The first and most fundamental tenet of positivism is this: Knowledge
regarding reality, or empirical knowledge, must be verifiable or
356 The Economics and Ethics of Private Property
at least falsifiable by experience; that whatever is known by experience
could have been otherwise, or, put differently, that nothing about
reality can be known to be true a priori; that all a priori true propositions
are analytical statements which have no factual content whatsoever
but are true by convention, representing merely tautological
information about the use of symbols and their transformation rules;
that all statements are either empirical or analytical, but never both;
and hence, that normative statements, because they are neither
empirical nor analytical, cannot legitimately contain any claim to
truth, but must be regarded as mere expressions of emotions, saying,
in effect, no more than “wow” or “grrr.”15
The second tenet of positivism formulates the extension or rather
the application of the first one to the problem of scientific explanation.
According to positivism, to explain a real phenomenon is to formulate
a statement of either the type “if A, then B” or, should the
variables allow quantitative measurement, “if an increase (or
decrease) in A, then an increase (or decrease) in B.” As a statement
referring to reality (with A and B being real phenomena, that is), its
validity can never be established with certainty by examining the
proposition alone or any other proposition from which the one in
question could in turn be logically deduced, but will always remain
hypothetical and dependent on the outcome of future experiences
which cannot be known in advance. Should experience confirm a
hypothetical explanation, i.e., should one observe an instance where
B indeed followed A, as predicted, this would not prove that the
hypothesis is true, since A and B are general, abstract terms (“universals,
as opposed to proper names”) which refer to phenomena or
events of which there are (or, at least might, in principle be) an indefinite
number of instances, and hence later experiences could still possibly
falsify it. And if an experience falsified a hypothesis, i.e., if one
observed an instance of A that was not followed by B, this would not
be decisive either, as it would still be possible that the hypothetically
related phenomena were indeed connected and that some other
Austrian Rationalism in the Age of the Decline of Positivism 357
15See in particular Alfred J. Ayer, Language, Truth, and Logic (New York:
Dover, 1946).
previously neglected and uncontrolled circumstance or variable had
simply prevented the hypothesized relationship from being actually
observed. A falsification would only prove that the particular hypothesis
under investigation was not completely correct as it stood and
needed some refinement, some specification of additional variables
which one would have to control in order to be able to observe the
hypothesized relationship between A and B. However, a falsification
would never prove once and for all that a relationship between some
given phenomena did not exist.16
Finally, positivism claims that these two related tenets apply universally,
to all fields of knowledge (the thesis of “the unity of science”):
No a priori knowledge of nature nor of the social reality of
human actions and knowledge exists; and the structure of scientific
explanations is the same regardless of the subject matter.17
Assuming for the moment this doctrine to be correct, it is easy to
recognize its relativistic implications. Ethics is not a cognitive discipline.
Any normative statement is just as well-, or rather, ill-founded
as any other one. But then, what is wrong with everyone trying to
impose on others whatever one wishes? Surely nothing. Everything is
allowed. Ethics is reduced to the question “what can I get away
with?” What better message could there be for those in power: for
the cannibal king, for the slave owner, or for the holders of government
office! It is precisely what they want to hear: might is and makes
right.
Similarly, they must be thrilled about the message of positivism as
regards the positive sciences. In the natural sciences, the positivist
doctrine is relatively harmless. Disciplines such as logic and protophysics,
whose propositions are generally considered a priori true
358 The Economics and Ethics of Private Property
16See Karl R. Popper, The Logic of Scientific Discovery (New York: Basic
Books, 1959); idem, Conjectures and Refutations (London: Routledge and Kegan
Paul, 1969); Carl G. Hempel, Aspects of Scientific Explanations (New York: Free
Press, 1970); Ernest Nagel, The Structure of Science (New York: Harcourt, Brace
and World, 1961).
17See Paul Oppenheim and Hilary Putnam, “Unity of Science as a Working
Hypothesis,” in H. Feigl, ed., Minnesota Studies in the Philosophy of Science
(Minneapolis: University of Minnesota Press, 1967), vol. 2.
