Economic models may be logical and some economic models may approach real life events but human economic is not logical because all human activity is effected by our sin nature.

The primary human error is faulty risk/benefit analysis. For example, ciggy butt smoking. If nicotine was addictive then the source of nicotine to poor people would be immaterial, just as the source of alcohol is immaterial to winos.

I have suggested to many theoretically poor people standing on line to get handouts and smoking factory made ciggy butts that they could save 75% by rolling their own. The universal reply: I don’t like the taste. Then there are the people who borrow money to buy toys . . . logical?

i think essentially what kant and consequently mises were getting at is modeling. in the scientific method, this is called the “hypothesis” or the “theory”. sometimes these are referred to as “laws”, but i find that term deceptive; such as newton’s “laws” of motion. (the universe doesn’t obey newton’s “laws”; newton’s “laws” usefully model an aspect of the universe.) if your model provides sufficiently accurate predictions about emperical data, then you can consider it useful; usefulness is then a function of accuracy. but by godel’s incompleteness theorem, the information in your model must always be less than the information of what you’re modeling.

the real unification of rationalism and empericism, to me, seems to be stochastics, rather than determinism. both norbert wiener with cybernetics and alfred korzybski with general semantics emphasize this.

-z

The first thing I ever heard Murray Rothbard say was that Austrian economics participates in a tradition that goes back all the way to Aristotle by way of the Thomist Scholastics. In light of Marcus Verhaegh’s recent article in these pages, we would do well to remember this, because a Kantian underpinning to Austrian economics is not as solid a foundation as an Aristotelian/Scholastic one.

Whether Mises himself was a Kantian I am not qualified to say. It is clear that Rothbard was an Aristotelian/Thomist. And I think many would agree that some of his improvements to the Misesian system are traceable to this fact. It’s not my purpose here to argue the point, but rather to discuss the inadequacy of Kantian “transcendentalism” as groundwork for Austrian economics.

For virtually all philosophers from the Nominalists to Kant, metaphysics, the understanding of being in itself, is impossible. (Kant was the one who finally had the guts to say so.) The reason is their prejudice that the relations (such as cause and effect) that give intelligibility to reality are merely fictions of the mind, as the Nominalists taught, not real relations that actually tell us about the being of things. And so, as Verhaegh points out, Kant’s mode of thinking is “broadly ‘transcendental’ – where this term refers to basing inquiry in the search for the conditions of knowledge.” Nothing could be further from the insights of classical philosophy, summed up by Aristotle in The Metaphysics, that the real world really tells us about itself; and that it really makes sense. For the classical philosopher, experience teaches us about reality, while for Kant, we create our own experience and our own reality.

Does this seem like too bold a claim? Obviously, we have an equivocation in the use of the word “experience.” For Aristotle, experience is what we take in through our senses about the world around us. We abstract from the particularities of sensory data to uncover underlying realities, general knowledge about being, cause and effect, and so on. This knowledge may not be complete (we don’t fully know essences), but it is reliable as far as it extends, and it can be built upon and improved. What we have with Kant is the mind imposing on the data acquired from sensation a mental construct that “makes intelligible” sensory data. Relations such as cause and effect that we seem to discover in real phenomena are actually only constructs of our minds that we “know” are true because they are “conditions for knowledge.” Experience comes to mean not the sensory input, but the complete picture presented to our understanding after the mind has worked its magic. But I would say this begs the question of whether all minds impose the same constructs on phenomena in the same way. And this is crucial to the discipline of economics.

If each mind creates experience in this way, then is not the polylogism of a Marx or a Sombart perfectly understandable? Why can’t the bourgeois mind impose one set of “conditions for knowledge,” the Aryan mind another, the proletarian mind one more still, and so on and on? Under this assumption, Marx is perfectly justified in calling his system “scientific.” After all, he imposes on history a construct of his mind that is a condition for proper understanding of the laws of history. The proof of his ideas is the apparent intelligibility they give to the historical phenomena. His ideas “must be the case if we are to make sense of the world.”

Of course, a classical philosopher, such as Eric Voeglin, would call this Gnosticism (and did, too!). If Austrian economics were truly grounded in Kantian transcendentalism, I see no answer the discipline could give to Marx’ claims. Because the transcendental philosopher is unable to make any statement about what is. Any Marxist would be irrefutable whenever he accused an Austrian of merely having an insufficiently raised consciousness.

The first sentence of Verhaegh’s essay, “Ludwig von Mises puts forth an account of economic laws based in logic, not experience,” is therefore false, if experience is understood, correctly, after the manner of the classical philosophers, not of Kant. The starting point for Austrian economics is the Action Axiom. We know that the a priori reasoning of the Austrian method is valid because it is grounded in our knowledge of action, which we know to be true on account of our experience (in the classical sense) of action, that is, that we all act, and know what we’re doing when we do so. We know the being-ness of action, because it is something we do. That’s why we speak of an axiom; it does not have to be proved. We know the scientific and practical laws that we deduce a priori from this starting point are statements about reality, not statements about what must be the case if we are to make sense of the world.

Therefore, we also know that the world does make sense, in and of itself.

To tidy up a loose end, let me point out that to say that Austrian economics is grounded in experience (classically understood) is not to say that it is experimental. The success of the empirical sciences in the modern age can perhaps be traced in part to the fact that empirical science is “under the radar” as far as these philosophical debates go. Because empirical science does not claim to make statements about being, natural philosophers could get on with their experiments without worrying about the problems I have reviewed. I will never forget the answer my high school physics teacher, Roger Lucido, gave me when I asked him if light was a wave or a particle: “It’s neither; it’s the equation” (Schrodinger’s, that is). For a physicist, this is the perfect answer, because he’s not interested in what light is. To run the experiments needed to develop Schrodinger’s equation, it doesn’t matter if you understand causation as a real relation or if you assume every event has a cause because the world won’t make sense any other way.

Is it any wonder that most social scientists want to ground their discipline in empiricism? If they can do that, then they can fly under the radar as well. Maybe their disciplines can advance by leaps and bounds, as did physics and chemistry and all the rest. Maybe they’ll receive the plaudits (and grant money) of a grateful world. Maybe they can leave these questions to St. John’s College graduates who sell insurance for a living (what a downer), sweating out an essay at their keyboards instead of watching Harry Potter on DVD. And maybe then they can ignore those pesky Austrian economists who keep saying their policies won’t work, and who keep getting it right, because they just happen to be in touch with what’s real.