Investigations into the Method of the Social Sciences

The Two Basic Orientations of Theoretical Research in General and of That in the Field of Economy in Particular

The opinion that there is only one orientation of theoretical research.—The realistic-empirical orientation of theoretical research and its advantages.—That it is not suited to producing strict laws, so-called “laws of nature” of phenomena.—Nature and kinds of theoretical knowledge which it can produce.—The realistic-empirical orientation of theoretical research in the field of economy.—The exact orientation of theoretical research in general.—Its object and theoretical basis.—The exact orientation of theoretical research in the social sciences in general and in economics in particular.—An exact theory by its nature always offers us only the understanding of a special side of the phenomena.—Exact economics can only provide us with the theoretical understanding of the economic side of social phenomena.—Only the totality of the exact social sciences could reveal to us the exact understanding of social phenomena, or of a definite part of them, in their full empirical reality.

In Book Two the nature of the “historical point of view” in political economy is to be described; or, more correctly, that influence is to be described which is exercised on the theoretical and practical sciences of economy and on the nature of their truths by the fact that economic phenomena exhibit development. However, before we go on to the solution of this problem, we must mention another error that has contributed to no smaller extent than those characterized in the two preceding chapters to the confusion of the methodological doctrines of the historical school of German economists and discussion of which can therefore not be avoided at this point.

But we should most particularly like to direct the attention of our readers to the following investigations, not merely because they expose a basic methodological error of the historical school, without the knowledge of which the attitude of the latter to the questions discussed here cannot be completely understood. They simultaneously throw a bright light on the theoretical problems of our science in more than one respect.

Above we have distinguished between the two main orientations of research in general and in the realm of economic phenomena in particular: the individual (the historical) and the general (the theoretical). The former strives for the cognition of the individual nature and the individual connection of phenomena, the latter for that of their general nature and general connection. Now it would be a gross one-sidedness to believe that the general orientation of research in the various realms of the world of phenomena, and even in one special realm of it, e.g., in that of economy, is of necessity one without differences. Just as the individual orientation of research breaks down into various special orientations (the historical one in the narrower sense, the statistical one, etc.), which all to be sure bear the character of the individual orientation of research, but simultaneously exhibit certain special features when compared to one another, so theoretical research also breaks down into several branches. Each one of these, to be sure, bears the character of the general orientation of research, i.e., it has as its object the determination of the types and the typical relationships of the phenomena; nevertheless it does not necessarily solve this problem from the same point of view. The subject of the following investigations is the determination of the orientations of theoretical research which are most important for our science. Along with this goes an attack on the opinion held almost universally by the methodologists that there is only one orientation of theoretical research, or else that only one orientation of the latter (e.g., the empirical, or the exact, or else even the historical-philosophical, the theoretical-statistical, etc.) is adequate for certain realms of the world of phenomena in general and those of economy in particular.

The purpose of the theoretical sciences is understanding of the real world, knowledge of it extending beyond immediate experience, and control of it. We understand phenomena by means of theories as we become aware of them in each concrete case merely as exemplifications of a general regularity. We attain a knowledge of phenomena extending beyond immediate experience by drawing conclusions, in the concrete case, from certain observed facts about other facts not immediately perceived. We do this on the basis of the laws of coexistence and of the succession of phenomena. We control the real world in that, on the basis of our theoretical knowledge, we set the conditions of a phenomenon which are within our control, and are able in such a way to produce the phenomenon itself.

The desire for knowledge of so great a scientific and practical interest, the desire for cognition of the types and typical relationships of phenomena, is as old as civilization. Only the degree of development of this desire for knowledge has increased in the course of cultural development in general and in the development of the sciences in particular.

The most obvious idea for solving the above (the theoretical) problem is to investigate the types and typical relationships of phenomena as these present themselves to us in their “full empirical reality,” that is, in the totality and the whole complexity of their nature; in other words, to arrange the totality of the real phenomena in definite empirical forms and in an empirical way to determine the regularities in their coexistence and succession.

