Category Archives: Espitemology

Mises contra Callahan

Gene Callahan writes on the methods of history, arguing that it’s a mistake to think that we can only understand unique historical episodes by cataloging them with the help of “some general law.” His analogy illustrates what he means,

Consider: I say to you, “Here is my group of events: Jackie Robinson breaking the color barrier in baseball, Caesar crossing the Rubicon, the assassination of Abraham Lincoln, the fall of Constantinople, and the 9/11 terrorist attacks. OK, now let us draw up what theory connects them.” You will naturally tell me I am talking rubbish.

According to Gene, it doesn’t make sense to pool unique historical episodes and then try find common features. Any common features he finds amongst those things he lists are probably going to arbitrary and meaningless. He argues that we know that this approach is wrong, because we first approach each event individually, understand it, and then catalog it. He takes the opportunity to criticize Mises, implying that Mises’ method followed what he criticizes in his post and calling the approach “absurd.”

I interpret Mises differently. Mises (and before him, Weber) argued that to understand history we first need to develop theory, because theory is the only way we can make sense out of data, which otherwise would seem random to us. Our brains need some way of establishing causality between the data. We can create theoretical categories because of the internal logic of our theory. This doesn’t guarantee that these theories are empirically valid, but one purpose of history is to test the applicability of theory.

Just to make clear the difference between what Mises actually believed and what Gene thinks Mises believed, Mises never (at least, on my reading) argued that we look at a group of historical events and draw general inferences to categorize them. Maybe Mises did this in his early work (before his Theory of Money and Credit), when he was a practicing historicist, but this isn’t the Mises of 1920–…, when he began his serious work into epistemology and methodology. Instead, he built ideal types which were internally coherent, and then looked to see if individual events were characterized by the preconditions, assumptions, and outcomes that the theory calls for.

Gene is right that it is absurd to pool n individual events (say a random selection of historical events) and then try to categorize them by looking at them as a whole, rather than individually. I don’t know who approaches history like this, although who knows, but Mises certainly isn’t one of these people.

Being a Scientist

The following sentence really stuck with me,

Thinking Fast and Slow (Kahneman)Contrary to the rules of philosophers of science, who advise testing hypotheses by trying to refute them, people (and scientists, quite often) seek data that are likely to be compatible with the beliefs they currently hold.

— Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Strous, and Giroux, 2011), p. 81.

It stuck with me so much that by the time I finished the book I really thought that Kahneman had written more directly about the philosophy of science. We all know that the human mind tends to look for confirming data, and that evidence without theory is not of much use is something we read a lot — especially among Austrians. What I’ve heard less often is the emphasis on falsification.

Most people do know that in science a theory is never really proven. Instead, we accept it as useful until somebody comes and falsifies it. But, the way I’ve — and I’m sure others — interpreted this method is simply as a general rule, not one that the individual necessarily needs to follow. In other words, I’ve never thought of being a good scientist as someone who actively looks to disprove her own understanding. I consider it important, and I’ve made similar points on this blog, but I’ve never framed it as something of fundamental importance.

A great tragedy is that non-academic media out of necessity has to sacrifice some element of science. Not too long ago, I read a short 2003 paper on beauty, productivity, and discrimination in the classroom by Daniel Hammermesh and Amy Parker, who at the time was one of his undergraduate students. The results were generalized and re-published in the New York Times by Hal R. Varian, who we all recognize as one of the most well-known microeconomists of our time. Something that stands out is that while Hammermesh and Parker are very careful about drawing conclusions, and they delineate where some of their results are tentative and where there still exists uncertainty, Varian’s column is much more certain. Varian understands what it means to be a scientist more than most other people and he wasn’t trying to mislead anybody. What happened is that stories about uncertain results are not popular, because it makes the reader wonder why the news is even relevant. There is little room for the pedantic objectivity that complex scientific questions call for.

