I am reading Robert Murphy’s new book, Choice. Think of it as an English translation of Human Action. I am very happy with it so far. I can see how much of The Book of Arnold can be found in Mises, and yet. . .
I still do not buy into Mises on epistemology. Murphy writes,
Mises shows that economic laws are not obvious and that they do indeed enlarge our body of knowledge, even though economic laws do not need to be verified with empirical observation.
The Anglosphere is largely empiricist, or logical positivist. We tend to believe that there are two types of truths. There are tautologies, which are embedded in language; and there are truths about the world, which are learned by observation.
A claim that 2 + 2 = 5 can be falsified using logic. A claim that pigs know how to fly can be falsified using observation.
Milton Friedman takes an empiricist view of economics. For Friedman, the economist makes predictions about the world, and those predictions are verified or falsified on the basis of observation.
Empiricists give no epistemological status to anything that appears to be a claim about the world that cannot be falsified using observation. Such claims are classified as dogma or nonsense.
Mises was no empiricist. Murphy writes,
From the starting point that humans act, the economist could logically deduce–thereby forming a tautology, it’s true–that individuals have subjective preferences with ordinal rankings, that choices come with opportunity costs, and that the value of second-order capital goods is dependent on the value of the first-order consumer goods that the individual believes they have the technological power to produce.
The way I read Murphy/Mises, economic laws are derived from insight into human nature. At least some insight into human nature comes not from observation but from introspection. The insight that comes from introspection is not falsifiable. For example, suppose I find it inconceivable that I would make choices on some basis other than benefits and costs at the margin. This makes it inconceivable to me that other people would make choices on some other basis. Hence, I appear to arrive at a statement about the world–people make choices on the basis of benefits and costs at the margin–that is not falsifiable by observation.
My take on this is that a statement such as “people make choices on the basis of benefits and costs at the margin” falls into a category that I might term “guiding dogma.” We will use a guiding dogma to make predictions about the world. However, the guiding dogma is not testable. If our predictions go awry, we will not discard the guiding dogma. Instead, we will look for something else that made our prediction go wrong.
“Guiding dogma” may be synonymous with Kuhn’s notion of “paradigm.” In physics, there are some spectacular cases in which a guiding dogma came to be replaced by a new guiding dogma.
The interesting predictions are those which go beyond a guiding dogma. For example, a prediction that a rise in the minimum wage will reduce employment is based in part on the guiding dogma of the Law of Demand. However, the prediction about the effect of the minimum wage is falsifiable empirically. Suppose that a rise in the minimum wage does not produce a decline in employment. Will we throw out the Law of Demand, or will we look for some other factor at work? My claim is that we will do the latter.
Speaking of the minimum wage, consider this sarcastic assault on Larry Summers by John Cochrane:
Never mind centuries of supply and demand, centuries of experience with minimum wages and other price controls, or even the current controversies. Never mind that who works for what business and how many do so is a little bit endogenous. Larry has a new and very clever theory about monopsonistic wage setting in the presence of recruitment and motivation costs. (One that apparently only holds at the lower end of the wage scale where minimum wages bite?)
Thus, if we were to find that an increase in the minimum wage does not reduce employment, then we would credit something like “a new and very clever theory about monopsonistic wage setting in the presence of recruitment and motivation costs” rather than reject “centuries of supply and demand.”
Incidentally, the laws of probability are also not easy to fit into the empiricist framework. When we say that the probability of a coin landing on heads is 1/2, that sounds like a statement about the world, but it also might be thought of as the definition of a fair coin. Once again, the phrase “guiding dogma” comes to mind.
“This makes it inconceivable to me that other people would make choices on some other basis.”
This seems like a really far fetched assumption. Shouldn’t observation show that different people often make choices on very different basis from one another. I don’t think I need a mountain of data to prove this (though it exists), its the kind of thing most people can figure out from simple social observation.
Projecting your own psychology onto others is a pretty common nerd failing. I think it comes from the lack of innate social understanding characteristic of nerds. When people talk about things like sperg logic this over-self projection onto others is part of it. The inability to construct accurate mental modules of others (a social deficiency) leads to the sperg attributing his own mental mode to others. I speak as someone who understands the phenomenon because when I was a younger nerd it fit me to a bill, and it was part of why I used to be libertarian-ish. Like the Marxists if you can ignore inconvenient parts of reality with simplifying and convenient assumptions about human nature then you can come up with libertarianism.
With the discovery of HBD and modern psychological and sociological research you’d think this “we all think roughly the same” stuff would die a death empirically, but there are a lot of interests in favor of it and quite frankly its the lazy or spergy mans way of understanding the world.