This idea has also led in all realms of the world of phenomena to the corresponding orientation of theoretical research, the realistic-empirical one. It has done this not only for the reason that, as said, it presents itself to us as the most obvious one, but for the reason that the purposes which theoretical research serves seem at the same time to be attained most simply and completely by means of this orientation of research.

The theoretical sciences are, as we saw, supposed to teach us the types (the empirical forms) and the typical relationships (the laws) of phenomena. By this they are to provide us with theoretical understanding, a cognition going beyond immediate experience, and, wherever we have the conditions of a phenomenon within our control, control over it. How could we now solve the above problems more simply, more suitably, and yet at the same time in a more complete way than by arranging in strict types the phenomena of the real world as they are presented in their empirical reality and by obtaining their strictly typical relationships—“laws of nature”?

Close examination, however, teaches us that the above idea is not strictly feasible. Phenomena in all their empirical reality are, according to experience, repeated in certain empirical forms. But this is never with perfect strictness, for scarcely ever do two concrete phenomena, let alone a larger group of them, exhibit a thorough agreement. There are no strict types in “empirical reality,” i.e., when the phenomena are under consideration in the totality and the whole complexity of their nature. This might be the case if each individual concrete phenomenon were set up as a particular type. By this the purpose and usefulness of theoretical research would be completely invalidated. The desire to determine strict categories of empirical forms comprising “all empirical realities” (according to their full content) is therefore an unattainable goal of theoretical research.

So also with respect to the second problem of theoretical research: the determination of typical relationships, laws of phenomena. If the world of phenomena is considered in a strictly realistic way, then laws of the latter signify merely the actual regularities, determined by way of observation, in the succession and in the coexistence of real phenomena which belong to certain empirical forms. A “law” obtained from the above point of view can in truth only state that in reality, regularly or without exception, phenomena belonging to the empirical form C have followed the concrete phenomena belonging to the empirical forms A and B, or that they were observed coexistent with them. The conclusion that the phenomenon C follows the phenomena A and B in general (that is, in all cases, even those not observed!), or that the phenomena under discussion here are in general coexistent, transcends experience, the point of view of strict empiricism. From the standpoint of the above manner of consideration it is not strictly warranted. Aristotle recognized this correctly when he denied the strictly scientific character of induction. But even the inductive method perfected essentially by Bacon was only able to increase the guarantees of the absoluteness of the laws gained in the above way (empirical induction); it was never able to offer absolute guarantee of it. Strict (exact) laws of phenomena can never be the result of the realistic school of thought in theoretical research even if this were the most perfect conceivable and its fundamental observation the most comprehensive and most critical.

The scientific knowledge to which the above orientation of theoretical research, the empirical-realistic, can lead, merely in consideration of the methodological presuppositions of the latter, can only be of two kinds:

(a) real types, basic forms of real phenomena, within the typical image of which, however, a more or less broad scope is given for particularities (also for the development of the phenomena!), and

(b) empirical laws, theoretical knowledge, which make us aware of the actual regularities (though they are by no means guaranteed to be without exception) in the succession and coexistence of real phenomena.

If we derive from what has been said its practical application for theoretical research in the realm of economic phenomena, we arrive at the result that, as far as the latter are brought into consideration in their “full empirical reality,” only their “real types” and “empirical laws” are attainable. Properly there can be no question of strict (exact) theoretical knowledge in general or of strict laws (of so-called “laws of nature”) in particular for them, under this presupposition.

But what needs no less to be emphasized is the circumstance that with this presupposition the same thing also holds true of the results of theoretical research in all the remaining realms of the world of phenomena.1 For even natural phenomena in their “empirical reality” offer us neither strict types nor even strictly typical relationships. Real gold, real oxygen and hydrogen, real water—not to mention at all the complicated phenomena of the inorganic or even of the organic world—are in their full empirical reality neither of strictly typical nature, nor, given the above manner of looking at them, can exact laws even be observed concerning them.

Not only in the realm of the ethical world, and of economy, but also in that of natural phenomena, the realistic orientation of theoretical research can lead only to “real types” and “empirical laws.” And in the above point of view, at any rate, no essential difference between the ethical and the natural sciences exists, but at most only one of degree. The realistic orientation of theoretical research excludes in principle, rather, in all realms of the world of phenomena the possibility of arriving at strict (exact) theoretical knowledge.

