I was thinking about Mises' definition of "rationality" and it seems pretty useless to me, it's pretty much a tautology. It just seems that the neoclassical usage is both more fruitful and intuitive.
I can't really spell out what I mean so I'm wondering if anybody else has any links or thoughts.
edit: who is it that keeps deciding to give my topcis 1 star the moment I post them?
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Mises' "rationality" is just the other side of the coin of subjective value theory. i.e. we can't criticize some-ones ends directly on value terms, the best we can do is say, given his ends, how well we think his chosen means will achieve them for him.
not only is it so related to subjective value theory, but also, it is another way of saying that human action is goal oriented. the rationality of man, is in his reasoning about the means he has and about how to achieve the ends he has.
you're not going to junk the action axiom just because neo-classicals tell you its tautological are you?
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nirgrahamUK:you're not going to junk the action axiom just because neo-classicals tell you its tautological are you?
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Fixed title, moved to appropriate forum.
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liberty student: Fixed title, moved to appropriate forum.
Thanks, sorry for any inconveniences.
nirgrahamUK: Mises' "rationality" is just the other side of the coin of subjective value theory. i.e. we can't criticize some-ones ends directly on value terms, the best we can do is say, given his ends, how well we think his chosen means will achieve them for him. not only is it so related to subjective value theory, but also, it is another way of saying that human action is goal oriented. the rationality of man, is in his reasoning about the means he has and about how to achieve the ends he has. you're not going to junk the action axiom just because neo-classicals tell you its tautological are you?
But neoclassicals don't criticize the ends held by individuals. I agree, that neoclassicals are unsufficiently subjectivist in the sense that they take knowledge as a "given" (see Hayek's "Economics and Knowledge"), but it's just not true that they criticize the ends individuals hold. Caplan, for example, doesn't say that people that people shouldn't value protectionism, he just says that it's rational for people to demand more of it when the price is low (or even negative).
Take a fairly simply example. An individual wants to satiate his hunger and thus decides to eat 20 chocolate bars. Given Mises' definition it's rational simply because he's doing it. For the neoclassical it's irrational for the obvious reason. It just seems that Mises' definition is both useless and "unscientific", any behaviour is rational.
How is the standard neoclassical approach not goal oriented?
Snowflake: nirgrahamUK:you're not going to junk the action axiom just because neo-classicals tell you its tautological are you? Indeed the tautological definitions of austrians are the basis of their praxeologic economic theory. In this way, austrians are always a priori and always right even though they sacrifice on predicting the specifics. I think this is the main point of contention between austrians and the neoclassicals, that the NCs want to predict everything with eqns and the austrians are content to simply understand what is currently happening. I guess you can't make any money or get any kred if you don't at least pretend to know what the economy is going to do.
Don't neoclassicals use basically the same assumption of rationality? Individuals act to maximize their utility function, given their limited knowledge. Sometimes they use ideas like bounded rationality or other variants, but even in that case, it's not clear that an individual can ever truly make an error. Even drug use is rational, according to this theory (check out Becker's "A theory of rational addiction"). This version is just as much a tautology as the Misesian version (Caldwell has a few articles on the maximization principle, from a vaguely Austrian perspective).
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GilesStratton:A priori does not mean "always right".
GilesStratton:Not all Austrians consider Mises' dichotomy between theory and history correct, so stop the blanket statements.
GilesStratton:Where have you been for the past few months? Mainstream macro guys have pretty much been saying "look, we know we couldn't predict the financial crisis, but at least we predicted that we wouldn't be able to predict it..."
Actions are means to achieve individual ends. His definition implies all means and action is rational to achieve any end, which is stupid.
GilesStratton:Take a fairly simply example. An individual wants to satiate his hunger and thus decides to eat 20 chocolate bars. Given Mises' definition it's rational simply because he's doing it. For the neoclassical it's irrational for the obvious reason. It just seems that Mises' definition is both useless and "unscientific", any behaviour is rational.
no, human action is rational, a human behaviour may or may not be. instinct reflex e.t.c., are just givens and not directly analysed by praxeology..
have you read this?
http://mises.org/story/2249
he even mentions caplan
scineram:Actions are means to achieve individual ends. His definition implies all means and action is rational to achieve any end, which is stupid.
whats stupid about it?
There is nothing rational about raindancing.
you are confusing ignorance with irrationality.
nirgrahamUK: no, human action is rational, a human behaviour may or may not be. instinct reflex e.t.c., are just givens and not directly analysed by praxeology.. have you read this? http://mises.org/story/2249 he even mentions caplan
Thanks, I'll read it, just to be clear, I'm not attempting to refute the Misesian view here, it's just something that I've found problematic for a long time. Granted, if I sneeze, it's usually not a rational action and this poses problems in terms of application of theory to history. But that's a seperate problem.
