Research Programs in Libertarian Social Science

Economics Political Theory
1

Recently, some disagreements have arisen about the meaning of Hayek’s writings or of some passages in his writings. The question has to do with validity of various research programs as they relate to either the intended meaning in Hayek’s writings, or to the meaning of those writings as interpreted differently than he intended in writing them.

In what follows, I will try to explain the difficulty, first by way of analogy, and then by considering Hayek’s writings compared to his assumed intention in writing them and compared to their usefulness for the Misesian research program regardless of whether Hayek supported that program or not.

We are all familiar with a document containing the phrase “all men are created equal.”

But as libertarians and as social thinkers, we are also aware that to a socialist, this phrase has a different meaning from what it does to a libertarian. It also has a different meaning to a racist.

The “research programs” incorporating this idea that will be pursued by a libertarian, by a socialist, and by a racist, will be vastly different, though all three can support this founding statement by interpreting it in various ways. The socialist will focus on a certain meaning of equality, while the racist might focus on what constitutes a “man.”

A libertarian will also focus on a specific conception of this idea. In an important sense, the libertarian won’t be dissuaded from his libertarian research program—founded on the idea that all men are created equal—upon learning that, not only do other schools of thought interpret this phrase differently, but even the people who crafted the phrase themselves do not or did not interpret it to mean exactly the same thing as the libertarian now does.

We might hold or argue that the program of libertarianism is largely concerned with the implications of the idea that all men are created equal, irrespective of the fact that others view the implications of that same idea or phrase differently, and irrespective of whether or not key figures involved in the crafting of this very phrase contradicted it significantly in their words or deeds.

Something similar may be the case with our present disagreement having to do with the Hayekian research program versus the Misesian research program.

In two important essays, “Economics and Knowledge,” and “The Facts of the Social Sciences,” Hayek reiterates and reinforces key insights that form much of the basis of the a prioristic praxeological research program advocated by Mises.

Some of the key insights Hayek either makes or reiterates are:

  1. There is such a thing as a purely formal science of human action that largely consists of tautological transformations of assumptions from which the formal social scientist begins.

  2. These scientific assumptions are data that are present in the mind of the individual actor, and are not, strictly speaking, objective facts.

  3. That the categories and definitions of social science are not, and cannot be, physical categories. As Hayek writes: “…no physical properties can enter into the explicit definition of any of these classes…”

These are some of the important insights conveyed by Hayek. Libertarian social thinkers are encouraged to read these two extremely important essays by Hayek.

The point has been raised that while Hayek provides key insights into the nature and foundation of praxeology, his intention in writing “Economics and Knowledge” was in fact to demonstrate to Mises the limitations of praxeology as the pure logic of individual choice.

But here, we have to be aware that praxeology, or the Pure Logic of Choice, is a research program that views social or ethical phenomena from a certain point of view. Praxeology has limitations. As a science of exact laws that attains exact laws through its formality, praxeology cannot instruct on the specific tangible aspects of social phenomena. Whether more people will move to Atlanta or to Chicago as the result of a particular economic policy, praxeology cannot say. This is a question having to do with the specific spatial and temporal location of things, and praxeology does not treat this aspect of things.

The categories of praxeology are those of “satisfaction” and “dissatisfaction,” (of the individual actor) and praxeology utilizes praxeological (not physical) categories by assuming that aforementioned economic policy is a datum “…given, known, to the person underconsideration.” “Only this subjective interpretation of the term “datum” ma[kes] those propositions necessary truths.”

Praxeology “transforms” so-called “objective” data into subjective data (data appearing for an assumed subject), and then uses formal analysis to demonstrate what the incontestable results must be…for that individual. The results of various social and ethical actions and policies, are brought under comprehension in terms of exact laws to the extent these phenomena can be conceived in terms of data given to an individual actor.

But it is not at all clear that this is understood by Hayek, by Rothbard, by Kirzner, or by any number of students of Mises who at some point or another abandoned or disavowed Mises’s views after having previously supported them.

If we interpret Hayek as making the point that the Pure Logic of Choice cannot be applied to the situation of the interaction of many individuals, this is accurate only to the extent that the interaction of many individuals, as an object or event of a specific kind, cannot be considered a datum "given, known, to the person under consideration." (not as objective fact, but as believed by him to exist)

But Hayek’s statement here is not accurate, by his own account of things, to the extent that such interactions of people can be conceived as data of the individual’s action. To the extent that such data can be conceived, then the Pure Logic of Choice applies…

Aside from the “interactions of individuals” as they “really are,” what about the “interactions of individuals” as individual A sees things ?

Has this conception of things been considered and rejected by Hayek? If so, where?

It is difficult to see how if things are not considered as they appear from the point of view of the individual subject (subjectivism), and if things are to be considered as they are objectively, that this does not require the introduction of the concepts of spatial and temporal location, essentially the founding concepts of physical science.

But Hayek has written, regarding the definitions and categories of social science:

“…no physical attributes can enter into the explicit definition of any of these classes..”

“The common attributes which the elements of any of these classes posses are not physical attributes but must be something else.”

“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.”

By Hayek’s own definitions in these articles, the Pure Logic of Choice (praxeology) deals with datum of the individual’s consciousness and is able to establish necessary truths by performing tautological transformations on data assumed to exist in/for the mind of the person concerned.

But if we want to explain more than this, if we want to explain the things as they “really are” in a “society of many individuals,” how are we to conceive this secondary realm, if not in terms of physical (spatial and temporal) concepts?-----if not in terms of the spatial and temporal relations of things?

And if we do need to use the concepts of spatial and temporal location, then how is this not the attribution of physicality to the objects concerned?

It is not clear that Hayek is aware of this problem if he is intending to imply that another method of social research must be appended to the Pure Logic of Choice for social science to be meaningful.

The question is, if we no longer conceive things as they appear from the point of view of the acting individual, how do we then conceive things non-physically? (In conceiving things physically we are no longer in the domain of social science as defined by Hayek.)

I believe Hayek is partially presenting his own lack of understanding of how the Pure Logic of Choice can be applied to various assumed social phenomena as an objective fact about the limitations of the applicability of the Pure Logic of Choice.

And I believe this is the same mistake made by Rothbard, when in The Ethics of Liberty he stated that praxeology was applicable in economics (market phenomena), but not in ethics.

Rothbard seems to have failed to recognize that there may be such things as ethical actions (actions of an ethical nature). From there he seems to have presented his lack of understanding how praxeology may be fruitfully applied to ethical phenomena, as a limitation of praxeology itself.

