Praxeology and Realism

The following are ideas I have read about, rather than my position. I do think they merit consideration, but I haven't reached a conclusion yet. (I just thought I'd clear that up so I don't get labelled an anti-Austrian!)

 

Thinking about the economy, we basically conceive of human action on the one hand and institutions and social structure on the other (language, law and money are especially important). Praxeology explains the origins of institutions (money for example) as a result of human action. This seems valid, but two issues arise:

1) Human action does not explain the origin of all institutions this way. Some institutions (presumably language) and co-operation would be necessary for the emergence of trade. These institutions, alongside human action, are a part of the explanation.

2) In market activity we draw on pre-existing institutions, such as money and law. These institutions may be explained completely by earlier human action, or they may have drawn on other pre-existing institutions (see previous point). Either way, the explanation consists of something more than just human action.

More generally human action and social structure are best understood as being recursively related.  They are both a cause (a necessary condition) and a consequence of the other.

Does this present a problem for praxeology? How would you answer?

 

Human action includes language and co-operation.  It is not merely "trade," which I think is the point they are trying to make.  Social structure emerges from human action.  Whether it is deliberate or not is irrelevant.

That's not quite it. Nobody is suggesting language is not human action. The question is rather whether this human action causes some sort of structure which makes further human action possible (structures thereby exerting influence on human action), rendering incomplete an account which only includes human action.

So part of the issue of language is that it is not, and presumably cannot, be explained by praxeology. Does this just mean praxeology is incomplete (it cannot explain all social phenomena), or does it mean praxeology fundamentally distorts our understanding of economy and society?

How does it not explain it? The more the division of labour advances, and the more the benefits of cooperation multiply, the more one can achieve.

-Jon

Jon Irenicus:

How does it not explain it? The more the division of labour advances, and the more the benefits of cooperation multiply, the more one can achieve.

I'm not sure I get it either.  The OP said:

1)Human action does not explain the origin of all institutions this way. Some institutions (presumably language) and co-operation would be necessary for the emergence of trade. These institutions, alongside human action, are a part of the explanation.

2) In market activity we draw on pre-existing institutions, such as money and law. These institutions may be explained completely by earlier human action, or they may have drawn on other pre-existing institutions (see previous point). Either way, the explanation consists of something more than just human action.

I think that the objections raised in 1 (language, co-operation) can be thought of as preconditions of human action, as part of human nature.  I'm still not sure what 2 is saying.

Thank you both for your replies. I should just point out again that the ideas we're examining are not mine. Furthermore, I'm still unsure whether it does pose problems or not.

Jon Irenicus:

The more the division of labour advances, and the more the benefits of cooperation multiply, the more one can achieve.

Both sides to the argument agree with this. The issue is not whether liberty and the division of labour result in benefits. It is whether it can be explained simply by human action, or whether other elements are required for explanations of economic activity.

Let me try to clarify point (2): Human action resulted in language, money (Menger), law (Hayek etc.). But now these institutions actually exist! They are not merely subjective meanings. Therefore one cannot really explain the market economy without acknowledging the influence of these institutions, which goes beyond praxeology and methodological individualism. To some extent this is already implicit in Austrian economics. I think this is what makes the argument espcially confusing.

But now these institutions actually exist!

Their 'existence' is nothing more than the perceptions, values and behaviours of independent human beings.  Money is only money because people desire it, such 'institutions' have no meaning whatsoever outside of the interaction of human beings and the values they place on the world.

Also, while cooperation is part of the market, most of the money-exchanges that go on are coordination, not cooperation.

I don't think you had said anything to question the position put forward either!

1) You haven't justified your claim that things like money and law are just perceptions. But what does it mean anyway - do you mean hallucination? Money and law facilitate cooperation. How is this possible if they are merely perceptions and have no real existence? Perceptions are of something real except when they are delusional.

2) It is true that money depends on human action for its meaning and continued existence, but do people continually create money anew, or does money itself have some part to play in the continued use of money?! Institutions only have "meaning" when humans are acting, but when they are acting, and drawing on these institutions, they are an important element.

1) You haven't justified your claim that things like money and law are just perceptions. But what does it mean anyway - do you mean hallucination? Money and law facilitate cooperation. How is this possible if they are merely perceptions and have no real existence? Perceptions are of something real except when they are delusional.

They are not 'hallucinations', but the value of money derives from people's subjective perception of its utility (and the utility of things it can be exchanged for).  If people did not value it thusly, it would not be money and would not exist.  No good, including money, exists without people considering it a good.  Law, money and markets in general are a result or outcome of individual human beings.  Gold or dollars are of course objective physical entities, but they are only 'money' because of a value people place upon them.

2) It is true that money depends on human action for its meaning and continued existence, but do people continually create money anew, or does money itself have some part to play in the continued use of money?! Institutions only have "meaning" when humans are acting, but when they are acting, and drawing on these institutions, they are an important element.

Past action effects what capital and structures exist, as well as directly influencing people's perceptions.  This in no way is contradictory or outside of human action.

Sam:

Does this present a problem for praxeology? How would you answer?

 

Mises and Rothbard both cover the emergence of social cooperation in Human Action and Man, Economy and State respectively. The action axiom by itself is not sufficient to explain social cooperation. This requires several subsidiary axioms. Human beings are unequal in their ability to perform various kinds of labour. Human beings have different wants. There is an unequal distribution of natural resources over the earth's surface. Man had reason which gives him the ability to recognize these inequalities take them into account. The first three each individually guarentee a higher productivity under a division of labour as explained by the Law of Association. The last is necessary for humans to utilize the division of labour.