You often see the same thing in the blogosphere. How many times has Krugman written that the evidence is on his side? How many times have I posted graphs of very general data suggesting it validates, at least within some limit, my beliefs? The answer is very often. To some degree, it’s justifiable. I like to draw attention to things I think others might miss. Krugman is interested in convincing people of points he thinks are important. No less, Krugman is not completely adverse to falsfication — there are plenty of examples of him changing his views. Finally, that some body of evidence is not necessarily at odds with our world view is worthy of consideration. But, in outlets read by people who don’t always operate with the understanding that we should challenge our beliefs — and that no evidence is really ever final —, I feel that focusing too much on evidence of us being right can be misleading.

Scientists with wide readership should always make the point that there are limits to our understanding, and that the probability of being wrong is very high — whether these mistakes are major or minor. Inculcating methods of dealing with our cognitive limitations is an important step in making the world a more educated place. I’d say that it’s more important than strict schooling, because even strict schooling is a lost cause for those who aren’t interested in exploring the limits of their knowledge.

Why Our Ideas are Clearer to Us…

… and may be unclear to everyone else?

Thinking Fast and Slow (Kahneman)The lesson of figure 5 is that predictable illusions inevitably occur if a judgment is based on an impression of cognitive ease or strain. Anything that makes it easier for the associative machine to run smoothly will also bias beliefs. A reliable way to make people believe in falsehoods is frequent repetition, because familiarity is not easily distinguished from truth.

— Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011), p. 62.

The lesson — and it’s one as much for me as for anybody else — is that the fact that our ideas are clear and plainly true to us doesn’t make it so obvious to anybody else. This may also be why people tend to become entrenched in their views. This doesn’t imply any bad faith or dishonesty, it’s just how our brains work. The more you work on your idea, the more familiar you become with your idea, and the truer it will seem to you over time.

Much of the book is spent distinguishing what Kahneman calls “System 1″ and System 2” thinking. System 1 is an intuitive, automatic process that associates different words, muscle movements, emotions, et cetera, to allow your brain to unconsciously make sense out of events. This process isn’t causal or step-by-step, instead it’s associative and you can make many associations simultaneously. Most of the time, you’re unaware of the associations made, or even why these associations were made. For instance, an experiment found that subjects exposed to words which connote old age were more likely to walk slower after the experiment. System 2 has to be catalyzed by System 1, often when the latter is strained. Skepticism also triggers System 2 — it causes your brain to double check its first, intuitive response.

My System 1 made an association between this distinction between systems and the debate between a priorists and fallibilists. Sometimes the latter are accused of being nihilists, of denying the validity of immutable law. I don’t think a priori methodology is inconsistent with fallibility (indeed, our logic could be wrong), but this discussion of systems and the illusions our brain can play on us does suggest we ought to place a premium on admitting the possibility of being wrong. Because not only can we be wrong, but we can be legitimately convinced of being right all along.

Epistemology of Rejection


In Misunderstanding Financial Crises, Gary Gorton provides a short overview of the U.S. banking experience between, roughly, the 1830s and 1913. Some of it is geared towards building up towards a justification of bank bailouts as a means of maintaining liquidity. His example of bank bailouts prior to the Federal Reserve and activist treasury policy was examples of clearinghouse associations pooling member banks’ assets and using these to back the clearinghouse’s own (temporarily issued) notes, which were used to satisfy interbank adverse clearings. This shored up the member banks’ position towards those who held their debt, meaning that the liquidity of their assets was preserved. Another example of a market solution to temporary illiquidity was temporary suspension of redemption, which usually carried along with it — by terms of contract — the promise to pay additional interest throughout the period of suspension.

Despite these examples, many libertarians — some of them quite erudite — will reject the premises behind certain forms of interventionism. Another example includes monetary disequilibrium: it’s not unusual for a libertarian, although maybe more accurate to say Austrian here, to totally reject any possible credible foundations to an advocacy of Fed countercyclical policy. In fact, to seal the example, many Austrians go as far as to argue that the “correct” “market” solution to an increase in the demand for money is a downward movement in the price level. I recognize that there’s an element of hubris in this discussion so far; I acknowledge that in both examples I could be wrong in implying that the market would offer different solutions. But, take these examples for what they are: illustrations of my broader point.