My point was, all action is rational because it's defined in such a way, but I find the definition to be problematic. I mean, if I have to stock up food for my nuclear bombshelter in which I will have to live for a month, any choice I make from the Misesian definition will be rational. So if I choose to live of 1000 chocolate bars and 1 loaf of bread for a month, Mises et al would say "that's rational". But, the neoclassical would say, that's just stupid the optimal bundle would be "X,Y".
ziragt: Don't neoclassicals use basically the same assumption of rationality? Individuals act to maximize their utility function, given their limited knowledge. Sometimes they use ideas like bounded rationality or other variants, but even in that case, it's not clear that an individual can ever truly make an error. Even drug use is rational, according to this theory (check out Becker's "A theory of rational addiction"). This version is just as much a tautology as the Misesian version (Caldwell has a few articles on the maximization principle, from a vaguely Austrian perspective).
But ultimately it makes sense for a neoclassical to say "he acted irrationality", for an Austrian economist that's impossible.
GilesStratton: Mises et al would say "that's rational". But, the neoclassical would say, that's just stupid the optimal bundle would be "X,Y".
Misesians still can call the means chosen stupid , easily done in thought experiments, harder in real life as gathering all the relevant facts is difficult. ; even if they call the inefficacious choice rational. stupid!=irrational. ignorance!=irrational.
GilesStratton: for an Austrian economist that's impossible
yes, say that to an Austrian and you are pretty much saying a contradiction, that the person did not act at all. or that he wasn't a person. etc.
still we can talk about efficacy, and of knowledge of alternative means etc, just remember there is no point even discussing such issues unless the rationality of the actors involved is presumed.
Here, Rothbard points out that Mises uses the word "rational" in a way that nobody else uses it. I'm surprised that it hasn't been posted already.
scineram: There is nothing rational about raindancing.
Given the state of technology, raindancing might very well be rational. It's not rational if you know that it does not work, and even then it's only irrational if you try to bring rain by dancing. If you're dancing just for the hell of it, and the dance is called a raindance, then, again, it's completely rational.
There's nothing irrational in acting accordingly to the state of knowledge you have - in fact, that's the only way one can act.
What do you mean by 'rational'? The agent believes that this will satiate some want, ergo carries out the action. The thinking is rational, i.e. conclusions following inferentially from premises, even if wrong/unsound. So at best one could say someone is holding to a flawed premise - you'd need to be able to say their ends are irrational to say they should not do so, and this is something Mises considers external to the orbit of economics.
I think the definition is fine as far as praxeology goes. There's multiple meanings of the term and all are fine in a given context. When most people say 'irrational' they seem to mean 'wrong'/unsound, but that isn't the same thing.
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Action is subjectively rational because it is believed to bring about the desired end. The perception might be flawed(as in the case of Indian raindances), the action chosen might be suboptimal; but in each case the problem is not a rationality one.
Keynes must've been a fan of Brave New World; why else would he write a book about its economics?
Santtu: Given the state of technology, raindancing might very well be rational. It's not rational if you know that it does not work, and even then it's only irrational if you try to bring rain by dancing. If you're dancing just for the hell of it, and the dance is called a raindance, then, again, it's completely rational. There's nothing irrational in acting accordingly to the state of knowledge you have - in fact, that's the only way one can act.
This ^^^.
