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The Logic of Economic Law

December 1, 2004

Ludwig von Mises puts forth an account of economic laws based in logic, not experience.  Due in part to this emphasis on the a priori—that which is not dependent on experience for its justification—Mises has long been viewed as relying upon the ‘transcendental’ approach of Immanuel Kant. 

At the same time, owing to Mises’ wandering from Kantian terminology and method, many commentators have wondered whether the appeal to Kant is anything more than a chimera.

Given the complexity of the exegetical issues involved, in a short account of the Kant-Mises connection, it may be better to ignore this question of how Mises is or is not a ‘neo-Kantian.’  This will allow for more general inquiry into the broad parallels and compatibilities between Kant and Mises.  Doing so will reveal that Mises’ thought finds a good friend in that of ‘the sage of Königsberg.’

What Kant and Mises share in common is the view that we can lay down scientific and practical laws by examining what must be the case if we are to make sense of the world.  This type of thinking is broadly 'transcendental'—where this term refers to basing inquiry in the search for the conditions of knowledge.  For example, as a transcendental thinker, Kant argues that ‘Every event has cause under constant laws’ is a claim we know to be true because it is a condition for knowledge. 

We do not have to run countless experiments to make sure that every event does indeed have a cause. Indeed, we have to assume that this is how the world works if we are to run any experiments whatsoever. If un-caused events were possible, or if the laws of nature all varied randomly from moment to moment, then nature would not be a proper object of knowledge, and  it would not be more rational to believe one view of nature over any other. Experimentation would be useless. Thus Kant’s transcendental approach secures the starting points for scientific experimentation, and for other modes of inquiry.

Mises thinking is similarly ‘transcendental.’  For example, Mises points out that when we see a person trade one good for another, we simply have to assume that they value the received good more than the one given away.  (Thus if I trade a Jaguar for a Pinto, it must be that—despite what one might think would be my view of which is the more valuable good!—I value owning the Pinto more than owning the Jaguar.)  In this way, action reveals value-preferences. 

We do not have to run millions of experiments to see that people value the good received in an exchange over the good given away. We do not have to run one experiment to see this. We don’t have to run any at all: Rather, we have to assume this point right from the start, if we are to come to any kind of knowledge of what it is for a person to engage in exchanges—and to come to any kind of knowledge of all the further economic activity that involves exchanges. ‘The good received in an exchange is valued more than the good given away’ is something that is true because it is a condition for economic knowledge, not because we have demonstrated it experientially.

Beyond noting such broad parallels, the key to placing Mises within a Kantian framework is to recognize that individuals’ ultimate valuations are not, for Kant, something that we can know—not even when it comes to one’s own valuations—and are therefore not described by the same type of laws used in natural science.

Hence, for Kant, laws about economic value generally have to be given by what Kant calls ‘reflective judgment’: this is a type of judgment that does not aim at describing what is the case in nature, but rather lays out how we humans are to think about nature and the things in nature—such as people. Thus we get a more ‘hermeneutical’ approach in social science than we find in natural science:  a greater sense of issues of meaning and interpretation is required, since the concern in social science should be with how phenomena relate to the human viewpoint, rather than with the nature of things as spatio-temporal objects.

Looking to the classification of ‘reflective judgment’ is important to avoid doing violence to Kant’s finely-grained system. Moreover, doing so allows us to focus on what Kant made clear with his account of reflective judgment: the way in which one needs different methods for ‘the human sciences’ than for natural science. Kant’s view here found fertile soil in the work of Dilthey and Mises.

At the same time, Kant’s approach was ignored or mis-understood by neo-Hegelian ‘optimists of reason,’ who thought that our progress in managing natural forces through application of physical and biological knowledge betokened a similar possibility for State management of human lives and aspirations.

In the face of such scientistic, managerial approachs to culture, revisitionist streams of thought are needed.  And so, as the 19th Century neo-Kantians put it:  ‘back to Kant!’  Here we will find a thinker of many faults and much un-clarity, who nonetheless offers us crucial intellectual tools for linking Austrian economics to wider theories of science, morality, and aesthetics.  With such tools, much can be accomplished as we move against the spreading, desiccating tendrils of the State apparatus.


Marcus Verhaegh is a fellow at the Mises Institute. See his philosophy website. Email: Verhaegh@mises.org. Post comments on the Blog.


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