for being rude. I should have thought of a better way of making my point.
I cannot think of such a scenario. I also can’t think of any way this would change how I do economics.
There are necessary truths implied in this axiom of action, which are categories of economics (goals, means, ends, cost, profit, and loss are implied in the axiom of action). To illustrate this concept, say someone absurdly claims the negation of what was just said (i.e., goals, means, ends, costs, profit, and loss, are not implied in the axiom of action). The act of making this statement in of itself constitutes an action, with the goal of refuting the truth of the axiom itself or the necessary truths that follow, using argumentation as means, hoping to be proven right in the end; yet it is hopeless because anyone who makes this statement does not profit from their performative contradiction and, as a result, is at a loss. None of these necessary truths derived from this axiom are self-evident, of course; this is why the action axiom is not analytic.
You could argue that all truths are analytic, but this would technically be an all out philosophic assault on reason. After, all we can define things how ever we want I suppose, but Aristotle’s law of indentity holds. Here’s an idea: next time you go into work, show up 3 hours late. If you have to be at work at 9, then show up at 12. Claim that 9 o’clok really means 12 o’clock to you; since all truths are analytic (from your position), then this shouldn’t really be a problem.
This is helping me see why Austrian Economics is often so confused. If the concept of profit is derived from this axiom, then it explains why the Austrian definition differs from the one used in the mainstream. In AE, profit seems to be the same thing as a goal, an end, or a benefit. But in mainstream usage, it means something like ending up with an objectively greater quantity of money (or equivalent value) than the quantity that one spent. The concept of value is similarly transformed. The problem is, to do proper economics we still need to be able to talk about the concepts according to their old definitions. So to me, Mises’s method only seems revolutionary in its ability to obfuscate and limit certain discourses.
FWIW, Wikipedia says that self-evident propositions and analytic proposition are different. I think I understand what your saying though.
There’s nothing confusing about this position at all. Profit doesn’t neccesarily mean gaining money. Certainly, if one volunteers one’s own time to serve in a soup kitchen (for free), there may not be any monetary benefit involved, but the profit from this action in manifested in a different form: the additional satisfaction that one gains from “doing a noble thing” takes place in the form of added social capital.
Profit has the same definition in Austrian economics - having more money than you started with. In fact, the Austrians are more insistent about it being money (and not some kind of psychic general warm-fuzzy) because what is meant by economic calculation is the pricing of all non-money goods in terms of money, thus permitting the direct comparison of the objective exchange value of many disparate goods.
But action is not motivated by profit. Action is motivated by ends. Profit permits calculation of one’s success in attaining one’s ends in the most general possible sense. The anti-materialists get confused on this point… “money can’t buy happiness” but they miss the fact that bringing about the conditions for happiness necessarily entails some sort of material processes and that money is the most general means for bring about any particular material state of affairs.
Perhaps another child is what will make you happy. But the money to build an addition to your house for the extra bedroom and to birth, clothe, feed, etc. the new child are the means by which you will be able to bring about the state of affairs of having another child. Money is the most general means for bringing about these material conditions and profit permits the calculation of the extent of the means at your disposal for bringing about material states of affairs.
Clayton -
The disutility of labor is not of a categorial and aprioristic character. …. Experience teaches that there is disutility of labor. But it does not teach it directly. There is no phenomenon that introduces itself as disutility of labor. There are only data of experience which are interpreted, on the ground of aprioristic knowledge, to mean that men consider leisure—i.e., the absence of labor—other things being equal, as a more desirable condition than the expenditure of labor (Mises 1949).
Doesn’t the first part contradict the bold part? The disutility of labor doesn’t seem to be an empirical observation, but rather a synthetic a priori axiom. If we were to say, “Q has stopped laying bricks” and then add “because he is tired,” the addition would make the statement not empirical, but synthetic, no? We can’t observe someone getting tired; we can only understand that someone is getting tired by reflecting on what we observe. We only notice Q get tired because we understand the nature of what he is doing is stressful and that he needs a break. We can’t derive the disutility of labor axiom purely through empirical observation, can we? Hoppe explains in his Economic Science and the Austrian Method:
It is true, as Kant says, that the true synthetic a priori propositions are grounded in self-evident axioms and that these axioms have to be understood by reflection upon ourselves rather than being in any meaningful sense “observable.”