The pattern is the same with Kirzner. In The Economic Point of View, Kirzner does the same thing that Rothbard does in Man, Economy, and State. Under the influence of Mises’s philosophy, and as students of Mises, he produces a work in accord with the vision of praxeology as an exact science of human action, human action being understood broadly as all acts (purposeful activities) of the individual.

Then in later works and writings, this view of things is disavowed.

Kirzner gives an account of this in his essay “Human Action and Freedom.” He explains how in 1991, he has come to reject the view he had in1960 while writing under the influence of Mises.

He writes, among other things:

“There is nothing in this 1960 discussion [when he was essentially in agreement with Mises] which draws attention to the role of entrepreneurial discovery in generating the systematic results which economic science is able to explain.” (emphasis added)

As I understand Kirzner, the discovery aspect in his newer conception of economics (the idea of dynamic discovery, or the idea of market process) is something to be added to, or something beyond, the concept of human action as the purposefulness of the individual actor.

The apparent idea is that there is some process going on independently of the opinions, wants, desires, perceptions, etc…of the individual actor, and that therefore, if economics is to be realistic, and treat the real world as it really exists, it must go beyond the subjective mind-world of the individual actor, and study the actual market or dynamic processes themselves.

There are at least two problems with this conception of things:

First, and most importantly, it simply ignores or overlooks the possibility of treating any given process from the aspect of how that process appears to the individual concerned. As Kirzner wrote in 1960:

“This point of view [praxeology] 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.”

(The Economic Point of View, p.179) (emphasis added)

Kirzner, as Hayek and Rothbard, seems not to have considered a simple question:

Regarding any dynamic market or discovery process assumed, why can’t we approach such processes abstractly, not with respect to these process as objects, but with respect to the postulated attitudes of men towards them ?

I don’t believe Kirzner has seriously considered this question.

To bring this back to the original point, the question is the meaning of what Hayek wrote in the two essays cited.

What I am trying to show is that regardless of what Hayek’s intention was in writing them, he in fact laid down important insights and principles that could well have implications of which he was unaware.

It could be that he had within his grasp an understanding of important aspects of social science, but chose to take those insights in one direction rather than another, based on his understanding or misunderstanding of the implications of those aspects.

Regardless of whether Hayek intended to demonstrate the shortcoming of Mises’s conception of theoretical exact science (Praxeology, Pure Logic of Choice, Exact Science, etc…), the fact is he glimpsed and recorded important and essential aspects of of this conception. But he also likely overlooked how that very conception may be applied to the problems he was concerned with. He may have inadvertently demonstrated the validity of Mises’s approach while attempting to demonstrate its insufficiency. It is possible that Hayek’s “action” was contrary to purpose or not suited to his end.

The research program initiated by Menger and expanded and refined by Mises is independent of the ability of any particular Austrian economist to advance and apply that research program. When we are unable to further the a prioristic science of exact laws, then further research apparently must be conducted along empiricist-realist lines of thought. This seems to require the introduction of the concepts of spatial and temporal location and the introduction of what Menger calls “real types,” which in turn can only lead to the formulation of “empirical laws,” but never exact laws. The Hayekian and Kirznerian research programs in economics, and the Rothbardian program in ethics, to the extent they depart from the theoretical exact research program of Menger and Mises, become empirical-realistic disciplines and/or disciplines that no longer refer to the categories of human action, but instead to the categories of physical science.

As Menger wrote:

“The realistic-empirical orientation of theoretical research, as we saw, offers us in all realms of the world of phenomena results which are formally imperfect, however important and valuable they may be for human knowledge and practical life. They are theories which give us only a deficient understanding of the phenomena, only an uncertain prediction of them, and by no means an assured control of them. From the very beginning, too, the human mind has followed another orientation of theoretical research beside the one discussed above. It is different from the latter both in its aims and in its approaches to cognition.”

"Both the exact and the realistic orientation of theoretical research are therefore justified. Both are means for understanding, predicting, and controlling economic phenomena, and to these aims each of them contributes in its own way. "

“There is scarcely any need to remark that the nature and significance of the exact orientation of research is completely misunderstood in the modern literature on national economy.”

(Investigations Into the Method of the Social Sciences, Book 1, Chapter 4)

2

I think Giles was asking, essentially: aren’t the exact and realistic orientations just the two halves of the scientific method?

  1. Take observed data as assumptions and reason with “thought experiments” (often exact logic) to make a hypothesis (theory). Here the scientist is operating in a world of pure abstraction, reasoning only analytically - a priori with respect to the assumptions, essentially taking empirical results as givens, just like the axioms mathematicians (and praxeologists) work with.
  2. Test it empirically (against reality).

Perhaps the idea of praxeology is to take non-controversial assumptions (about human action) and see what can be logically deduced from them. To say, in effect, “Hey, how about less data gathering and more deducing from what we already know?” The issue Giles may be raising is the idea that “there are no non-controversial assumptions,” or none that aren’t trivial [this is not AJ’s position, by the way].

3

AJ:

I don’t see it that way.

Giles is denying the fruitfulness of a specific path of inquiry or research program that has come to be associated with Mises, but that goes back to Menger, and passes through the two Hayek essays referenced above.

In “Economics and Knowledge,” Hayek notes how the Pure Logic of Choice is able to attain exact laws because the two entities that are related by the exact law are two entities in the mind of the individual actor:

“…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.”

Here, Hayek is describing the method by which the Pure Logic of Choice (Mises’s praxeology, Menger’s theoretical exact science) arrives at exact laws: by taking the data of the individual’s action (for example, in Mises the actor’s judgment of value is taken as ultimately given), and relating that to another data of the individual’s action.

“What is relevant is not whether a person as such is or is not in equilibrium but which of his actions stand in equilibrium relationships to each other.”

“All propositions of equilibrium analysis,…are propositions about the relations between actions. Actions of a person can be said to be in equilibrium in so far as they can be understood as part of one plan. Only if this is the case, only if all these actions have been decided upon at one and the same moment, and in consideration of the same set of circumstances, have our statements about their interconnections, which we deduce from our assumptions about the knowledge and the preferences of the person, any application. It is important to remember that the so-called “data,” from which we set out in this sort of analysis, are…all facts given to the person in question, the things as they are known to (or believed by) him to exist, and not, strictly speaking, objective facts.”

“…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.”