“Like the Marxists if you can ignore inconvenient parts of reality with simplifying and convenient assumptions about human nature then you can come up with libertarianism.”
if you can ignore inconvenient parts of reality with simplifying and convenient assumptions about human nature then you can come up with anything, specially your half-baked theory about why other people disagree with you.
“I speak as someone who understands the phenomenon because when I was a younger nerd it fit me to a bill, and it was part of why I used to be libertarian-ish.”
“When people talk about things like sperg logic this over-self projection onto others is part of it. The inability to construct accurate mental modules of others (a social deficiency) leads to the sperg attributing his own mental mode to others.”
What more is left to say?
Arnold,
This article (now published in the Journal of the History of Economic Thought) might interest you. It discusses an alternative interpretation of Mises epistemology which is more consistent with Hayek, IMO, than with Rothbard. I found it very interesting.
http://papers.ssrn.com/abstract=2229570
In my view, von Mises is an epistemological charlatan of breathtaking logical inconsistency and artistic license.
I remember when I first read “Nationalökonomie” (the German precursor to “Human Action”), I was put off to the point of shock by the first 180 pages of “epistemological” balderdash, thus missing for many years the good stuff on economics that comes later in the book.
Misesian apriorism triggered the first alarm that would begin to wake me up from my uncritical libertarian slumber, the second was libertarian anarchism (pushed by the Mises Institute) and crytpo-anarchism (which latter is to be found in von Mises, i.e. an almost exclusive preoccupation with the evils of the state practically identical with an outspoken avowal of anarchism).
I have not read “Choice,” but from many other books and articles by Murphy – a good expositor – that I have read, I judge him to be superficial, necessarily so, as he is a mere speaking trumpet of the Mises Institute (line). He is into exegesis, defence, and proselyting; he is not into unprejudiced research, lacking the true scholar’s readiness to be refuted and confronted with unexpected insight.
If you want high quality analysis concerning Misesian epistemology, by far the best source is “Lord Keynes (LK),” a passionate Keynesian, whose philosophical analysis of von Mises epistemology is outstanding.
Hard to accept for me in the beginning, in view of the author’s fanatical Keynesianism, but ultimately I was more interested in sound reasoning than in partisan sartorial issues, meaning: I don’t care if the best analyst of von Mises’ epistemology holds economic views that differ from mine.
I recommend the section in LK’s blog on “Debunking Austrian Economics 101” and the various sub-categories offered there, such as “Debunking Austrian Apriorism and Praxeology.” There is also a sub-category entitled “Against Robert Murphy.”
At any rate, Lord Keynes ought to be standard reading for every (Misesian or otherwise) libertarian. His criticisms are highly intelligent, a true challenge.
Here is the link:
http://socialdemocracy21stcentury.blogspot.de/p/blog-page.html
I recommend reading the link I provided above.
I’ll read some of LK’s stuff, but my reading of his comments on Murphy’s blog don’t provide much hope.
Thanks for drawing my attention to this interesting paper.
It is some time ago that I examined von Mises’ epistemology according to my own lights.
Later, when I chanced on LK’s copious blog entries on the matter, I found myself in concurrence with most of the findings on this specific issue that he reports at his blog – producing in me at long last the effect of sufficient corroboration and a certain closure of the matter.
There comes a time when one gets tired of being sent around in circles or into traps and impasses by Mises’ uninhibited epistemological inconsistency and opaqueness.
Mises was severely traumatised by the onslaught of the overly powerful German Historical School against Austria’s “merely peripheral” Carl Menger and his students (their German opponents denying the possibility of a general economic theory), and endeavoured to come up with an old-fashioned, nowadays obsolete philosophical strategy, being consumed with the burning ambition to present an epistemological “fundamentum inconcussum” on which to base a truly general theory of economics. Concerning this obsolete philosophical predilection, I have jotted down a few ideas here, some time ago:
http://redstateeclectic.typepad.com/redstate_commentary/2014/07/performative-contradiction.html
Mises offers a lot of good economics in his works, which, however, contrary to his claims, has no genuinely substantive connection with his whimsical praxeology, largely because his economics has in large measure been collated from earlier economists, which is not to deny his own important contributions – e.g. to the theory of money or the analysis of socialism.
Not surprisingly, Mises never (even tried to) develope his praxeology into a decent formal axiomatic theory so as to give it a clearly provable/refutable form. Praxeology is a messy hotchpotch created by someone who endeavours to articulate absolute truth, a royal road to (economic) knowledge.
Didn’t George Bernard Shaw say “don’t judge a book by the first 180 pages?”