If there were only the one, just now characterized orientation of theoretical research, or if it were the only justified one, as the economists of the “historical orientation” in fact seem to believe, then the possibility of or the justification for any research aimed at exact theories of phenomena would a priori be out of the question. Not only in the realm of ethical phenomena in general and of economy in particular, but also in all other realms of the world of phenomena any success would a priori be denied to the above-mentioned effort.

It scarcely needs to be stated that the above presupposition is invalid in the realm of natural phenomena. The task of the following investigations will be to show that the situation is the same in the realm of human phenomena in general and of economy in particular. It will also be to show that the opinion of our historical economists, that the realistic-empirical orientation of theoretical research is the only justified one in the field of economy, accordingly involves one-sidedness and its inevitable consequences.

The realistic-empirical orientation of theoretical research, as we saw, offers us in all realms of the world of phenomena results which are formally imperfect, however important and valuable they may be for human knowledge and practical life. They are theories which give us only a deficient understanding of the phenomena, only an uncertain prediction of them, and by no means an assured control of them. From the very beginning, too, the human mind has followed another orientation of theoretical research beside the one discussed above. It is different from the latter both in its aims and in its approaches to cognition.

The aim of this orientation, which in the future we will call the exact one, an aim which research pursues in the same way in all realms of the world of phenomena, is the determination of strict laws of phenomena, of regularities in the succession of phenomena which do not present themselves to us as absolute, but which in respect to the approaches to cognition by which we attain to them simply bear within themselves the guarantee of absoluteness. It is the determination of laws of phenomena which commonly are called “laws of nature,” but more correctly should be designated by the expression “exact laws.”2

The nature of the research activity generally directed toward the goal just described and of economic research in particular will become clear directly from the following statements.

There is one rule of cognition for the investigation of theoretical truths which as far as possible is verified beyond doubt not only by experience, but simply by our laws of thinking. This is the statement that whatever was observed in even only one case must always put in an appearance again under exactly the same actual conditions; or, what is in essence the same thing, that strictly typical phenomena of a definite kind must always, and, indeed in consideration of our laws of thinking, simply of necessity, be followed by strictly typical phenomena of just as definite and different a type. Phenomena A and B must under the same conditions always be followed by the strictly typical phenomenon C in so far as A and B are thought of as strictly typical and the succession of phenomena under discussion here has been observed even in only a single case. This rule holds true not only of the nature of phenomena, but also of their measure, and experience not only offers us no exception to it, but such a thing simply seems inconceivable to the critical mind.

A further rule of cognition likewise highly significant for the exact orientation of theoretical research is only a correlate of the above statement. This is the statement that a circumstance which was recognized as irrelevant only in one case in respect to the succession of phenomena will always and of necessity prove to be irrelevant under precisely the same actual conditions in respect to the same result.

If, therefore, exact laws are at all attainable, it is clear that these cannot be obtained from the point of view of empirical realism, but only in this way, with theoretical research satisfying the presuppositions of the above rule of cognition.

But the way by which theoretical research arrived at the above goal, a way essentially different from Bacon’s empirical-realistic induction, is the following: it seeks to ascertain the simplest elements of everything real, elements which must be thought of as strictly typical just because they are the simplest. It strives for the establishment of these elements by way of an only partially empirical-realistic analysis, i.e., without considering whether these in reality are present as independent phenomena; indeed, even without considering whether they can at all be presented independently in their full purity. In this manner theoretical research arrives at empirical forms which qualitatively are strictly typical. It arrives at results of theoretical research which, to be sure, must not be tested by full empirical reality (for the empirical forms here under discussion, e.g., absolutely pure oxygen, pure alcohol, pure gold, a person pursuing only economic aims, etc., exist in part only in our ideas). However, these results correspond to the specific task of the exact orientation of theoretical research and are the necessary basis and presupposition for obtaining exact laws.

