Rebirth of Reason


Can the Ideas of Mises and Rand Be Reconciled?
by Edward W. Younkins

Ludwig von Mises (1881-1973), the Austrian philosophical economist and social thinker is one of our most passionate, consistent, and intransigent defenders of capitalism. Mises defends the free society and private ownership on the grounds that they are desirable from the perspective of human happiness, freedom, peace, and productivity. He constructed a monumental, overarching, systematic, and comprehensive conceptual framework that attempted to elucidate the timeless, immutable laws that guide the world and human behavior. Mises integrated his profound theories of methodology, political science, history, the social sciences, and so on in his 1949 magnum opus, Human Action. The purpose of this essay is to assess the compatibility of Mises' system, known as praxeology, with Ayn Rand's profoundly original philosophical system of Objectivism.

Misesian Praxeology

Mises' grounds economics upon the action axiom which is the fundamental and universal truth that individual men exist and act by making purposive choices among alternatives. Upon this axiom, Mises deduces the entire systematic structure of economic theory. Mises' advocacy of free markets and his opposition to statism stems from his analysis of the nature and consequences of freely acting individuals compared to the nature of government and the consequences brought about by government intervention.

For Mises, economic behavior is a special case of human action. He contends that it is through the analysis of the idea of action that the principles of economics can be deduced. Economic theorems are seen as connected to the foundation of real human purposes. Economics is based on true and evident axioms, arrived at by introspection, into the essence of human action. From these axioms, Mises derives logical implications or the truths of economics.

Through the use of abstract economic theorizing, Mises recognizes the nature and operation of human purposefulness and entrepreneurial resourcefulness and identifies the systematic tendencies, which influence the market process. Mises' insight was that economic reasoning has its basis in the understanding of the action axiom. He says that sound deductions from a priori axioms are apodictically true and cannot be empirically tested. Mises developed through deductive reasoning the chains of economic theory based on introspective understanding of what it means to be a rational, purposeful, and acting human being. The method of economics is deductive and its starting point is the concept of action.

According to Mises, all of the categories, theorems, or laws of economics are implied in the action axiom. These include, but are not limited to: subjective value, causality, ends, means, preference, cost, profit and loss, opportunities, scarcity, choice, marginal utility, marginal costs, opportunity cost, time preference, originary interest, association, and so on.

Mises maintains that all economic reasoning rests on (1) an understanding of the categories of human action and the meaning of a change taking place in phenomena such as knowledge, values, preferences, means, ends, costs, etc., and (2) the logical deduction of the consequences which would emerge from the accomplishment of some particular action or of the outcome which would arise from a specific action if the circumstances are altered in some specific way.

As an adherent of Kantian epistemology, Mises states that the concept of action is a priori to all experience because it is part of the essential and necessary character of the logical structure of the human mind. Mises agrees with Kant that there is a group of common categories lodged in men's minds through which they grasp that which exists.

Mises considers the law of human action to be a law of thought and as a categorical truth prior to all experience. Thinking is a mental action. For Mises, a priori means independent of any particular time or place. Denying the possibility of arriving at laws via induction, Mises argues that evidence for the a priori is based on reflective universal inner experience.

It is hard to see how Mises could contend that a priori knowledge is gained exclusively through non-inductive means. Perhaps it would have been better if he had said that economic theory is based in part on introspection. He could have argued that sense data alone could not reveal to a person the essential purposefulness of human action. The action axiom could then be depicted as derived form a combination of both external observation and introspection.

Misesian praxeology could operate within a Randian philosophical structure. The concept of action could be formally and inductively derived from perceptual data. Actions would be seen as performed by entities who act in accordance with their nature. Man's distinctive mode of action involves rationality and free will. Men are thus rational beings with free will who have the ability to form their own purposes and aims. Human action also assumes an uncoerced human will and limited knowledge. All of the above can be seen as consistent with Mises' praxeology. Once we arrive at the concept of human action, Mises' deductive logical derivations can come with play.

Mises' Subjective Value and Value Freedom

The preeminent theory within Austrian value theory is the Misesian subjectivist school. Mises maintained that it is by means of its subjectivism that praxeological economics develops into objective science. The praxeologist takes individual values as given and assumes that individuals have different motivations and prefer different things. The same economic phenomena means different things to different people. In fact, buying and selling takes place because people value things differently. The importance of goods is derived from the importance of the values they are intended to achieve. When a person values an object, this simply means that he imputes enough importance to it to be willing to start a chain of causation to change or maintain it, thus making it a thing of value. Misesian economics does not study what is in an object, as does the natural scientist, but rather, studies what is in the subject.