Thus, Hayek is describing a theoretical “approach to cognition” whereby necessary truths (exact laws) are attained by tautological transformations done exclusively within the realm of the individual’s action or consciousness. The laws relate one entity of the individual’s action with another entity of the individual’s action.

This is the exact approach as it was being developed from Menger to Mises, and as outlined in these essays by Hayek.

Giles is arguing against this approach:

“As far as the observer, in the case the economist, goes, he must use his theory to explain social events and in doing so must make reference to the subjective beliefs of the actors. But, the point of economics is not some sort of applied epistemology but to explain social events, and if one’s theory is unable to do this it must be revised or rejected. As an normative statement, Mises’ methodology is undesirable, as a positive statement of how science occurs (even amongst Austrian economists) it is wildly inaccurate,…”

Here, Giles refers to the economist as an observer. Giles is saying that the economist must observe social events and see whether those events unfold according to his prediction. He says that economics is not some sort of applied epistemology.

But if you read Hayek’s account of the Pure Logic of Choice, which is the same thing as Mises’s praxeology, you will see that in fact it is a type of applied epistemology:

“For, as must be emphasized again, the reality the elucidation and interpretation of which is the task of praxeology is congeneric with the logical structure of the human mind.” (Ultimate Foundation, p.65)

In other words, the logical relations that provide the necessary truths or exact laws of praxeology, are logical mental relations that inhere in the acting subject. This is the strain of thought that begins in Menger with the law of marginal utility, and is picked up and developed by Mises, and is explained as the Pure Logic of Choice by Hayek.

Giles is rejecting that, in favor of a research program in which the economist is an observer of empirical or objective social facts. The economist predicts what the social facts will be, then observes social reality to see what the empirical evidence shows (what the objective social facts really are), and whether these social facts correspond with his predictions.

Regardless of the merits or shortcomings of what Giles is describing, he is rejecting the epistemological approach that strives for exact laws by means of a specific “approach to cognition,” in favor of a prediction-making conception of economics where theories are more like hypotheses that are verified or rejected based on what the empirical evidence shows.

In the conception Giles is describing, the subjective beliefs of individuals are one of the things “out there” in the economy interacting with all the other things in the economy such as institutional conditions, knowledge distribution, entrepreneurial discovery, etc… The actor’s subjective values are one of the things “out there” in the economy influencing the real empirical situation that the economist is trying to predict.

That is not the function that the subjective beliefs of the individual serves in the Pure Logic of Choice Hayek is describing.

Giles is arguing for a different research program entirely.

4

Reading Giles perhaps too charitably, it nevertheless seems he may merely mean that economics can’t just be praxeology, that it also needs theoretical verification at some level (presumably in checking the premises that are taken as a priori, or as a check to make sure the pure logical operations have been performed correctly).

I don’t know what he means by the final sentence in the quote, but in the prior sentence he says, “the point of economics is…” rather than “economics is only…” Do either you or Giles believe investigation must be limited to either the analytic/praxeological approach or the empirical one?

5

AJ:

I think the point is that to the extent that the empirical approach is adopted, then only empirical (i.e., non-necessary) regularities can be established and/or asserted, as a matter of principle.

Again, Menger:

"The scientific knowledge to which the above orientation of theoretical research, the empirical-realistic, can lead, merely in consideration of the methodological presuppositions of the latter, can only be of two kinds:

(a) real types, basic forms of real phenomena, within the typical image of which, however, a more or less broad scope is given for particularities (also for the development of the phenomena!), and

(b) empirical laws, theoretical knowledge, which makes us aware of the actual regularities (though they are by no means guaranteed to be without exception) in the succession and coexistence of real phenomena.

“…in the realm of economic phenomena…as far as the latter are brought into consideration in their “full empirical reality,” only their “real types” and “empirical laws” are attainable. Properly there can be no question of strict (exact) theoretical knowledge in general or of strict laws (of so-called “laws of nature”) in particular for them, under this presupposition.”

(Investigations Into the Method of the Social Sciences, Book 1, Chapter 4)

What Menger is arguing is that, to the extent that…the empirical approach is used, then only empirical laws can be obtained. He is not arguing that people should not study the empirical side of things. He is saying that doing so can only produce a certain kind of knowledge.

What I believe Giles is arguing or implying is that there is no such thing as exact laws of social phenomena. If this is the case, then only empirical laws (empirical regularities) are the subject matter of economics.

From this it follows that therefore, economics is has to do with who has the best predictive theories with respect to empirical regularities. Who has the best technology for predicting the actual concrete phenomena? Which theory more correctly predicts how many people will move to Atlanta, or what the actual price of corn will be? If only empirical regularities are the subject matter of economics, then the most suitable economic theory is the one that best predicts empirical regularities.

This implies a rejection of Menger’s theoretical exact science, Mises’s praxeology, and Hayeks’s Pure Logic of Choice.

That is how I interpret Giles’s “economics is not some sort of applied epistemology but to explain social events.”

In other words, economics is not theoretical exact science applied to social phenomena, economics is about explaining empirical regularities…

The choice is not between theoretical exact social science and empirical social science, the choice is between different approaches to empirical social science. That is the implication of Giles’s argument.

It’s the Methodenstreit all over again…

6

I’m going to post the usual note on Hayek, I think a lot of this has been said in a previous topic, but for those who missed it. Caldwell argues that Hayek had two teachers, Wieser and Mises. Obviously in this discussion it is the latter that is important, and as has been documented by more than one biographer he had a very low tolerance for disagreement, cutting students such as Harbeler and Machlup off for intellectual disputes. Given that Hayek was exceedingly fond of Mises, is it too much of a stretch to argue that perhaps he adopted some of Mises terminology and refrained from harsher criticisms (at least until Mises was dead) for personal reasons? Of course, I don’t disagree that there are other factors including his later relationship with Karl Popper and Bill Bartley, but I think that it’s fair to say Mises’ temperament was not insignificant in the tameness of Hayek’s disagreements.

One more small note, Hayek states that we know what it means to act from knowledge of the inside of our mind, or in other words, experience. And yet, a quick check on Wikipedia (not the most rigorous of sources, but it will suffice for now) defines a priori as " known independently of experience". Perhaps I’m missing something, but, given this, I don’t see the utility in using the term a priori. This, by the way, is part of the reason that I think Mises was wrong to dichotomize theory and history, without a theoretical understanding of human action and all its implications, one can’t analyse history, but without a historical understanding of action, theory is meaningless. I understand you took issue with this in your post, but I think that any attempt to deduce economic theory without looking outside the window (as opposed to inside the mind) is going to yield, at best, a very barren economic theory and at worst absolutely no progress.