My argument boils down to the idea that because of certain predispositions that austro-libertarians hold and because of the limited cognitive ability of the human mind, we oftentimes fail to recognize the merits of opposing positions. But, there is evidence that these rejections can be premature. While sometimes it’s difficult to know for sure, some cases (such as the two above) suggest that we ought to treat with greater nuance theories we disagree with. (As a disclaimer, my arguments here have been influenced by my recent reading of Bruce Caldwell’s Hayek’s Challengebut the idea is mine, and all errors are my own.)

Human society is complex, and it’s complex to several degrees. Its complexity makes it difficult to understand, and if we do understand it is mostly only superficially. Oftentimes what we do understand is from experience, and we don’t understand it well enough to make predictions on how institutions and organizations will develop, or evolve, over time. As a result, there are handicaps to everyones’ ability to know how the market, or privately developed institutions and organizations, would react to different adversities. To make matters worse, we’re oftentimes disallowed from experiencing specific manifestations of market solutions, because market institutions and organizations are oftentimes replaced by public, or quasi-public, features of the same nature. It’s convenient that both of my above examples have to do with banking, because it’s also the perfect example of how private changes have been all-too-often superseded by government alternatives (e.g. frequent prohibition of branch banking, the 10 percent tax on privately issued banknotes after the U.S. Civil War, the Federal Reserve system, deposit insurance, et cetera).

For the sake of argument, let’s assume that public alternatives to private institutions and organizations are inferior in the task they’re trying to accomplish. In banking, for example, public changes in the structure of the industry, and the rules that guide it, have not done a very good job at smoothing cyclical fluctuations. One might even argue that they have made the industry worse, and have exacerbated these fluctuations. This, I think, is a more-or-less universal theme in the libertarian literature. Consequently, there is a developing culture that stimulates an impulse to reject all things classified as interventionism. Some not only oppose the specific interventions, but even the arguments and premises behind them. But, as the clearinghouses and suspension examples above illustrate, this is not always the correct approach.

I’d argue that a good deal of the ideas behind certain theories we may reject, paradoxically, actually a lot of common ground with ideas we hold. Given that human society, including economics and economic relationships, can be incredibly complex, it’s true that none of us have a complete, or specific, explanation for various phenomena. However, I think that oftentimes everyone operates from a similar base — that is, everyone has a substantially broad, or general, idea of how things work —, and that it’s only a movement from that base that produces major differences between thinkers (influenced by a variety of factors, including ideologies). Furthermore, I’d argue that many of the general premises behind interventionist policy, or theories that might suggest interventionist policy recommendations, are true, because all people tend to have some part of the general picture right, even if they may take it in the wrong direction. Finally, social complexities and the fallibility of the human mind apply both to non-libertarians and libertarians, and a failure of some libertarians to see merit in others’ arguments is a product of ubiquitous ignorance (it works in the other direction too, of course).

It may be that an interventionist may recommend a certain policy because he’s unable to fathom how the market, through piecemeal-planned and/or spontaneous order, could accomplish a similar result in a superior way. That being said, the same is absolutely true the other way around. My point is that we should be wary of the possibility that our complete rejection of ideas we disagree with may be a result of the fact that we can’t begin to picture how a free society might ultimately commit to similar solutions to social problems. In other words, the critiques we oftentimes apply to “planners” are also equally as applicable to us. This doesn’t mean we should accept interventionism; I’m mostly writing out of interest in preserving some kind of intellectual march towards scientific improvement. It does mean that we should be careful not to throw the baby out with the bathwater, because we are fallible human beings and we can reject things we still don’t (and may never) fully understand (which, by the way, was more-or-less my initial reaction to Gorton’s discussion of “private” bank bailouts).

If you’re not comfortable with my examples, I’m sure there are many others to choose from. Also, in no way am I suggesting that this is the only cause of disagreement. Neither am I rejecting the possibility that much disagreement is justified. I’m only asking for people to remember that a more refined approach to weighting theses that may not adhere to your current world view is preferable, because there can be things you’ve missed — we all have the propensity of being wrong, as we often are.