So its not that we can see someone getting tired, but that we see someone doing work and understand that the work is tiring and that there is therefore a disutility associated with it. This seems to be the only specific critique offered by this author.
Do I have this right?
EDIT: I don’t know how I suggested this post, but, obviously, ignore it.
Contribution from Libertarian Monarchy:
Here is a simple way, using praxeology, to deduce the disutility of labour. Leisure can be defined as engaging in the action that immediately maximizes utility. Labour can be defined as engaging in an action which is just a means to acquiring an end. The end is the goal that will maximize utility. The means is only done for the satisfaction of acquiring the end. Therefore, the end is valued more highly than the means. If the actor could achieve the end without ever going through the means he would do so. So, there is inherent disutility that comes from using the means, labour. Hence the disutility of labour.
I, personally, would skip the definition of leisure. Just associate labor as an action, which is a means, and the rest follows. Defining leisure as utility maximizing activity would be an empirical definition that is unnecessary in his train of thought. Thoughts?
But can you describe a scenario where someone voluntarily acts without expecting greater satisfaction than would result from not acting?
Oh, but charity, scarifice, goodness! Certainly those don’t benefit us at all 
So it would not be unreasonable to say that we know this to be true a priori, right? And that this must logically apply to the voluntary action of trade as well?
What if the economic model were shown to contradict this principle?
Consumeriat: “The article linked does the job better than I can, but my main problem with Praxeology is that its claims to being apodictically certain are completely overblown. I’ve never once met anyone able to deduce economic laws from the Action Axiom without slipping in assumptions that require empirical evidence. So Praxeology’s claim to being a-priori are nonsense.”
Hahaha, how about no. Terrible strawman.
And you whole argument just got shattered… because you didn’t have one in the first place. Further clarification:
“The present work deduces the entire corpus of economics from a few simple and apodictically true axioms: the Fundamental Axiom of action-that men employ means to achieve ends, and two subsidiary postulates: that there is a variety of human and natural resources, and that leisure is a consumers’ good.” In “Power and Market” (p. 1309, in the same volume) he than describes concordantly the “three universally acceptable axioms: the major axiom of the existence of purposive human action; and the minor postulates, or axioms, of the diversity of human skills and natural resources, and the disutility of labor.” ~ Rothbard: Man, Economy, and State, p. xxxi.
“The attempt to disprove the action-axiom would itself be an action aimed at a goal, requiring means, excluding other courses of action, incurring costs, subjecting the actor to the possibility of achieving or not achieving the desired goal and so leading to a profit or a loss.
And the very possession of such knowledge then can never be disputed, and the validity of these concepts can never be falsified by any contingent experience, for disputing or falsifying anything would already have presupposed their very existence. As a matter of fact, a situation in which these categories of action would cease to have a real existence could itself never be observed, for making an observation, too, is an action.” ~ Hans-Hermann Hoppe, ESAM.
“This axiom, the proposition that humans act, fulfills the requirements precisely for a true synthetic a priori proposition. It cannot be denied that this proposition is true, since the denial would have to be categorized as an action-and so the truth of the statement literally cannot be undone. And the axiom is also not derived from observation-there are only bodily movements to be observed but no such things as actions-but stems instead from reflective understanding.
Moreover, as something that has to be understood rather than observed, it is still knowledge about reality. This is because the conceptual distinctions involved in this understanding are nothing less than the categories employed in the mind’s interaction with the physical world by means of its own physical body. And the axiom of action in all its implications is certainly not self-evident in a psychological sense, although once made explicit it can be understood as an undeniably true proposition about something real and existent.[18]” ~ Hans-Hermann Hoppe, ESAM
“Mises’s great insight was that economic reasoning has its foundation in just this understanding of action; and that the status of economics as a sort of applied logic derives from the status of the action-axiom as an a priori-true synthetic proposition. The laws of exchange, the law of diminishing marginal utility, the Ricardian law of association, the law of price controls, and the quantity theory of money all the examples of economic propositions which I have mentioned can be logically derived from this axiom. And this is why it strikes one as ridiculous to think of such propositions as being of the same epistemological type as those of the natural sciences. To think that they are, and accordingly to require testing for their validation, is like supposing that we had to engage in some fact-finding process without knowing the possible outcome in order to establish the fact that one is indeed an actor. In a word: It is absurd.” ~ Hans-Hermann Hoppe, ESAM.