Now, on to your post Adam. As I understand it what you’re saying is that the social scientist is himself an acting individual and the information that he works with is not objective information, but instead his own subjective interpretation of this and that everything must be seen in terms of the subjective beliefs of individual actors. Now, so far we’re in agreement. Correct me if I’m wrong here and I’ll go back and try again.

You write “Giles is rejecting that, in favor of a research program in which the economist is an observer of empirical or objective social facts. The economist predicts what the social facts will be, then observes social reality to see what the empirical evidence shows (what the objective social facts really are), and whether these social facts correspond with his predictions.”, which I think is correct enough description. Don’t get me wrong, I don’t believe that the social scientist is an objective observer of events, but the process of weeding out incorrect theories that characterizes science will, to the greatest extent possible, remove the subjective element of the individual observes. Another point that needs to be clarified is that whilst the scientist should be an observer of empirical of social facts, these facts need to include the subjective information and beliefs of the individual actors within the economy.

Part of my problem with the a priori approach is that it is purely tautological. Once you’ve picked your starting points, you’ve picked your conclusions. But obviously there can be incorrect or incomplete starting points, perhaps these tautological transformations can yield some conclusions concerning the real world, but I’m not sure how useful it is to restrict oneself to this methodological straight jacket.

To give you an example, look at the Kirznerian entrepreneur. There is very little that a priorism itself can about the entrepreneur. Obviously once we define the entrepreneur in certain ways we can say that he brings the economy towards equilibrium, but all of this is very trivial. It isn’t until we start doing empirical work in the use of knowledge or interdisciplinary work in psychology that we can actually say anything meaningful about the real world. And that is exacly what economics is about, describing certain aspects of the real world. Once you shield your theory from empirical criticism it is far less likely that the weaker elements will be weeded out, no matter how good the Austrian approach is for removing logical inconsistancies.

All this said Adam, I’m having trouble locating your exact criticism, so if you could be a little clearer.

7

I believe that you are misrepresenting Mises.

8

Hi Giles

My point is that you are advocating an empirical approach to economic phenomena, as opposed to a formal-logical approach. As I understand it, you are essentially repeating in a different form, arguments like those of the German historical school as against the Austrian theoretical school…in the sense that what you argue for is a rejection of what Menger argues for in Book 1, Chapters 1 to 5 in Investigations Into the Method of the Social Sciences:

“Testing the exact theory of economy by the full empirical method is simply a methodological absurdity, a failure to recognize the bases and presuppositions of exact research.” (ch. 5)

You are saying that the formal-logical approach is un-scientific or meaningless, and only the empirical approach is scientific and meaningful. And you are maintaining that there is no universally valid logic of human action, but that economics consists in hypothesis and testing, hypothesis and testing, etc…

Both Menger and Mises practiced something different from what you are advocating. Also, Hayek, in some of his earlier writings, made important insights and contributions to this same approach. Schutz does this kind of investigation in the first 100 pages of The Phenomenology of the Social World, and Searle does the same in various sections of Minds, Brains, and Science. Essentially, it is as you wrote, a kind of applied epistemology. It is the social-scientific version of mathematics. It isn’t based on field studies or statistics. It is a science that investigates the logical form of action and of consciousness–and thus, necessarily of social phenomena also–not from a physical-empirical standpoint, but from an analytical standpoint.

It is the same idea explained by Kirzner in The Economic Point of View, and Robbins in The Nature & Significance of Economic Science. Also two important essays written when this kind of analysis was more widespread explain this kind of science:

“The Philosophical Basis of Economics: A Word to the Sociologists” (Sidney Sherwood), and

“Croce and the Nature of Economic Science” (Giorio Tagliacozzo)

The main point is not that you, Giles, should practice this or that kind of social science. My point is that what you are advocating is what Menger is arguing against in Investigations Into the Method of the Social Sciences, and what Mises is arguing against in Human Action. You are also advocating an approach that would depart from Hayek’s insights in “The Facts of The Social Sciences.”

You are rejecting the core insights of Austrian school social science which spring from analysis of the universal form of subjective experience. Instead, you advocate conceiving the “subjective beliefs” of actors as material entities spatially and temporally related to other objects, inside buildings and driving down highways. You propose not to analyze action, but to “position” it.

One approach is a formal analysis of subjective experience which renders the universal categories of human experience.

One approach is the conception of a “subjective belief” as a spatial and temporal entity, out there among other entities “in the economy,” and thus subject to the laws of physics (the laws of spatial and temporal relations), and thus, subject to hypothesis and testing, empirical studies, etc…

My point is simply that you reject the core of Austrian analysis.

9

“Close examination, however, teaches us that the above idea is not
strictly feasible. Phenomena in all their empirical reality are, according
to experience, repeated in certain empirical forms. But this is never with
perfect strictness, for scarcely ever do two concrete phenomena, let alone
a larger group of them, exhibit a thorough agreement. There are no strict
types in “empirical reality,” i.e., when the phenomena are under consideration
in the totality and the whole complexity of their nature. This
might be the case if each individual concrete phenomenon were set up
as a particular type. By this the purpose and usefulness of theoretical
research would be completely invalidated. The desire to determine strict
categories of empirical forms comprising “all empirical realities” (according
to their full content) is therefore an unattainable goal of theoretical
research.”

“So also with respect to the second problem of theoretical research: the
determination of typical relationships, laws of phenomena. If the world
of phenomena is considered in a strictly realistic way, then laws of the
latter signify merely the actual regularities, determined by way of observation,
in the succession and in the coexistence of real phenomena which
belong to certain empirical forms. A “law” obtained from the above point
of view can in truth only state that in reality, regularly or without exception,
phenomena belonging to the empirical form C have followed the
concrete phenomena belonging to the empirical forms A and B, or that
they were observed coexistent with them. The conclusion that the phenomenon
C follows the phenomena A and B in general (that is, in all
cases, even those not observed!), or that the phenomena under discussion
here are in general coexistent, transcends experience, the point of view of
strict empiricism. From the standpoint of the above manner of consideration
it is not strictly warranted. Aristotle recognized this correctly when
he denied the strictly scientific character of induction. But even the inductive
method perfected essentially by Bacon was only able to increase
the guarantees of the absoluteness of the laws gained in the above way
(empirical induction); it was never able to offer absolute guarantee of it.
Strict (exact) laws of phenomena can never be the result of the realistic
school of thought in theoretical research even if this were the most perfect
conceivable and its fundamental observation the most comprehensive and
most critical.”