(nonfalsifiable by experience), are interpreted by positivists as containing
no “real” knowledge at all, as empirically empty formalisms.
This view has helped legitimize and further the degeneration of parts
of logic and mathematics into meaningless symbolic games, of which
the general public has remained largely ignorant due to the arcane
nature of the subject.18 But it has not, nor could it have, changed the
fact that at least some propositions of logic and mathematics are
employed as the very foundation of the empirical natural sciences,
and hence are actually treated as containing empirical information,
though of a nonhypothetical kind.19 Nor is there much harm in the
positivist view of the empirical natural sciences, such as physics. Its
methodology, according to which one can never definitively establish
whether a hypothesized relationship between two or more variables
exists or not, offers the possibility that one might cling to one’s
Austrian Rationalism in the Age of the Decline of Positivism 359
18See Kambartel, Erfahrung und Struktur, esp. pp. 236–42. The rationalist
conception of logic and mathematics is summarized by Gottlob Frege’s dictum
that “it follows from the truth of the axioms, that they do not contradict each
other.” The positivist-formalist interpretation, on the other hand, is formulated
by the young D. Hilbert: “If the arbitrarily assumed axioms do not lead to contradictory
implications, then they are true, and the objects defined by the axioms
exist” (quoted from Kambartel, p. 239).
The advance of formalism, then, explains Kambartel, has far-reaching consequences.
The retreat of mathematics from all practical justification, and from
the corresponding epistemological justification of formalism, is itself
a practical decision of the utmost importance. It is the abandonment
of practical justification and, since formal systems without a meaningful
interpretation of their starting point cannot justify anything,
ultimately of the justification of propositions altogether. (p. 241)
In consequence,
many formal analyses become a high-bred game of an interested few,
although without the public noticing it, because of its inability to
attain the level of discussion that is required here to determine the
borderline between theory and game. (p. 238)
19See Hans Lenk, “Logikbegründung und Rationaler Kritizismus,”
Zeitschrift für Philosophische Forschung 24 (1970); K.O. Apel, Transformation der
Philosophie, vol. II, pp. 406–10.
hypotheses regardless of all seemingly falsifying experiences, for one
could always blame a previously neglected variable for one’s predictive
failures. However, as explained above no one trying to produce
some given physical event would systematically prefer finding excuses
for not reaching this goal over actually reaching it because he alone
would have to pay the price for such stubbornness.
In the realm of the social sciences, however, where the costs of
one’s actions can be externalized onto others, this possibility of immunizing
one’s hypotheses from falsification offers welcome opportunities
to those in power.
Consider some typical economic propositions: Whenever an
exchange is not voluntary but is coerced, such as highway robbery or
taxation, one exchange party profits at the expense of the other. Or:
Whenever minimum wage laws are enforced that require wage rates
to be higher than existing market wages, involuntary unemployment
will result. Or: Whenever the quantity of money is increased while
the demand for money is unchanged, the purchasing power of money
will fall. Or: Any supply of money is “optimal” such that no increase
in the supply of money can raise the overall standard of living (while
it can have redistributive effects). Or: Collective ownership of all factors
of production makes cost-accounting impossible, and thus leads
to a lower output in terms of consumer evaluations. Or: Taxation of
income producers raises their effective time preference rate, and thus
leads to a lower output of goods produced. Apparently, these propositions
contain knowledge about reality, yet they do not seem to be
falsifiable but are true by definition.20 However, according to positivism
this cannot be so. Insofar as they claim to be empirically meaningful
statements, they must be hypotheses subject to empirical confirmation
or falsification. One can formulate the very opposite of the
above propositions without thereby stating anything that could be
recognized from the outset, a priori, as false (and nonsensical).