Snowflake: Indeed the tautological definitions of austrians are the basis of their praxeologic economic theory. In this way, austrians are always a priori and always right even though they sacrifice on predicting the specifics. I'm not sure I agree with this one. If a person builds up a logical system, something mathematicians do all the time for instance, he does it in three steps. Step 1. Makes a list of the "things" he will be talking about. Euclid, for example, said he would be talking about lines points and circles. He may also try to tell you what these things are, by giving a definition of each of them. This is usually the messiest part of the whole system, because every definition relies on you understanding the words used in the definition. And if you try to explain those, you will have to use more words, which need more defining. It literally never ends. There are a few ways out of this. Modern math just says, I am not going do define what they are. I will just make a list here and move on to Step 2. Euclid tried to use poetic words that would make the reader's mind imagine what a circle is, hoping everyone would imagine the same thing. AE apparently does both at the same time, using tautologies. "We both know the vague image more or less that your common sense produces when these words are used. Well that's the definition. Green cheese is defined to be green cheese." Step 2. Making a list of assumptions about the things listed in step 1. These are called the axioms of the system. How do we know these axioms are true? Modern math says "I'm not going to bother ascertaining if they are true. I am just going to assume them. Go to step 3." Euclid appeals to common sense to see these axioms as "self evident." So does Mises. Although they could be, no tautologies are used here. They just clutter things up. You introduce nothing new into the system by stating the obvious in Step 2, such as "a circle is a circle." Step 3. Here everyone appeals to common sense. They all say [even mathematicians], "Thousands of years of experience and wisdom have introduced into the storehouse of human knowledge that which is called The Rules of Deduction. We are now going to apply the Rules of Deduction to the axioms listed in Step 2 and see what new valid conclusions we come up with." A tautology is a valid deduction. Green cheese is indeed green cheese. But it is never used, because it is a triviality. We all knew that already. OK we have shown what a deductive system looks like when all goes well. Where can mistakes creep in? In step 1: Applying the definitions where they don't fit. It may be true that "All elite basketball players can dunk the ball." But if you think some guy in a wheelchair fits the definition of an elite basketball player when he doesn't, you will think he can dunk the ball when he can't. In step 2: Choosing the wrong axiom. Had Euclid taken it as a self evident that the shortest distance between two points is a circle, he would be in trouble. In step 3: Using the wrong rules of deduction. If a person accepts as a valid rule of deduction that "Everything I say is right," he will grind out errors. The point of all this is that using a tautology does not guarantee you will avoid any of the possible mistakes listed above. I think this is the main point of contention between austrians and the neoclassicals, that the NCs want to predict everything with eqns and the austrians are content to simply understand what is currently happening. I guess you can't make any money or get any kred if you don't at least pretend to know what the economy is going to do. I am very surprised at this one, Snowflake. AE is full of predictions. Here are a few: If you print money, you will get inflation. A socialist state will waste resources. In a Socialist state, the odds are excellent that no one will get what they want. A boom caused in a certain way will always produce a bust. Any attempt whatsoever by gov't to end a recession will lengthen it. Any decrease in govt interference in any sphere of economic activity will produce better results.
I'm not sure I agree with this one.
If a person builds up a logical system, something mathematicians do all the time for instance, he does it in three steps.
Step 1. Makes a list of the "things" he will be talking about. Euclid, for example, said he would be talking about lines points and circles. He may also try to tell you what these things are, by giving a definition of each of them. This is usually the messiest part of the whole system, because every definition relies on you understanding the words used in the definition. And if you try to explain those, you will have to use more words, which need more defining. It literally never ends.
There are a few ways out of this. Modern math just says, I am not going do define what they are. I will just make a list here and move on to Step 2. Euclid tried to use poetic words that would make the reader's mind imagine what a circle is, hoping everyone would imagine the same thing. AE apparently does both at the same time, using tautologies. "We both know the vague image more or less that your common sense produces when these words are used. Well that's the definition. Green cheese is defined to be green cheese."
Step 2. Making a list of assumptions about the things listed in step 1. These are called the axioms of the system. How do we know these axioms are true? Modern math says "I'm not going to bother ascertaining if they are true. I am just going to assume them. Go to step 3." Euclid appeals to common sense to see these axioms as "self evident." So does Mises. Although they could be, no tautologies are used here. They just clutter things up. You introduce nothing new into the system by stating the obvious in Step 2, such as "a circle is a circle."
Step 3. Here everyone appeals to common sense. They all say [even mathematicians], "Thousands of years of experience and wisdom have introduced into the storehouse of human knowledge that which is called The Rules of Deduction. We are now going to apply the Rules of Deduction to the axioms listed in Step 2 and see what new valid conclusions we come up with." A tautology is a valid deduction. Green cheese is indeed green cheese. But it is never used, because it is a triviality. We all knew that already.
OK we have shown what a deductive system looks like when all goes well. Where can mistakes creep in?
In step 1: Applying the definitions where they don't fit. It may be true that "All elite basketball players can dunk the ball." But if you think some guy in a wheelchair fits the definition of an elite basketball player when he doesn't, you will think he can dunk the ball when he can't.
In step 2: Choosing the wrong axiom. Had Euclid taken it as a self evident that the shortest distance between two points is a circle, he would be in trouble.
In step 3: Using the wrong rules of deduction. If a person accepts as a valid rule of deduction that "Everything I say is right," he will grind out errors.
The point of all this is that using a tautology does not guarantee you will avoid any of the possible mistakes listed above. I think this is the main point of contention between austrians and the neoclassicals, that the NCs want to predict everything with eqns and the austrians are content to simply understand what is currently happening. I guess you can't make any money or get any kred if you don't at least pretend to know what the economy is going to do.
I am very surprised at this one, Snowflake. AE is full of predictions. Here are a few: If you print money, you will get inflation. A socialist state will waste resources. In a Socialist state, the odds are excellent that no one will get what they want. A boom caused in a certain way will always produce a bust. Any attempt whatsoever by gov't to end a recession will lengthen it. Any decrease in govt interference in any sphere of economic activity will produce better results.
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