"The scientific knowledge to which the above orientation of theoretical
research, the empirical-realistic, can lead, merely in consideration of the
methodological presuppositions of the latter, can only be of two kinds:

(a) real types, basic forms of real phenomena, within the typical image
of which, however, a more or less broad scope is given for particularities
(also for the development of the phenomena!), and

(b) empirical laws, theoretical knowledge, which make us aware of the
actual regularities (though they are by no means guaranteed to be without
exception) in the succession and coexistence of real phenomena."

“If we derive from what has been said its practical application for theo-
retical research in the realm of economic phenomena, we arrive at the
result that, as far as the latter are brought into consideration in their “full
empirical reality,” only their “real types” and “empirical laws” are attainable.
Properly there can be no question of strict (exact) theoretical
knowledge in general or of strict laws (of so-called “laws of nature”) in
particular for them, under this presupposition.”

“But what needs no less to be emphasized is the circumstance that with
this presupposition the same thing also holds true of the results of theoretical
research in all the remaining realms of the world of phenomena.
For even natural phenomena in their “empirical reality” offer us neither
strict types nor even strictly typical relationships. Real gold, real oxygen
and hydrogen, real water-not to mention at all the complicated phenomena
of the inorganic or even of the organic world-are in their full
empirical reality neither of strictly typical nature, nor, given the above
manner of looking at them, can exact laws even be observed concerning
them.”

“Not only in the realm of the ethical world, and of economy, but also
in that of natural phenomena, the realistic orientation of theoretical research
can lead only to “real types” and “empirical laws.” And in the
above point of view, at any rate, no essential difference between the ethical
and the natural sciences exists, but at most only one of degree. The realistic
orientation of theoretical research excludes in principle, rather, in all
realms of the world of phenomena the possibility of arriving at strict
(exact) theoretical knowledge.”

“If there were only the one, just now characterized orientation of theoretical
research, or if it were the only justified one, as the economists of
the “historical orientation” in fact seem to believe, then the possibility of
or the justification for any research aimed at exact theories of phenomena
would a priori be out of the question. Not only in the realm of ethical
phenomena in general and of economy in particular, but also in all other
realms of the world of phenomena any success would a priori be denied
to the above-mentioned effort.”

“It scarcely needs to be stated that the above presupposition is invalid
in the realm of natural phenomena. The task of the following investigations
will be to show that the situation is the same in the realm of human
phenomena in general and of economy in particular. It will also be to
show that the opinion of our historical economists, that the realistic-empirical
orientation of theoretical research is the only justified one in
the field of economy, accordingly involves one-sidedness and its inevitable
consequences.”

“The realistic-empirical orientation of theoretical research, as we saw,
offers us in all realms of the world of phenomena results which are formally
imperfect, however important and valuable they may be for human
knowledge and practical life. They are theories which give us only a
deficient understanding of the phenomena, only an uncertain prediction
of them, and by no means an assured control of them. From the very
beginning, too, the human mind has followed another orientation of theoretical
research beside the one discussed above. It is different from the
latter both in its aims and in its approaches to cognition.”

"The aim of this orientation, which in the future we will call the exact
one, an aim which research pursues in the same way in all realms of the
world of phenomena, is the determination of strict laws of phenomena,
of regularities in the succession of phenomena which do not present themselves
to us as absolute, but which in respect to the approaches to cognition
by which we attain to them simply bear within themselves the guarantee
of absoluteness. It is the determination of laws of phenomena which
commonly are called “laws of nature,” but more correctly should be
designated by the expression “exact laws.”

“Exact science, accordingly,
does not examine the regularities in the succession, etc., of real phenomena
either. It examines, rather, how more complicated phenomena
develop from the simplest, in part even unempirical elements of the real
world in their (likewise unempirical) isolation from all other influences,
with constant consideration of exact (likewise ideal!) measure. It does
this without taking into account whether those simplest elements, or complications
thereof, are actually to be observed in reality uninfluenced by
human art; indeed, without considering whether these elements could
be found at all in their complete purity. In this case it is also aware that
a completely exact measure is not possible in reality. Science starts out,
however, with these assumptions, since it would never be able otherwise
to reach the goal of exact research, the determination of strict laws. On
the other hand, with the assumption of strictly typical elements, of their
exact measure, and of their complete isolation from all other causative
factors, it does to be sure, and indeed on the basis of the rules of cognition
characterized by us above, arrive at laws of phenomena which are
not only absolute, but according to our laws of thinking simply cannot be
thought of in any other way but as absolute. That is, it arrives at exact
laws, the so-called “laws of nature” of phenomena.”

“Whether the individual constitutive factors of human phenomena,
thought of in their isolation, are real; whether these can in reality be
measured exactly; whether those complications, in the case of which (according
to the nature of exact research) an abstraction must be made
from the effect of a variety of factors of real human life, actually put in
an appearance-all this is no less irrelevant for the exact orientation of
theoretical research in the realm of social phenomena than in the realm
of nature. Only complete lack of understanding of the exact orientation
in general can apply to the results of the latter the standard of the postulates
of the empirical-realistic orientation of theoretical research.”

“Among economists the opinion often prevails that the empirical laws,
“because they are based on experience,” offer better guarantees of truth
than those results of exact research which are obtained, as is assumed,
only deductively from a priori axioms. Accordingly the latter would have
to be modified and corrected by the former in case of a contradiction
between the two kinds of scientific knowledge. Exact research appears
thus as methodologically more subordinate, and realism, on the contrary,
as the better guaranteed road to cognition. This is a view which, as scarcely
needs to be noted, touches in its most sensitive spot the position of exact
research in the field of political economy. Indeed, it actually implies a
negation of its independent value.”

“The error at the basis of this view is caused by the failure to recognize
the nature of the exact orientation of theoretical research, of its
relationship to the realistic, and by applying the points of view of the
latter to the former.”

“Nothing is so certain as that the results of the exact orientation of
theoretical research appear insufficient and unempirical in the field of
economy just as in all the other realms of the world of phenomena, when
measured by the standard of realism. This is, however, self-evident, since
the results of exact research, and indeed in all realms of the world of
phenomena, are true only with certain presuppositions, with presuppositions
which in reality do not always apply. Testing the exact theory of
economy by the full empirical method is simply a methodological absurdity,
a failure to recognize the bases and presuppositions of exact research.”