According to Mises, economics is a value-free science of means, rather than of ends, that describes but does not prescribe. However, although the world of praxeological economics, as a science, may be value-free, the human world is not value-free. Economics is the science of human action and human actions are inextricably connected with values and ethics. It follows that praxeological economics needs to be situated within the context of a normative framework. Praxeological economics does not conflict with a normative perspective on human life. Economics needs to be connected with a discipline that is concerned with ends such as the end of human flourishing. Praxeological economics can stay value-free if it is recognized that it is morally proper for people to take part in market and other voluntary transactions. Such a value-free science must be combined with an appropriate end.

Economics, for Mises, is a value-free tool for objective and critical appraisal. Economic science differentiates between the objective, interpersonally valid conclusions of economic praxeology and the personal value judgments of the economist. Critical appraisal can be objective, value-free, and untainted by bias. It is important for economic science to be value-free and not be distorted by the value judgments or personal preferences of the economist. The credibility of economic science depends upon an impartial and dispassionate concern for truth. Value-freedom is a methodological device designed to separate and isolate an economist's scientific work from the personal preferences of the given economic researcher. His goal is to maintain neutrality and objectivity with respect to the subjective values of others.

Misesian economics focuses on the descriptive aspects of human action by offering reasoning about means and ends. The province of praxeological economics is the logical analysis of the success or failure of selected means to attain ends. Means only have value because, and to the degree that, their ends are valued.

The reasons why an individual values what he values and the determination of whether or not his choices and actions are morally good or bad are certainly significant concerns but they are not the realm of the praxeological economist. The content of moral or ultimate ends is not the domain of the economist qua economist. There is another level of values that defines value in terms of right preferences. This more objectivist sphere of value defines value in terms of what an individual ought to prefer.

Simply because Mises expounds a value-free science of economics, it does not mean that he believes that a man's behavior lacks moral content. Because a human being is not compartmentalized, economic values and moral values coexist in a man's consciousness, frequently affect one another, and oftentimes overlap. Sooner or later, some moral values must be referred to before the propositions of praxeological economics can be used in men's concrete situations and in service of their ultimate ends. It follows that theories of the moral good are compatible with Austrian economics because they exist on a different plane.

Knowledge gained from praxeological economics is both value-free (i.e., value neutral) and value-relevant. Value-free knowledge supplied by economic science is value-relevant when it supplies information for rational discussions, deliberations, and determinations of the morally good. Economics is reconnected with philosophy, especially the branches of metaphysics and ethics, when the discussion is shifted to another sphere. It is fair to say that economic science exists because men have concluded that the objective knowledge provided by praxeological economics is valuable for the pursuit of both a person's subjective and ultimate ends.

Advocating or endorsing the idea of "man's survival qua man" or of a good or flourishing life involves value judgments. To make value judgments, one must accept the existence of a comprehensive natural order and the existence of fundamental absolute principles in the universe. This acceptance in no way conflicts with the Misesian concept of subjective economic value. Natural laws are discovered, are not arbitrary relationships, but instead are relationships that are already true. A man's human nature, including his attributes of individuality, reason, and free will, is the ultimate source of moral reasoning. Value is meaningless outside the context of man.

Toward An Integration of Traditions

Rand explains that knowledge is acquired by an active, conscious agent through the processes of induction and deduction. In order to deduce from axioms and general statements, we must first have inductive inferences. We can know via the senses, inferences from data supplied by the senses, and introspective understanding. Once it is acknowledged that Mises' action axiom could be derived through an inductive process, it will then be legitimate to follow and adopt his logical arguments that all the core principles and relationships of economics can be deduced from that axiom. After the free market has been accepted as moral and politically legitimate, it is then appropriate for economists to derive praxeological laws.

Praxeological economics and Objectivism are complementary and compatible disciplines. Economics teaches us that social cooperation through the private property system and division of labor enables most individuals to prosper and to pursue their flourishing and happiness. In turn, Objectivism informs men how to act. In making their life-affirming ethical and value-based judgments, men can refer to and employ the data of economic science.

Objectivism's Aristotelian perspective on the nature of man and the world and on the need to exercise one's virtues can be viewed as synergic with the economic coordination and praxeology of Austrian Economics. Placing the economic realm within the general process of human action, which itself is part of human nature, enables theoretical progress in our search for the truth and in the construction of a systematic, logical, and consistent conceptual framework. The Objectivist worldview can provide a context to the economic insights of the Austrian economists.

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