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Is There a Missing Element in Austrian Economics?

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Tags Other Schools of ThoughtPraxeologyValue and Exchange

That’s what John Mueller argues in the latest issue of the Quarterly Journal of Austrian Economics. The issue features a symposium on Mueller’s work—inspired by his Lou Church Memorial Lecture at the Austrian Economics Research Conference—that includes an essay by Mueller along with replies by Michael Watson (here) and me (here). This is actually the second time I’ve discussed Mueller’s writing, the first being in a review of his 2010 book, Redeeming Economics.

I’m grateful, however, for the opportunity to comment once again, as the symposium raises a number of important questions for Austrians to think about, especially regarding the basic assumptions of economics, the limits of theory, and the Scholastic heritage in the history of economic thought.

The central question in our debate is whether Austrian economic theory can fully explain human action and its consequences. Specifically, Mueller argues that modern economics can’t account for the role of love in human action. Consequently, economics explains only narrowly self-interested behavior, not selfless acts. This in turn means economics is missing a theory of “final distribution,” or how goods and services ultimately wind up in the hands of those who consume them.

For example, a mother who feeds her child is not acting out of self-interest, but of love for her infant, which explains why she feeds her child rather than consuming all her food herself. According to Mueller, standard economic assumptions cannot account for either the mother’s loving behavior or her distribution of food to her child. Likewise, there are an enormous number of similar non-exchange behaviors that fall outside economic analysis. What is needed then is a thorough revision of theory to incorporate these missing actions, and this is what Mueller sets out to do.

Nevertheless, readers of Mises will perhaps see the difficulty with Mueller’s argument: praxeology suggests that all action is self-interested in that it tries to substitute a more for a less satisfactory state of affairs, from the point of view of the actor. Action is thus a kind of exchange, though not necessarily an exchange of goods and services. Rather, when a loving mother feeds her child, she exchanges the less desirable state of the child’s hunger for the more desirable state of the child’s nourishment. Taken this way, selflessness, or love, does not pose much of a problem for economic theory.

Concepts like love are part of what Mises called thymology, or the study of human psychology as it relates to action. Praxeology deals with the implications of action, while thymology concerns the content of human values. Thymology is thus the tool we use to acquire “specific understanding” of historical human action: that is, of people’s motivations, thoughts, judgements, etc. Love and hate are important parts of this understanding.

In my opinion then, Mises’ economic theory already incorporates Mueller’s missing element. Mueller’s critique does, however, apply to some schools of economic thought. For instance, he criticizes the British classical economists for first expunging the ideas of selflessness and love from economics. In Mueller’s view, economics would have been better off had the classical economists more closely adhered to the ideas of the Scholastics. This is one place Austrians are likely to agree with Mueller, as they too have criticized the British for neglecting early versions of the subjective theory of value. Incidentally, contrary to Mueller’s suggestion, Rothbard did not endorse a Whig theory of the history of economic thought, and in fact, detested such theories.

In any case, although I often disagree with his conclusions, Mueller’s ideas make for interesting reading, and will, I hope, inspire some discussion about the history of economics. In particular, they raise important questions regarding the extent of Scholastic contributions to economics, and how they might have been unfairly neglected in light of the success of British classicism.

Matt McCaffrey is assistant professor of enterprise at the University of Manchester.

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