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As a related postscript, in a surprising response to a Noah Smith tweet on a Paul Krugman blog post, someone wrote,

“Keynesian theory is actually too hard for most libertarians to understand”

I responded as follows,

I disagree; as a libertarian, I think there is something of a culture of not making the effort to understand it.

I don’t mean this to be an opportunistic attack on libertarianism (and I think that first response to Noah Smith was borderline ignorant, in the worst possible sense) — after all I’m a libertarian (and I pick on libertarianism only because as a libertarian I want to best for our ideas) —, rather it’s meant to be constructive. Given what I wrote above on the fallibility of the human mind, it doesn’t make sense to me to promote an insular approach to science. Unfortunately, from my experience, these methods are too often advocated. In my opinion, this only increases the opportunity of being wrong. Think of intellectual progress through the metaphor of profit and loss. We abandon ideas that we find out are wrong and we keep those we think are correct. Ideas have to be tested on a trial-and-error basis. By narrowing your exposure to potential trials you’re also limiting your intellectual growth. Those who push for what is tantamount to insularity are doing their readers, and those they influence, a disservice.

This is a perfect opportunity to close by linking to a post by professor Callahan that builds on my discussion of Mises’ treatment of Keynes in yesterday’s post. He points out that by the time The General Theory was published and Mises decided to write on it, he might have been beyond the point of learning new things. He just wasn’t very good at including this as a caveat when he discussed things he might not have known enough about. In a comment to that post, I also point out (and Callahan reinforces in a response) that Mises was notorious for his poor reactions to criticism. Knowing that many of Keynes’ doctrines were misaligned with his own, Mises may have been confident enough in his own knowledge to essentially entirely dismiss whatever Keynes had to say (he doesn’t just dismiss this, but he fails to actually engage them).

Two economists come to mind that, in this sense, were almost complete opposites of Mises: Hayek and Lachmann. Both were economists who, it could almost be said, thrived on criticism. Hayek’s work was positively influenced by his critics throughout his life (and we are better off because of it). I think Lachmann oftentimes took wrong turns in older age (e.g. his apparent acceptance of Hicksian “fixed price” theory), but you also see a drastic evolution in his thought throughout his life work. I don’t intend to disparage Mises — he was a brilliant thinker who contributed positively in more ways that most people can approach —, but when it comes to acknowledging your own fallibility economists like Hayek and Lachmann are truly role models.

Knott on Hayek

Adam Knott has a good article published at the Mises Institute’s website: “Hayek and Praxeology.” It’s a very sophisticated discussion of Hayek’s critique of praxeology. I enjoyed the comment that Hayek, by considering the study of the market an empirical science, departs from the Mengerian methodological tradition.

However, while Knott is much more experienced than me with Austrian methodology, I can’t help but feel that he misses Hayek’s point. Knott describes Hayek’s belief that the only a priori analytical statements that can be made are between an agent, the action, and the object of that action. Further, this doesn’t help us when studying the market, which involves more than one agent. Knott rebuts this by arguing that there’s no convincing reason why a social scientist couldn’t study the relationship between the market, as an object, and the agent.

My interpretation of Hayek is somewhat different from Knott’s. The study of the market doesn’t involve a relationship between the agent and the market. “The market” isn’t an object, but a connection of relationships between autonomous agents. These relationships aren’t necessarily directly established either, which gives rise to the theory of spontaneous order: an emerging order shaped by “negative” rules (which permit or restrict action). Hayek’s argument — at least, my interpretation of it — may be better understood within the context of his work on equilibrium. There can be an equilibrium within the individual, because his intentions are aligned with the object of his action; indeed, the object is defined by the intentions. But, the intentions of agent “A” aren’t necessarily aligned with those of agent “B,” and because the intentions of these two agents are sovereign, we can’t establish a priori analytical statements about the outcomes of these kinds of interactions.