In a similar way exact research solves the second problem of the theoretical sciences: the determination of the typical relationships, the laws of phenomena. The specific goal of this orientation of theoretical research is the determination of regularities in the relationships of phenomena which are guaranteed to be absolute and as such to be complete. We have already demonstrated that laws of this kind are not attainable in respect to the full empirical reality of phenomena, and, indeed, because of the not strictly typical nature of real phenomena. Exact science, accordingly, does not examine the regularities in the succession, etc., of real phenomena either. It examines, rather, how more complicated phenomena develop from the simplest, in part even unempirical elements of the real world in their (likewise unempirical) isolation from all other influences, with constant consideration of exact (likewise ideal!) measure. It does this without taking into account whether those simplest elements, or complications thereof, are actually to be observed in reality uninfluenced by human art; indeed, without considering whether these elements could be found at all in their complete purity. In this case it is also aware that a completely exact measure is not possible in reality. Science starts out, however, with these assumptions, since it would never be able otherwise to reach the goal of exact research, the determination of strict laws. On the other hand, with the assumption of strictly typical elements, of their exact measure, and of their complete isolation from all other causative factors, it does to be sure, and indeed on the basis of the rules of cognition characterized by us above, arrive at laws of phenomena which are not only absolute, but according to our laws of thinking simply cannot be thought of in any other way but as absolute. That is, it arrives at exact laws, the so-called “laws of nature” of phenomena.

The circumstance that certain differences of phenomena (deviations from their strictly typical character) appear as irrelevant in respect to definite results (e.g., the different color, the different taste of substances in respect to their weight, the same and numerous other differences in respect to their numerical relationships, etc.) permits an incomparable expansion of exact research over numerous realms of the world of phenomena.

Thus we arrive at a series of sciences which teach us strict types and typical relationships (exact laws) of phenomena, and indeed not only in respect to their nature, but also to their measure. We attain to sciences, no single one of which teaches us to understand full empirical reality, but only particular sides, and therefore must not be judged rationally from the point of view of one-sided empirical realism. But the totality of these sciences conveys to us an understanding of the real world which is just as distinctive as it is profound.3

Also in the realm of the ethical world the above orientation of theoretical research has from the beginning found outstanding representatives who have vigorously pursued the kind of striving for cognition under discussion here, even if without complete clarity about the related theoretical problems. Indeed they have already given to it the form corresponding to the particular nature of ethical phenomena.

The nature of this exact orientation of theoretical research in the realm of ethical phenomena, however, consists in the fact that we reduce human phenomena to their most original and simplest constitutive factors. We join to the latter the measure corresponding to their nature, and finally try to investigate the laws by which more complicated human phenomena are formed from those simplest elements, thought of in their isolation.

Whether the individual constitutive factors of human phenomena, thought of in their isolation, are real; whether these can in reality be measured exactly; whether those complications, in the case of which (according to the nature of exact research) an abstraction must be made from the effect of a variety of factors of real human life, actually put in an appearance—all this is no less irrelevant for the exact orientation of theoretical research in the realm of social phenomena than in the realm of nature. Only complete lack of understanding of the exact orientation in general can apply to the results of the latter the standard of the postulates of the empirical-realistic orientation of theoretical research.

As we pursue this orientation of research we attain to a series of social theories, each single one of which opens up for us, to be sure, only the understanding of a special side of the phenomena of human activity (abstracted from the full empirical reality). The totality of this, however, if the theories corresponding to the above orientation of research are ever to be recognized for what they are, will teach us to understand human phenomena in a way similar to that in which those theoretical sciences, which are the result of an analogous consideration of natural phenomena, have opened to us the understanding of the latter. Not just any one theory of human phenomena, only the totality of such theories, when they are once pursued, will reveal to us in combination with the results of the realistic orientation of theoretical research the deepest theoretical understanding attainable by the human mind of social phenomena in their full empirical reality. And however remote the realization of the above thought may be, considering the lagging state of the theoretical social sciences—there is no other way to reach the great goal.