So the emergence of social cooperation is not that hard to explain. Common language is a product of social cooperation. It is only a problem for one to explain two things in terms of a recursive relationship, such as human action and social institutions, if one cannot identify a starting point, or base case. But the logical starting point is isolated human action. The other subsidiary axioms explain the emergence of social cooperation starting from isolated action.

 

 

 

Neither Mises nor Rothbard explain it. Humans are born into families and will only survive if they are cared for. At once we can see that they are not isolated (of course there is a distinction between isolated man and isolated action, but in the absence of isolated individuals there will not be much isolated action). Explanations cannot be in terms of isolated action as there were no isolated actors. I agree with the praxeological deductions about isolated action (preference, time preference, interest etc.), and so all these things are at work in human action in the world. Perhaps isolated action is just a useful pedagogical device though.

Also, do you think trade took place without language (or maybe some primitive form of co-operation)? I don't see how this is possible. So it seems social co-operation as an outgrowth of families was necessary for language and for trade. I'm not sure if these are all human actions or some is instinctive or something, but the Mises-Rothbard explanation does not appear to make sense.

Some of the issues I'm discussing come a critical realist orientation (see Economics and Reality, Tony Lawson, Routledge 1997, also see David Gordon's review). Gordon rightly questions much of Lawson's position, but it should be realized that many of the shortcomings of Lawson are due to his hostility to Austrian economics, rather than some essential element of critical realism.

Subsequently there has been some interest in Austrian economics and critical realism (see Lewis - Boettke, The Austrian School and the Reclamation of Reality in Modern Economics at http://www.gmu.edu/rae/archives/TOC_18_1.html). Bottke and Beaulier respond in Transforming Economics, Lewis ed. Routledge 2004 ("The Really Real in Economics" which is also available at http://www.scottbeaulier.com/Publications.html)

I was hesitant to cite these as I think they contain questionable elements and I wanted to focus on the more serious problems they claim are faced by Austrian economics. If you want to explore these ideas please have a look and see if you can get a better understanding (either or both present the realist critique better than I have been able to or provide a convincing explanation of why it is not important or how it is already answered by Austrian economics).

Runde (Bringing Social Structure Back into Economics: On Critical Realism and Hayek’s Scientism Essay, Review of Austrian Economics 2001, also online)

 

 points out that institutions "exist independently of what any single person thinks about them." Money is money not because I perceive, or you perceive, but you and I and others perceive that other perceive it. In this way it is considered to be irreducible to human actors.

 

Welcome to the forum Sam and thanks for the interesting thread.

Sam:

The following are ideas I have read about, rather than my position. I do think they merit consideration, but I haven't reached a conclusion yet. (I just thought I'd clear that up so I don't get labelled an anti-Austrian!)

your concern is whether whether praxeology is sufficient to explain economic phenomena.

Sam:

Thinking about the economy, we basically conceive of human action on the one hand and institutions and social structure on the other (language, law and money are especially important). Praxeology explains the origins of institutions (money for example) as a result of human action. This seems valid, but two issues arise:

The term used for institutions and related issues was thymology.

Sam:

1) Human action does not explain the origin of all institutions this way. Some institutions (presumably language) and co-operation would be necessary for the emergence of trade. These institutions, alongside human action, are a part of the explanation.

Perhaps we should define what institutions actually are. Something is institutionalized when it is repeated action and generally accepted by a group of people in a way. This can include many things like authority figures, social roles, habits, concepts, values, norms, practices, rules and the like. Language is an institutions in the way that it is repetetive and commonly accepted in terms of meaning and rules. Money is an institution given it's general acceptance as a means of payment.

Sam:

2) In market activity we draw on pre-existing institutions, such as money and law. These institutions may be explained completely by earlier human action, or they may have drawn on other pre-existing institutions (see previous point). Either way, the explanation consists of something more than just human action.

There need to be rules of exchange for a market to work. Money can come in later as a generally acceted means of exchange. It is then accepted, because you know other people are going to accept it as payment.

Sam:

More generally human action and social structure are best understood as being recursively related.  They are both a cause (a necessary condition) and a consequence of the other.

Social structure in what sense? Human action of course can lead to social structure (or institutions in general) as well as given social structure and relationships can be an input to subsequent human action.

Sam:

Does this present a problem for praxeology? How would you answer?

As said the concept of thymology would deal with the institutional part. Human action as such depends on several factors. One would be that their is an agent able to act, with other words a perceiving being that can make conscious decisions and has the power to realize them. Human action requires perception, interpretation, thinking, willing and execution. Perception are inputs from the outside world that are sensed and interpreted. Here ones organic set up and ideas on the mind are already a factor. For decvisions will power and valuation do play an important role. Again what and how we think as well as our desires will be of importance. Finally execution would draw on previous practices as well and their are of course boundaries in reality to what can be executed and what not.

 

Nah, you're just asserting they do not explain it now. Moore's and Stephan's posts pretty much rebutted your position. You're dealing with a strawman, as Mises never postulated mere isolated action as adequate for studying the entirety of human action (he did use it though to derive concepts like profit, and action as inherently purposive.) Hayek in fact deflected this wrongheaded criticism of methodological individualism.

I'm not really sure what it is you're trying to get at. Praxeology gives explanations for how money, language &c. arise. It also explains categories such as profit, loss, valuation &c. Mises argued that past action determines the structure of future action (e.g. the capital structure may either inhibit or facilitate further creation of wealth), much like a given environment can. Praxeology is concerned with the general principles of human action. As Torsten remarked, thymology deals with particular situations.

-Jon