Praxeology and Economic Science
Praxeology says that all economic propositions which claim to be true must be shown to be deducible by means of formal logic from the incontestably true material knowledge regarding the meaning of action. Specifically, all economic reasoning consists of the following:
- an understanding of the categories of action and the meaning of a change occurring in such things as values, preferences, knowledge, means, costs, etc;
- a description of a world in which the categories of action assume concrete meaning, where definite people are identified as actors with definite objects specified as their means of action, with some definite goals identified as values and definite things specified as costs. Such description could be one of a Robinson Crusoe world, or a world with more than one actor in which interpersonal relationships are possible; of a world of barter exchange or of money and exchanges that make use of money as a common medium of exchange; of a world of only land, labor, and time as factors of production, or a world with capital products; of a world with perfectly divisible or indivisible, specific or unspecific factors of production; or of a world with diverse social institutions, treating diverse actions as aggression and threatening them with physical punishment, etc; and
- a logical deduction of the consequences which result from the performance of some specified action within this world, or of the consequences which result for a specific actor if this situation is changed in a specified way.
Provided there is no flaw in the process of deduction, the conclusions that such reasoning yield must be valid a priori because their validity would ultimately go back to nothing but the indisputable axiom of action. If the situation and the changes introduced into it are fictional or assumptional (a Robinson Crusoe world, or a world with only indivisible or only completely specific factors of production), then the conclusions are, of course, a priori true only of such a “possible world.” If, on the other hand, the situation and changes can be identified as real, perceived and conceptualized as such by real actors, then the conclusions are a priori true propositions about the world as it really is. [19]
Such is the idea of economics as praxeology. And such then is the ultimate disagreement that Austrians have with their colleagues: Their pronouncements cannot be deduced from the axiom of action or even stand in clear-cut contradiction to propositions that can be deduced from the axiom of action.
~ Hans-Hermann Hoppe, Economic Science and the Austrian Method, pg 25.
There’s nothing confusing about this position at all. Profit doesn’t neccesarily mean gaining money. Certainly, if one volunteers one’s own time to serve in a soup kitchen (for free), there may not be any monetary benefit involved, but the profit from this action in manifested in a different form: the additional satisfaction that one gains from “doing a noble thing” takes place in the form of added social capital.
I’ve just started reading Human Action, and it is clearing things up for me. I’ve heard others on this site talk about monetary profit and psychic profit. These terms give the impression that the only difference is the object. But what I am realizing now is that these terms also differ in their very form. There are two relationships: choices and points in time. A person inevitably moves from time 1 to time 2 and meanwhile must inevitably choose between choices A, B, C, etc. What the action axiom states from what I understand is that if the person chooses choice A, we can conclude that the person expected to benefit more from A than any of the other choices. The person then gains psychic profit from choosing and successfully fulfilling choice A. In this sense, it is correct to say that both parties gain from voluntary exchange. On the other hand, monetary profit does not refer to the relationship between choice A and B but rather to the relationship between time 1 and 2. Monetary profit has nothing to do with the action axiom. To treat these two very different uses of profit as the same (or even similar) is to equivocate. Clayton seems to have this distinction right.
It remains to be seen whether Mises does, however. Already though, I’m finding hints that he doesn’t. Take what he says about happiness:
In colloquial speech we call a man “happy” who has succeeded in attaining his ends. A more adequate description of his state would be that he is happier than he was before. There is however no valid objection to a usage that defines human action as the striving for happiness.
Here Mises mentions a temporal component. Clearly this cannot be derived from his action axiom. Someone is not necessarily happier after they achieve an end than before they achieve it. That would mean, provided we always achieve our ends, that we get happier and happier as our life goes on. This is the exact reverse of what I described above: the form of monetary profit but with the object of psychic states. Either this is invalid reasoning or Mises is using a radical redefinition of happiness along with a completely different axiom.