Further, I think you’re very unfair to Murphy. His dissertation is very good as is a lot of his analysis of energy policy. I’m not a huge fan of the Mises institute either, but there are plenty of other Austrians who publish in real journals.
My reading of LK (mostly in comments) suggests that he is hopelessly steeped in the most naive Keynesianism. It certainly colors his analysis. His unwillingness to use his real identity is childish and makes him more akin to a troll than a scholar.
Well, I am not concerned with Murphy’s dissertation or pronouncements on energy policy.
I cannot confirm that LK’s statements on Misesian epistemology are biased by his Keynesian economics, Many of the arguments he incorporates into his posts are from philosophers unconcerned with economics. I myself do not subscribe to Keynesianism, preferring Arnold Kling’s ideas in this regard.
I am curious as to who LK is, I must admit, but I respect his choice of privacy, and am unhindered by it in the occasional pleasure of learning from or being challenged by him.
Wait, who gas?
LK is some guy who trolls Murphy. I had a spat with him a while back and pretty much wore him out and I don’t even care about either side of his pet hobby horse.
And when did the subject here become Bob Murphy’s petsonality?
The topic is a,Murphy book expounding Mises.
The main criticism is Murphy adheres to “the Mises line.” ?
Yes, Georg’s criticism is that he adheres to “the Mises line,” as you put it.
To the extent that this is true, he’s simply mistaken. The link I provided above is a wonderfully written paper by Nicholas Cachanosky on Austrian epistemology. I doubt very seriously that moving to Cachanosky’s thesis would change the overall point of Murphy’s book, especially since Murphy spends a lot of time focusing on the empirical aspects of Austrian Business Cycle theory.
Well, Murphy does good work and is an honest scholar. I provided evidence of that. You accuse him of being “superficial” and “a speaking trumpet” of the Mises Institute. Murphy works with plenty of other scholars and organizations (his book is published by The Independent Institute and he has worked with Fraser recently as well). You say you’re “not concerned with” his work that is obviously very scholarly and honest. That is just disingenuous nonsense.
I could see that LK would be a welcome voice of skepticism if your experience with Austrian thought were confined to the internet and LvMI. There are many Austrian scholars out there who have and continue to make actual contributions to economics. It’s tough to run into them if one confines his reading to blogs, but they’re out there.
If I want Keynes, I go to Keynes. Maybe Lord Keynes.
If I want,Mises, I would go to Mises.Maybe Bob Murphy.
I would not look in Lord Keynes for Mises nor the other way around.
Right?
“Murphy works with plenty of other scholars and organizations (his book is published by The Independent Institute and he has worked with Fraser recently as well).”
Wow, a whole epistemological universe away, those institutes are!
Seriously though, not impressed. I interned at I.I. back in 2008, they’re awfully committed to normative libertarianism. Economic analysis comes second.
Dain,
My point was that Murphy isn’t a microphone for a single organization.
Scholars (I’m talking about professional economists, not policy advocates) associated with the Independent Institute are very much respected.
If you’re looking for someone, anyone, to be “unbiased,” you’ll never stop looking. It doesn’t exist. The question is the quality of their analysis. Of course, one has to be properly trained to evaluate the quality of analysis.
No, it wouldn’t lead to rejection, but that is because there is much other evidence in its favor. It can lead us to a better understanding of its limits, what we mean by such concepts, and other concepts that can be significant in improving our understanding of it and modifying it. Dogma is reduced to the first crude approximation of a much more complex reality. We learn what makes a coin fair (I hear all coins are fair, it is the tossing that can lead to bias). Concepts and language are ambiguous and imprecise and we can choose to refine our definitions or our models, broadening benefits to incorporate subjective transitory phenomena or exploring how our reasoning fails us. The ridiculous position is to assume we have nothing to learn and scoff at the procession of Mercury because Newton told us all we must know.
Maybe I’m just too gullible but I found the whole praxeology obsession a bit OTT but nonetheless useful. It is only by introspection that we can understand ‘choice’ and when we have revealed a preference by making an action, that action ranked ahead of our second choice. Saying otherwise is self contradictory.
I think the only line of attack I can think of is either to undermine conscious choice as behavioural types like to do, eg finding examples where we make choices without conscious thought. However, that only works if you think ‘you’ are only the conscious decision maker which I think is a bit of a daft position. I think we are the whole package whether we like it or not.
Second line of attack might be the eliminative reductionist position of denying there is a you at all, the self is illusion stuff but I think that fails on the undergrad challenge that who is it that is being deceived, you? But you dont exist, it’s an illusion etc.