As far as the exact orientation of theoretical research in the realm of economic phenomena is specifically concerned, its general nature is given by the postulates of exact research. Its particular nature is given by the particularity of the realm of the phenomena on which it has the task of working. By economy we understand the precautionary activity of humans directed toward covering their material needs; by national economy, the social form of this activity.4 The problem of the above orientation of research can accordingly be nothing else than the investigation of the most original, the most elementary factors of human economy, the determination of the measure of the phenomena concerned, and the investigation of the laws by which more complicated forms of the phenomena of human economy develop from those simplest elements.5

The most original factors of human economy are the needs, the goods offered directly to humans by nature (both the consumption goods and the means of production concerned), and the desire for the most complete satisfaction of needs possible (for the most complete covering of material needs possible). All these factors are ultimately given by the particular situation, independent of human choice. The starting point and the goal of all economy (need and available quantity of goods on the one hand and the possible completeness of satisfaction of the material needs on the other) are ultimately given to the economic human, strictly determined in respect to their nature and their measure.6 The function of the exact orientation of theoretical research is to apprise us of the laws by which not real life in its totality but the more complicated phenomena of human economy are developed on the basis of the thus given situation from these most elementary factors in human economy, in their isolation from other factors exerting influence on the real human phenomena. It is to teach us this not only in respect to the nature, but also to the measure of the above phenomena, and thus to open up for us an understanding of these which has a significance analogous to that which the exact natural sciences offer us in respect to natural phenomena.

When we allude to the nature and the significance of the exact orientation of theoretical research in the realm of human phenomena in general and in particular in that of economy, and thus confront the one-sided realism of the social sciences, we are, to be sure, far from denying usefulness and significance to the realistic orientation, and far from under-estimating it and thus of falling into the opposite one-sidedness. This charge, however, is made against all those who, one-sidedly pursuing the exact orientation of theoretical research in the field of economy, consider the determination of its empirical laws as worthless, or for any methodological reasons whatever consider the attempt to attain such laws as inadmissible. For it may be admitted ever so unreservedly that people are governed in economic things neither exclusively by a single definite propensity, in our case by their egoism, nor are uninfluenced by error, ignorance, and external compulsion. It may accordingly be admitted that the results of the realistic orientation of theoretical research in the field of economy cannot exhibit complete rigor. But from this it by no means follows that no regularities at all in the nature and connection of phenomena can be observed from the realistic point of view in the realm of the world of phenomena under discussion here. It does not follow that their determination is not of great significance for the understanding of economy and the prediction and control of its phenomena. On the contrary, wherever we look, economic life confronts us with regularities both in the coexistence and in the succession of phenomena. This is a fact which must probably be attributed to the circumstance that people in their economic efforts, even if not exclusively and without exception, nevertheless are predominantly and regularly governed by their individual interests and on the whole and regularly recognize the latter correctly, even if not in all cases and absolutely. The real phenomena of economy actually present to us types and typical relationships, real regularities in the recurrence of definite forms of phenomena, real regularities in coexistence and succession, which, to be sure, are not of absolute strictness, but to determine which is under all circumstances the task of theoretical economics and particularly of its realistic orientation.

Both the exact and the realistic orientation of theoretical research are therefore justified. Both are means for understanding, predicting, and controlling economic phenomena, and to these aims each of them contributes in its own way. But whoever denies the justification and usefulness of the one or the other is comparable to a natural scientist who one-sidedly values physiology highly, perhaps under the pretext that chemistry and physics are based on abstractions, and would deny the justification of the latter or their justification as means for the understanding of organic structures. Or else, conversely, he resembles a physicist or chemist who would deny to physiology the character of a science because its laws are for the most part only “empirical.” If analogous doctrines in the field of theoretical social sciences are not only possible, but are announced by influential erudite schools as fundamental, indeed, as epoch-making truths, we find in this, perhaps, the best evidence for the imperfect state of these sciences. It is also an admonition to the experts in them seriously to take counsel with themselves about the theoretical bases of their scientific efforts.