“At the same time it is a failure to recognize the particular aims which the
exact sciences serve. To want to test the pure theory of economy by
experience in its full reality is a process analogous to that of the mathematician
who wants to correct the principles of geometry by measuring
real objects, without reflecting that the latter are indeed not identical with
the magnitudes which pure geometry presumes or that every measurement
of necessity implies elements of inexactitude. Realism in theoretical research
is not something higher than exact orientation, but something
different.”

Carl Menger, Investigations into the Method of the Social Sciences, Book 1, Chapers 4 and 5

10

Adam,

I think it’s a little disingenuous to claim that I’m simply rehashing the arguments of the historical school, as if to imply that I’m simply against theory. That really isn’t true, and as I’ve repeated, I fully agree with the argument put forth by Weber and Mises against the historical that one needs theory in order to do history, any piece of research that pretends to be unearthing objective historical facts untainted by personal beliefs is lying to itself and to its audience. But I just disagree that good research into the working of the world requires that the two be dichotomised. I’m in favour of methodological pluralism, whereby numerous approaches to economics can compete against one another and those that are the least successful are weeded out through criticism, both empirical and logical.

Now, you write " It is a science that investigates the logical form of action and of consciousness–and thus, necessarily of social phenomena also–not from a physical-empirical standpoint, but from an analytical standpoint.". Let me be quite clear about something, if it turns out that the type of theorizing you advocate really does the best job of describing the world out there then by all means, proceed as such. But, first of all this sort of reasoning concerning consciousness is rather limited and does describe the type of phenomena most people would consider economic. Second, and most importantly, how can we know, without some sort of test, whether the a priori reasoning you’ve described does fit reality?

We need this check against reality because humans are infallible and there exists the possibility of two theories, both a priori that are internally consistent and nonetheless contradictory.

Let me quote Fritz Machlup

One last point that’s not been mentioned. In his biography Caldwell notes that Hayek occasionally went against methodological individualism and used theories such as group selection. My point in mentioning this is that I think one needs to understand that we can use different tools for understanding different phenomena, Hayek certainly understood this and used methodological individualism as the basis of most of his work. However, when it came to cultural phenomena and understanding how culture is passed down he had to drop one tool and pick up another one.

nir, Mises reason for cutting off Machlup isn’t really relevant. All that matters is Hayek’s perception of it.

11

Giles:

I’ll stand behind my previous statement which I qualified. My main point is that you reject the primary theoretical program advocated by Menger and Mises in favor of a program that includes empirical tests. That is simply an outright rejection of Mengerian exact science and Misesian praxeology. Both thinkers clearly stated that it was a misunderstanding of theoretical exact science to believe that empirical testing could either confirm or contradict exact social science. You are saying Menger is wrong. In that sense you are advocating the position of the historical school…not in terms of their positive program…but in terms of rejecting the essential thesis of theoretical exact science applied to social phenomena. This is the very basis of Austrian school social science. It doesn’t matter whether you reject or accept the particular social theory advocated by Menger’s theoretical adversaries or contemporaries. You are essentially saying that you have better reasons than the historical school did for rejecting Menger’s thesis.

My second point is that you reject theoretical exact science based on a lack of understanding of it. The first five chapters of Menger’s Investigations are virtually written for you and anyone else who is arguing against the theoretical exact approach.

Theoretical exact science does not make the kind of predictions you imply tries to make. Theoretical exact science does not make predictions about the time or location a concrete will appear. When you try to subject the exact method to this standard, you show that you do not understand it.

The exact or praxeological approach doesn’t predict the appearance of concretes, it demonstrates rather, for any concrete considered as the result of human purpose, what means must necessarily have brought it about, or, what means cannot possibly have brought it about. The concrete appearance of something is supposed, not predicted. And the concrete event or object is analyzed with respect to whether a particular means must necessarily or cannot possibly have brought about this event or object.

If we suppose a person is temporarily suspended in mid air, exact knowledge tells us that this cannot be the result of that person placing his hands under his feet and lifting up.

If we suppose a person has arrived at a particular location by walking, exact knowledge tells us that this must necessarily be the result of that person walking away from another location.

Exact social science doesn’t try to “predict” whether a person will be found temporarily suspended in mid air. Nor does it try to predict whether or not a person will arrive at any particular location. These are empirical questions: questions of the time and location of the appearance of concrete phenomena.

During the Super Bowl, maybe more people will be suspended in mid air, due to their jumping up when their team scores. Considering this, one could try to formulate an empirical law; an inexact generalization that a certain number of people will be suspended in air (event 1) following an event such as a team scoring (event 2). This can then be empirically tested by first observing the team scoring, and then observing the number of people temporarily suspended in air.

Exact science doesn’t deal with such empirical questions. That is Menger’s and Mises’s point.

But you are appraising the exact method by an empirical standard:

“…it [the exact method] will never allow you to predict a particular price or a particular quantity produced or a particular way of acting…”

You are simply saying that exact science cannot provide the information that empirical science provides.

There is no test for whether a person can lift himself off the ground by means of placing his hands under his feet and pulling up. And there is no test for determining whether every time a person arrives at a location, it had to have been by means of leaving a different location. These kinds of things cannot be tested.

Exact science then applies this kind of reasoning to other phenomena such as market phenomena. It shows what various means must necessarily bring about, or cannot possibly bring about. But the law of marginal utility which forms the basis of much of the Austrian analysis of market phenomena cannot be tested any more so than the examples above can be tested. The law is a “mathematic” or “formal logic” applied to given suppositions about human purpose. Such a mathematic or logic cannot be empirically tested.

Again, to say…“yes, but such a procedure cannot predict the testable appearance of concrete phenomena” is to misunderstand the exact approach.

Some incidental points:

The law of marginal utility, properly conceived, does not refer to prices. The law of marginal utility is a law about a given relation inherent in human purpose or intentionality, between the appearance of a concrete, and a necessary attitude or opinion related to that concrete. The relation is always between supply and value (concrete + attitude), and it always refers to individual action.

The law does not relate two concretes. That is what the empirical or natural sciences try to do.

When we talk about students of Mises who earlier in their careers produced works consistent with the Mengerian and Misesian theoretical vision, but who later abandoned this approach to various degrees and for various reasons, I think the following distinction is important.