By extension, Knott’s critique of Hayek’s “pure logic of choice” falls, provided my interpretation is correct, on account that Knott misinterprets the causality between the agent and the object. In “The Facts and the Social Sciences” (the relevant sentences are excerpted in Knott’s piece, the first blockquote) Hayek writes that “we have to define … the objects of human activity … in terms of the opinions or intentions of the acting persons.” The relationship between the agent and the object derives from the agent, since its her intentions that define the object. How Knott interprets it, as evident by the direction of his critique, is that the causality runs in reverse, as if the object has a purpose in and of itself. Contrary to his argument, therefore, if we have two agents with two apples, yet one intends to eat it and the other intends to sell it, then the two objects are heterogeneous.

I’m not arguing that Hayek’s critique of praxeology is correct, but I do think it’s important to distinguish between a theory that focuses on the individual’s relationship to “the market” and theory that seeks to explain relationships between the individuals themselves. Perhaps Mises didn’t consider this broader aspect of the market as something within the realm of economic law, including it under another category of sociology (praxeology) — not all praxeological categories are a priori, after all. In this area, Knott is without a doubt a better scholar than I, and hence much better equipped to describe Mises’ approach to social interaction.

Hayek and Praxeology,” Adam Knott’s new piece for Mises Daily, is a great read, and a great discussion on the differences between Mises and Hayek in their approach to the method of economic analysis. Any discussion on the science of emerging order, that is of Hayek’s idea of “the market,” will be educational; I’d love to better understand how different theorists conceived of what governs change in human society, including market institutions. The market process as one of institutional change is an area that I’m becoming increasingly interested in.

“Rothbardian” Empiricism

In a piece on empiricism in Austrian economics, Bryan Caplan makes the following claim,

But what would Barro discover if he followed Horwitz’s advice? There are two main outlets for distinctively Austrian research. The first, The Review of Austrian Economics, was edited by Rothbardians for its first ten years (1987–1997) before passing to other Austrians more to Horwitz’s liking. The second, The Quarterly Journal of Austrian Economics, has been edited by Rothbardians since its inception in 1998, and is still being published. Similar Rothbardian/non-Rothbardian ratios hold for Austrian books. Critics could reasonably conclude that Austrian resistance to empirical research is even worse than they imagined.

Anybody who has read the Quarterly Journal of Austrian Economics knows that plenty of data-oriented articles have been published —  many of them fairly rigorous. It is true that much of the QJAE is theory oriented, but this isn’t a rejection of its application to history. The accusation that “Rothbardian” journals and books are devoid of empirical evidence has no substantial basis. (Edit: If we’re going to talk about Rothbardians, why not mention Rothbard’s America’s Great Depression? That is one thick empirical book.)

He follows with a horrendously uncharitable interpretation of Mises’ work,

Yet unless you’re an Austrian, the position Horwitz ascribes to Mises sounds extremely unempirical: He builds economics on a short list of “apodictic truths,” adds a few banal empirical assumptions like, “there is disutility of labor” and “money exists,” then claims to deduce lots of substantive conclusions that are definitely true as long as all the banal assumptions are true.

Well, of course, the application of theory to the data requires that the assumptions are empirically true. Anyhow, with these “banal” assumptions (which I’m not sure Mises actually makes), Mises derived a broad range of economic theory, much of it which has held true.

Caplan’s point that much of the “Austrian” empirical research that Horwitz may have in mind is not uniquely Austrian holds water. He rightly cites work like Peter Leeson’s research on pirates — although, spontaneous order? — and others’ political work. I fear, though, that he isn’t considering some more unique work, including empirical work dealing with economic calculation (e.g. Boettke’s work with the fall of the Soviet Union) and recent empirical work on Austrian business cycle theory (some of it, as above mentioned, published in the QJAE).

While some good points are made, overall Caplan’s piece seems to miss the mark. Why should economists hold behavioral psychology to be relevant? (I’m not necessarily arguing that it isn’t, but Caplan fails to provide any support for his claim[s].) He also doesn’t seem privy to a wealth of Austrian empirical research on unique topics. These are subjects that Caplan has criticized before, so maybe his rejection of uniquely Austrian insights has led him to distance himself from related Austrian historical research. Nevertheless, I can agree that uniquely Austrian empirical research has room for improvement, especially in degree of rigor.