There is scarcely any need to remark that the nature and significance of the exact orientation of research is completely misunderstood in the modern literature on national economy. In German economics, at least in the historical school, the art of abstract thinking, no matter how greatly distinguished by depth and originality and no matter how broadly supported empirically—in brief, everything that in other theoretical sciences establishes the greatest fame of scholars is still considered, along with the products of compilatory diligence, as something secondary, almost as a stigma. The power of truth, however, will finally also be tested for those who, sensing their inability to solve the highest problems of the social sciences, would like to raise their own inadequacy as a standard for the value of scientific work in general.

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7 See Appendix V: “In the Realm of Human Phenomena Exact Laws (So-Called Laws of Nature) Can Be Established Under the Same Formal Presuppositions as in the Realm of Natural Phenomena.”

8 The expressions “empirical laws” and “laws of nature” used in theoretical investigations by no means characterize exactly the contrast between the results of the realistic orientation in theoretical research and of the exact. Even in the realm of natural phenomena (e.g., in that of the organic world, of weather phenomena, etc.) the realistic orientation of research leads merely to “empirical laws.” There are, accordingly, laws of nature (in the true sense of the word) which are only “empirical laws” and hence not “laws of nature” in the above technical sense of the word, whereas conversely we can in other realms of the world of phenomena (not merely in that of the phenomena of nature) arrive at strict laws, “laws of nature,” which again are not laws of nature (laws of the phenomena of nature). The contrast under discussion here is expressed much more exactly by the phrases “empirical” and “exact” laws of phenomena. The laws of theoretical economics are really never laws of nature in the true meaning of the word. On the contrary, they can be only empirical or exact laws of the ethical world.

Another terminology stands in close connection with the above terminology. It is likewise incorrect and has already contributed much to confusion in the theoretical problems of our science. The contrast between the theoretical natural sciences and the theoretical social sciences is merely a contrast of the phenomena which they investigate from a theoretical point of view. It is by no means a contrast of methods, as both the realistic and the exact orientation of theoretical research are admissible in both realms (natural and social) of the world of phenomena. A contrast exists only between the realistic and the exact orientation of theoretical research, and between the sciences comprising the results of both orientations, the empirical and the exact theoretical sciences. There are natural sciences which are not exact ones (e.g., physiology, meteorology, etc.), and conversely there are exact sciences which are not natural sciences (e.g., pure economics). Accordingly it is not an accurate expression when this latter is called a “natural science.” It is in truth an exact ethical science. It is just as wrong, finally, to speak of the natural science method in the social sciences in general and in theoretical economics in particular. The method of the latter can be either the empirical or the exact one, but in truth never that of “natural science.”

9 The method of exact research, that is, the part which experiment plays in it, which the speculative element transcending experiment and all experience plays, especially in the formulation of “exact laws,” is not the object of our presentation in this book. It will find a separate presentation in another place in connection with a critique of Bacon’s induction.