If a particular scholar cannot see how the approach he is working with can be extended, this is not the same thing as the conclusion this scholar may draw, that therefore, the approach cannot be meaningfully extended.

This is a pattern I see with students of Mises (Kirzner, Rothbard, etc.), and I will argue that it applies to Hayek as well.

There is a difference between the proposition that one cannot see how the formal methods advocated by Menger and Mises can be meaningfully applied to a given phenomenon, and the proposition that the same formal methods cannot be meaningfully applied to a given phenomenon.

In my mind, Hayek is clearly in error with respect to the conclusions he draws about formal social science.

If we suppose that a phenomenon (morals, private property, family, language, etc.) was brought about not by the design of any individual or group, but rather as an unintended consequence of their self-interested actions, this does not mean that such phenomena are not explainable in terms of laws of human action. I don’t see where Hayek has ruled out that the traditional endowment of morals which we possess—granted that it is not the design of any person or group—is not conceivable in terms of exact laws of human purpose.

But where he discusses this issue, he gives the impression that he has refuted Mises.

(See: Hayek on Hayek, pages 72-73)

To refute Mises, one would have to assert and demonstrate that a given human or social phenomenon is not subject to universally valid laws of human action.

I don’t think any of Mises’s former students have even attempted this. The laws of action which form the basis of Mengerian and Misesian exact science are perfectly consistent with the idea of people acting unaware of such laws, but subject to them, and thus bringing about social institutions unintentionally.

Where is the proof, or even argument, that the phenomena Hayek has in mind are inconceivable in terms of laws of human action?

That Hayek cannot see how formal exact science can conceive morals or private property, and that Rothbard cannot see how praxeology can apply to ethical phenomena, does not necessarily mean that exact science cannot be fruitfully applied to these social realms. It means rather that they could not see how to extend exact science, the Pure Logic of Choice, praxeology, etc., to realms of human action outside of the market.

At that point, it was not necessary for them to declare that doing so is impossible or misguided. They could have said simply that they didn’t see how it could be done. Then they could have gone about their alternate approaches having done all they could do in the area of formal social science. Unfortunately, this seems not to have happened. Instead, they seemed to have felt the need to disavow Mises’s approach once they had reached their limitations in understanding it. This is what Hayek, Kirzner, Rothbard, and apparently Machlup have in common.

Simply stated, neither the failure to understand, nor the inability to extend it, constitute a refutation of formal-logical social science.

12

If praxeology is so purely logical why have I never seen its first (or whatever) order language defined, its axioms spelled out and the theorems deduced? No scientist or economist is against logical deduction, somehow praxeology is still marginal.

13

Giles, you seem to be saying something similar to this video. Correct?

14

I haven’t read where Hayek wrote down his perception of it. care to share?

15

Adam,

No doubt to some extent we’re talking past each other, and as much as I hesitate to say this, I really think you’re putting words in my mouth. To give you just one example, you write “Theoretical exact science does not make predictions about the time or location a concrete will appear. When you try to subject the exact method to this standard, you show that you do not understand it.” I believe that’s a rather poor characterization of my position, I don’t think for a second that economists should try to make predictions of that sort, and I think the failures of such an approach have been well documented. To use Hayek’s phrase, I think that in sciences dealing with complex systems, the scientist can only hope for an explanation of the principle.

Likewise, I think it’s a little unfair to lump everybody who disagrees with Menger and Mises in with the Historical school. As my understanding goes the Historical approach was to eschew theory entirely, in favour of an approach that attempted to collect large amounts of data and “objectively” enumerate economic laws.

Now, you write

Let me use this as an example. You say that the law of marginal utility forms the basis of much of the Austrian approach and as a result of the law of marginal utility, the demand curve must always slope downwards, But in the real world we see demand curves that slope upwards (giffen goods, expensive art), granted, it’s not a common occurance but it happens. Now, I understand that Austrians point to the definition of a good and the subjectivism entailed and logically this is acceptable, but I think that at the end of the day its comes up as very convoluted and somewhat lacking in explanatory power.

Now, let me make once more the criticism that I’ve been attempting to make all along, first posing it in question form. If you have two theories logically deduced from first principles, that yield different conclusions, how does one choose between them? This may sound trivial, but as Caldwell points out, in their book Rational Economic Man Hollis & Nell, do just that. I forget their exact starting point, but essentially the result is an economic theory that is Sraffian.

Two last points, first, you say that Mises numerous followers (I wouldn’t include Rothbard in the list, by the way) initially followed his approach only to eschew it as a result of their lack of understanding. Could it not simply be that they realised the approach was flawed?

My second point is an illustration of this. You’re right that Hayek did eschew it, and numerous Austrians have since. Even if we assume that the approach is valid, it is still extremely restrictive. There have been numerous advances in behavioural economics, experimental economics in the like that are empirical and could never have been achieved by praxeology. How would you suppose that these incorporated into your approach given that they help explain the empirical world. I can think of other examples such as the psychology used in Kirzner’s theory of the entrepreneur and group selection used by Hayek. I suppose it all comes down to whether or not one considers the task of economics as helping us understand the real world.

nir, I’m just going on Caldwell’s intepretation as presented in his biography of Hayek.

AJ, not really, my criticism is a bit more specific than that.

16

I wonder how Caldwell puts it, and whether it is sourced… I don’t plan on buying the book though. oh well.

17

Hi Giles

I thought your argument against Menger and Mises was that since their method was deductive in nature, it was shielded from empirical testing, and thus unscientific in some sense. My point was that an empirical test as I understand it would be a prediction about the time and location of an event coupled with an observation to see whether the event actually happens at the time and place specified. But you seem to be saying this is not the kind of testing you mean. If the economic theories of the type you advocate are not testable by this kind of prediction and observation, what kind of tests are they subjected to which can falsify them?

What you write about the historical school above I believe illustrates the problem. Your thesis is to reject the “exact” conception of regularity as unscientific or meaningless. The exact conception of regularity is characterized by Menger as:

“regularities in the succession of phenomena which do not present themselves to us as absolute, but which in respect to the approaches to cognition by which we attain to them simply bear within themselves the guarantee of absoluteness.” (Investigations, Book 1, ch.4)

You write that the Historical school eschews theory, but yet attempts to objectively enumerate economic laws. But if this is the case, those laws are a type of theory. Their epistemological status may be in dispute, but by your own account, the Historical school tries to enumerate economic laws, i.e., regularities in social phenomena. This is what Menger is addressing in the early chapters of Investigations.