Nature of Disagreement

Why do economists disagree? This is a question that Fritz Machlup attempted to answer in his 1954 article, “Why Economists Disagree.” It’s also a question I’ve been pursuing in my research on J.M. Keynes and F.A. Hayek. Fritz looks at four avenues of potential differences,

  1. Definitional (meaning of words);
  2. Logical;
  3. Factual assumptions;
  4. Values.

Machlup spends most of the short paper discussing differences in factual assumptions, and then ties this to differences in value judgment. It’s almost as if he defines the economist as an expert who recommends policy (and there is a couple of paragraphs on just this, near the end), so to some extent maybe there’s differences that exist when recommending policy where they wouldn’t exist if we we’re talking strictly about theoretical analysis. But, I think the two oftentimes blur, and what really matters — and, even Machlup may agree here, given that he suggests economists ought to recommend their best answer, as if anything were politically viable — are theoretical differences.

While Machlup believes that most differences are factual, I think that they tend to be logical. In fact, many of Machlup’s arguments in favor of emphasizing factual assumptions can, in turn, be (better) applied to the logical category. Even if we call economics the clescience of human action, or a science that studies the allocation of means and ends, ultimately the method of analysis is establishing causality between events: A → B. Empirically, we can verify the applicability of theory, or, maybe some will claim, we can verify the accuracy of our theoretical causal connections. Differences in factual — or even non-factual — assumptions can explain some variation, but it’s still ultimately a difference in logic.

Imagine a topic like the business cycle. Suppose that we’ve amassed an unequaled amount of data relevant to historical industrial fluctuations, ranging over the last two hundred. With this data you can’t do much, unless you already have some idea of the causality between events. Even if we use data to find gaps in our theoretical knowledge, just drive us to establish causality between previously personally non-experienced events, the ultimate task is still logical.

Machlup spends a lot of time on factual assumptions in the form of predictions about human behavior; e.g. how the political regime will react to event A. But, it’s not just about differences in prediction of how the same object will change over time; rather, “factual” differences are mostly seen in the form of which data is relevant. For instance, an Austrian might find the prices of capital goods relative to consumer relevant and important to business cycle theory, while a Keynesian may not. The latter may not know the causal relationship between changes in capital good prices (relative to consumer good prices) and industrial fluctuations, because he or she may find any such causal relationship irrelevant or unimportant.

Of the four categories of differences, Machlup finds the first two the easiest to solve. The third could be solved with greater empirical analysis and observation. This isn’t correct — the most difficult differences to iron out are logical (which, as above implied, is not necessarily separate from the empirical). It’s just about logical fallacies or logical mistakes, but of deciding what logical output is relevant and important. Logical mistakes are also difficult to solve, because sometimes the causal relationship between events isn’t obvious. Logic also impacts factual assumptions in the sense that an economist who places a great deal of weight on priors is likely to search for evidence only in the area he considers relevant.

Disputes between economists are not dictated by the data: its interpretation, its existence, and the assumption of its state. Academic differences are logical ones, which may be exacerbated by empirical and normative variations, that are difficult to solve. It’s precisely this that generates my interest in stepping into the shoes of those I disagree with, and try to look at the picture from their angle — invariably, you will always come across something new, that you haven’t considered before.

Mises Quote: On Prediction

…[S]cience does not render the future predictable. It makes it possible to foretell the results to be obtained by definite actions. But it leaves impredictable two spheres: that of insufficiently known natural phenomena and that of human acts of choice. Our ignorance with regard to these two spheres taints all human actions with uncertainty. Apodictic certainty is only within the orbit of the deductive system of aprioristic theory. The most that can be attained with regard to reality is probability.

— Ludwig von Mises, Human Action (Auburn: Ludwig von Mises Institute, 1998 [1949]), p. 105.

This excerpt showcases several key ideas contained within the idea of a praxeological science,

  • Science is meant to establish causality between events;
  • We can only be certain about the accuracy of our knowledge of causality;
  • What events will actually occur are unpredictable;
  • The last sentence is particularly good, because it shows that Mises well understood that theory is not reality, but rather a tool to interpret reality.