Experience would have to decide the matter. Thus, in assuming the
360 The Economics and Ethics of Private Property
20See on this the two foremost economic treatises of our times: Mises’s
Human Action, and Rothbard’s Man, Economy, and State.
positivist doctrine, the highway robber, taxman, union official or the
Federal Reserve Board would act legitimately, from a scientific point
of view, in claiming that taxation benefits the taxed and increases productive
output, minimum wage laws increase employment, and the
creation of paper money generates all-around prosperity. As a good
positivist, one would have to admit that these are merely hypotheses,
too. With the predicted effects being benevolent, however, surely
they should be put into effect and tried out. After all, one should not
close one’s eyes to new experience, and one should always be willing
to react flexibly and open-mindedly, depending on the outcome of
such an experience. However, if the outcome is not as hypothesized,
and the robbed or taxed do not appear to benefit, employment actually
decreases, or economic cycles rather than all-around prosperity
ensue, the possibility of immunizing one’s hypotheses becomes a real,
almost irresistibly tempting option. For why would the robber, the
taxman, or the Federal Reserve Board not want to continuously play
down all apparently falsifying experiences as merely accidental, so
long as he can personally profit from conducting their robbing-, taxing-,
or money-creating experiment? Why would he not want to interpret
all apparent falsifications as experiences that had been produced
by some unfortunately neglected circumstance and that would disappear
and turn into their very opposite, revealing the true relationship
between taxes, minimum wage laws, the creation of money, and prosperity
once these circumstances were controlled?
In fact, whatever empirical evidence one presents against these
hypotheses, as soon as one adopts positivism and rejects the idea of
formulating a principled case either for or against them as ill-conceived,
the robber’s or the taxman’s case is safe from decisive criticism
because any failure can be ascribed to an as yet uncontrolled
intervening variable. Not even the most perfectly controlled experiment
could change this situation. For it would never be possible to
control all variables that might conceivably have an influence on the
variable to be explained or the result to be produced. In practice, this
would involve controlling literally all of the universe, and in theory no
one even knows what all the variables which make up this universe
are. No matter what the charges brought against the robber, the taxman,
or the Federal Reserve Board, within the boundaries of the
Austrian Rationalism in the Age of the Decline of Positivism 361
positivist methodology they will always be able to preserve and rescue
the “hard-core” of their “research program” as the neo-Popperian
positivist Lakatos would have called it. Experience only tells us that a
particular experiment did not reach its goal, but it can never tell us if
a slightly different one will produce any different results, or if it is
possible to reach the goal of generating all-around prosperity by
means of any form of robbery, taxation, or paper money creation.
The attitude toward positive economics that positivism fuels and
that has indeed become characteristic of most contemporary power
elites and their subsidized intellectual bodyguards is that of a relativist
social engineer whose motto is “nothing can be known with certainty
to be impossible in the realm of social phenomena and there is nothing
that one might not want to try out on one’s fellowmen, so long as
one keeps an open mind.”21
The fact that positivism supports the mentality of social relativism
does not prove it wrong. However, suspicion regarding its validity
seems appropriate. It certainly is not obvious that there should be no
rational ethical standard at all and that literally “anything goes.” Nor
is it intuitively plausible that economics should be either an empirically
meaningless symbolic game (a system of analytic propositions),
or a set of hypothetical, empirically falsifiable predictions concerning
the outcome of human actions and interactions. In the former case it
would be nothing but a waste of time, and in the latter economics
would obviously be impotent and hence irrelevant (if anything, the
baker in ancient Athens could have predicted the behavior of his fellowmen
better and with a higher degree of confidence than his modern
counterpart!). However, economic propositions such as those mentioned
above are apparently neither meaningless nor irrelevant.
Indeed, in light of the self-serving implications of positivism for those
in power, it may well be suspected that positivism might come to be
362 The Economics and Ethics of Private Property
21See also Hans-Hermann Hoppe, A Theory of Socialism and Capitalism
(Boston: Kluwer Academic Publishers, 1989), chap. 6; idem, “The Intellectual
Cover for Socialism,” Free Market (February 1988).
accepted even if it were false, and that it might continue even if its
falsehoods were exposed—as they surely have been.
Each of the three interrelated premises of positivism is demonstrably
false.22