We agree that both of theories are addressing regularities in social phenomena, and you are saying you reject both approaches, apparently in favor of an alternative approach. The approach you advocate is not one that makes empirical predictions as to the time and place of concrete occurrences and is testable on this basis, and it is not one that arrives at purely logical propositions about the necessity entailed in various means of individual action (e.g., the examples of lifting and walking I referred to above)

Can you explain the exact nature of the principle of regularity you are advocating that is not an empirical prediction testable by observing whether an event takes place at a specified time and place, and, is not a logical statement about what a given means necessarily entails ?

“You say that the law of marginal utility forms the basis of much of the Austrian approach and as a result of the law of marginal utility, the demand curve must always slope downwards.”

Giles, I wrote nothing remotely like that.

“Mises’ numerous followers… initially followed his approach only to eschew it as a result of their lack of understanding. Could it not simply be that they realised the approach was flawed?”

My argument is that they mistakenly believed it was flawed.

Here is what I believe is Hayek’s mistake:

He writes in “The Facts of the Social Sciences”:

“…in discussing what we regard as other people’s conscious actions, we invariably interpret their action on the analogy of our own mind: that is, that we group their actions, and the objects of their actions, into classes or categories which we know solely from the knowledge of our own mind.”

“We thus always supplement what we actually see of another person’s action by projecting into that other person a system of classification of objects which we know, not from observing other people, but because it is in terms of these classes that we think ourselves.”

“…we can derive from the knowledge of our own mind in an “a priori” or “deductive” or “analytic” fashion, an (at least in principle) exhaustive classification of all the possible forms of intelligible behavior.”

“If we can understand only what is similar to our own mind, it necessarily follows that we must be able to find all that we can understand in our own mind.”

As I wrote previously, if what Hayek describes is accurate with respect to how individual A regards the actions of individual B, why isn’t it accurate with regard to how individual A regards the interactions of people B and C? And why isn’t it accurate with regard to how individual A regards market processes, or morality, or the family, etc.?

I think Hayek failed to realize that the principle he was enunciating, that the individual interprets social phenomena “on the analogy of [his] own mind”, applies not only to A’s observation of B alone, but in principle to any social phenomena A observes, and this includes the interactions between B and C, as well as all other social phenomena.

Or, if this is not the case, what principle does Hayek put forth to distinguish between social phenomena that we interpret on the analogy of our own mind, and those that we don’t?

So this is why I believe influential students of Mises failed to realize the extent to which methodological individualism could in principle be extended.

They thought that praxeology or The Pure Logic of Choice was more of a methodological preamble and jumping off point for doing empirical type theorizing. They didn’t realize the extent to which the exact approach could be extended. They simply missed it.

“There have been numerous advances in behavioural economics, experimental economics in the like that are empirical and could never have been achieved by praxeology. How would you suppose that these incorporated into your approach given that they help explain the empirical world.”

As I understand it, and as Menger emphasized in the passages I quoted previously, the exact approach is not a substitute for the empirical approach.

“Realism in theoretical research is not something higher than exact orientation, but something different.” (Bk.1, ch.5)

He is basically addressing you here Giles, since you are implying that the exact approach is inferior to the empirical/realistic approach.

The primary point is that the empirical approach can only comprehend empirical regularities. This approach can only state what might happen, not what must necessarily happen. Exact science is concerned with necessary relations.

“If you have two theories logically deduced from first principles, that yield different conclusions, how does one choose between them?”

Case #1:

3 x 8 = 2 x 12 = 24

3 x 8 = 2 x 12 = 23

In this case I suppose I would choose the first one ?

Case #2:

3 x 8 = 2 x 12 = 24

If B is greater than A, and C is greater than B, then C is greater than A

In this case I suppose I would try to choose the one that most accurately applied to the situation I was faced with.

May I ask you, if you have two theories logically deduced from first principles, that yield different conclusions, how would you choose between them?"

“I suppose it all comes down to whether or not one considers the task of economics as helping us understand the real world.”

I’m confident that both Menger and Mises would reply something to the effect that pure mathematics helps us understand the real world.

“To want to test the pure theory of economy by experience in its full reality is a process analogous to that of the mathematician who wants to correct the principles of geometry by measuring real objects…” (Investigations, Bk.1, ch.5)

“All geometrical theorems are already implied in the axioms. The concept of a rectangular triangle already implies the theorem of Pythagoras. This theorem is a tautology, its deduction results in an analytic judgment. Nonetheless nobody would contend that geometry in general and the theorem of Pythagoras in particular do not enlarge our knowledge. Cognition from purely deductive reasoning is also creative and opens for our mind access to previously barred spheres. The significant task of aprioristic reasoning is on the one hand to bring into relief all that is implied in the categories, concepts, and premises and, on the other hand, to show what they do not imply. It is its vocation to render manifest and obvious what was hidden and unknown before.” (Epistemological Problems)

18

At least one of those was heavily debated and contested, later shown to be conditional, rendering the theorem an approximation.

19

I just wanted to chime in regard to the concept of marginal utility.

Giles, when you make a connection between marginal utility and a downward sloping demand curve you are putting forth only one interpretation. A lot of times marginal utility is used to make overreaching assumptions; However, Adam is actually one of the people that has taken the time to bring the idea back to its conceptual roots. So, I would encourage you to investigate further.

Consider the following excerpt from some of Adam’s previous writings on the subject:

“In its most generalized form…the fundamental law of value and supply, commonly known as the law of marginal utility or the law of decreasing marginal utility…asserts a necessary connection between value and supply.”

“To the acting individual, only one event or phenomenon presents originally. So for example, an individual obtains something, or alternatively, he tries to obtain it. The fact that there is an inescapable copresent entailment to obtaining something, or alternatively, trying to obtain something, is shown by analysis. But in empirical reality, an individual experiences the necessary entailment as another, separate presentment in the temporal order, and not as something necessarily connected to the originally presenting event. Thus, people experience the general (but not exact or absolute) phenomenon that they often value something less after having gotten possession of it. Or conversely, they notice how often (but not always), that the less something is available, the more they tend to value it…

…if the law of value is interpreted as stating that an increase in the overall supply of some good must lead to a decrease in its price (written or asking price), then the law is interpreted as stating that event B must follow event A temporally, something we claim violates Hume’s Law of nonnecessity between events.”

So I think that the interpretation of marginal utility you are talking about is someone else’s, and certainly not Adam’s interpretation being one that is familiar with his work.