John Aziz writes the following (on Twitter),

Praxeology tries to draw conclusions from axioms. I prefer to draw from data.

For all I know, John might be making a valid point, but I feel that he isn’t properly considering Mises’ reasoning behind praxeology. Unlike many of his disciples, Mises was not anti-empirical. As I explained in a recent post (“Austrian Methodology: A Qualified Defense“), half of the task is empirical; that is, theory must be applied to real world events (i.e. history). But, Mises — and most other economists, for that matter — don’t believe that the evidence can be understood without mental tools that give order to what otherwise would be a mass of chaotic data. These tools are theory, and Mises believed that the only means of developing an internally consistent and realistic set of theory is deductively.

But, praxeology doesn’t mean just “drawing conclusions” from axioms (more accurately, theory), but both from theory and from history. More specifically, it depends on what kind of conclusions you’re seeking to draw. In any case, praxeology shouldn’t be seen as anti-empirical, and this should be realized not just by non-praxeologists, but also by “praxeologists” who have avoided empirical work.

Economic Law

Lars P. Syll writes (in an otherwise great post),

Stop pretending that we have laws in economics. There are no universal laws in economics. Economies are not like planetary systems or physics labs. The most we can aspire to in real economies is establishing possible tendencies with varying degrees of generalizability.

I might be totally off base, but different people seem to have different ideas of what an economic “law” is.

In economics, (some of us believe) we have laws of causality; i.e. if A, then B.  These are different from sociological laws, where humanity obeys some kind of deterministic pattern of action to reach some pre-determined outcome.  These kind of beliefs, actually, oftentimes are characteristic of socialist and historicist literature, although it’s everywhere (conservative, libertarian, et cetera).  No, economic laws don’t give economists the power to predict the future, but they do provide the ability to explain events.

Experience and the A Priori

There is another qualification to my defense of “a priori deduction:” it’s difficult for me to discard the usefulness of experience to know — paradoxical as it might seem — where gaps in my knowledge exist.  An obvious example of this is the inability to explain an empirical, or historical, event; that is, an inability to establish causality between the data.  This type of discovery would undoubtedly force me to backtrack and derive relevant understanding.  This type of knowledge of what we don’t know doesn’t exactly fall into the category of what Mises calls economics, but it is related in the sense that it impacts how a scientist might approach the acquiring of theoretical knowledge.

This also helps to explain — although here we might be deviating from the first point — why many are confused between a value-free science and the imposition of value in deciding on scientific endeavors.  For instance, the law of gravity is value-free — whatever your normative position, the law of gravity is objective; yet, the decision to derive the law of gravity is a subjective, or normative, one.  Tying it into the theme of this short post, the gaps in our knowledge are the product of our preferences.  Experience might help adjust our preferences to discover our intellectual lacunae, and may impulse us to better understand what we don’t know.

It is also in this sense that I think that falsifiability is productive.  Say that our sole theory of industrial fluctuations is the Mises–Hayek theory and say we suffer an industrial fluctuation between the years 2025–26.  Upon historical investigation, we see no data which match the causal factors of the theory.  Yet, we have no alternative; it’s not productive to continue to assume, despite the lack of evidence, that our theory is applicable.  Alternatively, we can admit a lack of explanation and work on deducing one.  (I wouldn’t draw parallels to Popper.  Like I’ve tried to emphasize before, I’m no philosopher — although I’ve been intending to read Popper’s The Logic of Scientific Discovery and his three-piece series “The Poverty of Historicism.”  I’ve also ghostwritten papers on philosophy, which goes to show the quality of our educational institutions.)

There are a lot of “praxeologists” who’ve taken the concept too far.  I can’t name any professional economists or philosophers (although, how many professional praxeologists can you name, period?), so most of those I’m referring to are the so-called “internet Austrians.” But, the fact is that there is a large scope for empiricism in the acquisition of knowledge, and these are oftentimes related to economics.