Mises, Rothbard, and the Methodology of Austrian Economics
by Stephen D. Parsons (De Montfort University)
Austrian economics tends to identify itself both in terms of its unique methodological position and its distinctive claims about the economy, as exemplified in the socialist calculation debate. However, in the case of Mises, the methodological defence of economic theory, or praxeology, appears to indicate that the Austrian contribution to the debate was not a praxeological exercise. Moreover, it is difficult to appreciate how claims about private property, uncertainty, and calculation can be logically inferred from the assumption that individuals act in the manner claimed by Rothbard. FULL PAPER
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Wow, I can see this turning into a lively thread.
To begin, Mr. Parsons (p13) states:
“Consequently, a priori categories include those of means, ends, costs, proceeds. The problem here is that the a priori categories include monetary categories such as costs and proceeds….As a non-monetary economy would not operate with the concepts of ‘costs’ and ‘proceeds’ yet these concepts must appear ‘perfectly’ wherever there is human action, then human action is impossible in such an economy.”
This is just silly. Praxeological terms such ‘costs’ and ‘revenue’ are in no way founded upon the existence of a monetary economy. These terms refer to PSYCHIC cost and revenue.
All actions involve a choice, and thus actions entail subjective ‘costs’, i.e the expected utility/value of the best alternative action forgone. Psychic revenue refers to the difference between the utility of the actor’s state prior to beginning the action, and the utility of his state after completing the action.
An action may improve an actor’s condition, in which case we would say the actor had earned a psychic ‘proft’. Or, it may turn out that the action was in error and that the actor was better off before acting. In this case we would say he had suffered a psychic ‘loss’.
These psychic profits and losses are subjective and can be known only by the actor himself. They are in no way measurable.
I find it very hard to believe that someone who has supposedly studied praxeology and considers themselves qualified to write a paper on the subject, could have such a complete misunderstanding of these basic praxeological concepts of psychic revenue, profit, and loss.
I eagerly await Mr.Parsons’ refutation of Hoppe’s
Economic Science and the Austrian Method.
Let the bloodbath begin
I like the last example. Someone has the idea of running a person over with their car, they then are so shocked that they had this idea that the shock leads them to accidentally press down on the gas pedal and run the person over. It is claimed that this act was not a choice and illustrates no preference. Yes sir, this really does explain the real world better than anything an austrian economist ever had to say.
Brian said, “These psychic profits and losses are subjective and can be known only by the actor himself. They are in no way measurable.”
Actually, you can measure them with surveys
, with the same value that political surveys have in relation to the actual act of voting.
I did not know the paper was up here, but thanks for the comments! I am aware that Mises talks in Human Action of ‘psychic profit’, but always believed this was an embarrassing lapse. For example, he writes ‘profit is the difference between the higher value attached to the reults and the lower value attached to the sacrifice … yield minus costs’. If anyone can explain to me how this claim is compatible with ordinal utility, I would be grateful. Why not simply ‘gains and loss’? Why ‘profit’unless it is measured?
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