I would sincerely like to see a logical rebuttal of Austrian theory as so far as much as I have looked, I can’t find one. The Keynes post earlier is with respect rather a lot of strawmen and ad hominems.
Physics can refute the idea that we’re even a unified self, if you REALLY wanna get into the woods here. And so much brain science is showing that as far as conscious or unconscious action goes, we’re not even the same people across our life span.
Austrian notions of choice begin to look awfully weak up against all this.
I wonder if what most upsets people about Austrian theory is it appears so morally offensive, and as Hayek said repeatedly if the logic takes you to a place you don’t feel comfortable, most people don’t go there or find reasons not to.
This paper is quite amusing as it attempts to show that science is biased depending on how morally offensive the hypothesis is, why would it be different for economics?
http://download.springer.com/static/pdf/224/art%253A10.1007%252Fs13164-015-0282-z.pdf?originUrl=http%3A%2F%2Flink.springer.com%2Farticle%2F10.1007%2Fs13164-015-0282-z&token2=exp=1439747786~acl=%2Fstatic%2Fpdf%2F224%2Fart%25253A10.1007%25252Fs13164-015-0282-z.pdf%3ForiginUrl%3Dhttp%253A%252F%252Flink.springer.com%252Farticle%252F10.1007%252Fs13164-015-0282-z*~hmac=97dccbeb2b83d68fbba2532d03254440a2a834ff8c72599cf718860654c8c3ad
Mises hit upon the right starting point for economic analysis. What many people get hung up on is a failure to understand Mises’ distinction between theory and history. Mises is not against empirical work per se, he simply says that it is not a substitute for theory, rather, it is history, and to understand historical analysis, we must appeal back to theory, not the other way around.
Take the minimum wage: we know the laws of supply and demand from deduction. They are pure theory. The question in empirical studies is whether, and to what degree, the laws of supply and demand are relevant to explaining what happened in a particular case. Pure theory actually offers a very simple case where a minimum wage won’t lead to any unemployment: if the minimum wage is set below the market clearing wage, rather than above it, for all labor markets. Finding a lack of effect in such a case would not be scandalous to the a priori theorist.
Economics often predicts a number of different influences may impinge on an outcome in any given case: it tries to narrow down in theory these influences by imposing a condition of ceteris parabus on the hypothetical. Historical conditions of specific time and place don’t have to abide by such a condition. If we fail to statistically observe an effect we predict from introspective deduction in real life, it doesn’t mean our reasoning was wrong about the hypothetical we assumed. It means the real world situation was different from the hypothetical one.
Arnold’s coin example is good. You can’t flip a coin enough times to even say that unique coin is “fair.” And what If you did, do you have time to do the next coin?
Well hey, if you need a fair coin flip There’s a great high tech alternative to the real thing.
Climate data? Thanks but I’ll just go with the coin.
Not that kind of noise, actually. They use radio receivers. It’s all very cool.
I was joking 🙂
Are we sure Aliens aren’t manipulating our stock futures bets?
Re: Pigs can’t fly.
There’s the joke about the chemist, physicist and mathematician riding on a train in Scotland. The chemist looks out the window and sees a black sheep. “Hey, look! They have black sheep in Scotland.”
“Not necessarily,” says the physicist. “All you can say is there is in Scotland at least one sheep that is black.”
“And not even that,” opines the mathematician. “All we know is that there exists in Scotland one sheep, at least half of which is black.”
Actually, that kind of misses the logical point. The point is that just because no flying pig have been observed, therefore one concludes that no flying pig exists. Of course we can’t prove that conclusively. One can’t prove a negative.
I always heard this version of the joke:
An engineer, a scientist, a mathematician, and a philosopher are hiking through the hills of Scotland, when they see a lone black sheep in a field.
The engineer says, “What do you know, it looks like the sheep around here are black.” The scientist looks at him skeptically and replies, “Well, at least some of them are.” The mathematician considers this for a moment and replies, “Well, at least one of them is.” Then the philosopher turns to them and says, “Well, at least on one side.”
My key example of this us always the Card and Krueger paper looking at fast food chains across county lines and the change to minimum wage in one county. It is a fine paper, except for what people try to use it for.
“The way I read Murphy/Mises, economic laws are derived from insight into human nature. At least some insight into human nature comes not from observation but from introspection. The insight that comes from introspection is not falsifiable.”
This reflects Mises’ German/Austrian roots, or, more specifically, the legacy of Kant on their intellectual tradition.
I’ve seen people eat a free ice cream cone. I’ve seen people eat two free ice cream cones. I’ve never even seen anyone offered a free third ice cream cone, Diminishing returns.
I’m thinking if sending this lyric to Drake.