10 See Appendix I.

11 Compare my Grundsätze der Volkswirtschaftslehre (1871), p. vii ff.

12 See Appendix VI: “The Starting Point and the Goal of All Human Economy Are Strictly Determined.”

• 1Menger does not draw from this insight the conclusion reached by Mises and Hayek that a basic distinction exists between the methods of inquiry and validation appropriate to social science and those appropriate to natural science. But this is not because, like some economists, he sees empiricism or positivism or falsificationism as the only proper method for both social science and natural science. Instead he argues (p. 59 n. 18) that both the search for empirical regularities and the formulation of non-empirical, non-falsifiable (“exact”) theories are methods common to both economics and such natural science fields as chemistry. In viewing theoretical research in every field as having a non-empirical proposition at its core, Menger’s position bears some resemblance to that of modern philosophers of science.
• 2With regard to the specific content of the core proposition of economics, however, Menger’s view is not nearly so modern. In claiming (p. 88) that economic theory is limited to the realm of “the efforts of economic humans aimed at the provision of their material needs,” Menger seems wedded to a late Classical, or at any rate needlessly narrow, view of the scope and method of economics. On a properly broad view of economics as the study of ends-seeking activity of all sorts, it becomes clear that the “Pure Logic of Choice,” as Hayek has called the core of economic theory, does not need to ascribe a “definite volitional orientation,” i.e., a special set of concrete ends, to the agents it studies. Still less does pure economic analysis rest, as Menger believes it does (p. 216), on the assumption that “the ultimate goal of all human economy is … to cover our direct material needs” or in other words that economic behavior is physiologically determined. Without this idea Menger’s distinction between “economic” and “other” sources of human action breaks down. Yet we should not too harshly criticize Menger for what amounts to a failure to see all the implications of the subjective approach to economics he himself pioneered. We who intellectually stand on the shoulders of those who stood on his shoulders quite naturally see a wider horizon for economics.
• 3With regard to the specific content of the core proposition of economics, however, Menger’s view is not nearly so modern. In claiming (p. 88) that economic theory is limited to the realm of “the efforts of economic humans aimed at the provision of their material needs,” Menger seems wedded to a late Classical, or at any rate needlessly narrow, view of the scope and method of economics. On a properly broad view of economics as the study of ends-seeking activity of all sorts, it becomes clear that the “Pure Logic of Choice,” as Hayek has called the core of economic theory, does not need to ascribe a “definite volitional orientation,” i.e., a special set of concrete ends, to the agents it studies. Still less does pure economic analysis rest, as Menger believes it does (p. 216), on the assumption that “the ultimate goal of all human economy is … to cover our direct material needs” or in other words that economic behavior is physiologically determined. Without this idea Menger’s distinction between “economic” and “other” sources of human action breaks down. Yet we should not too harshly criticize Menger for what amounts to a failure to see all the implications of the subjective approach to economics he himself pioneered. We who intellectually stand on the shoulders of those who stood on his shoulders quite naturally see a wider horizon for economics.
• 4We see in this passage just quoted an “essentialist” outlook quite contrary to the “instrumentalist” outlook officially more popular among neoclassical economists today, which says that the falsity of assumptions does not matter. (Significantly, instrumentalism is particularly preferred by those who espouse a hard-natural-science model for economics.) The ultimate goal of science for the instrumentalist is prediction, which enables control. Menger recognizes prediction-and-control as one goal of economic science (p. 36), but not as the exclusive goal: “Theoretical economics has the task of presenting not merely the laws’ of economic phenomena to us, but also their ‘general nature.’ (p. 198) Menger later, in a letter to Leon Walras, defended nonmathematical methods of economic theorizing as the only way to study “the nature of economic phenomena . . . (e.g., the nature of value, rent, profit, the division of labor, bimetallism, etc.).” An emphasis on essentialist understanding and explanation through verbal methods has been characteristic of the Austrian School from Menger down to the present. With respect to essentialism Menger’s methodological views are very much alive in modern Austrian economics.
• 5We see in this passage just quoted an “essentialist” outlook quite contrary to the “instrumentalist” outlook officially more popular among neoclassical economists today, which says that the falsity of assumptions does not matter. (Significantly, instrumentalism is particularly preferred by those who espouse a hard-natural-science model for economics.) The ultimate goal of science for the instrumentalist is prediction, which enables control. Menger recognizes prediction-and-control as one goal of economic science (p. 36), but not as the exclusive goal: “Theoretical economics has the task of presenting not merely the laws’ of economic phenomena to us, but also their ‘general nature.’ (p. 198) Menger later, in a letter to Leon Walras, defended nonmathematical methods of economic theorizing as the only way to study “the nature of economic phenomena . . . (e.g., the nature of value, rent, profit, the division of labor, bimetallism, etc.).” An emphasis on essentialist understanding and explanation through verbal methods has been characteristic of the Austrian School from Menger down to the present. With respect to essentialism Menger’s methodological views are very much alive in modern Austrian economics.
• 6We see in this passage just quoted an “essentialist” outlook quite contrary to the “instrumentalist” outlook officially more popular among neoclassical economists today, which says that the falsity of assumptions does not matter. (Significantly, instrumentalism is particularly preferred by those who espouse a hard-natural-science model for economics.) The ultimate goal of science for the instrumentalist is prediction, which enables control. Menger recognizes prediction-and-control as one goal of economic science (p. 36), but not as the exclusive goal: “Theoretical economics has the task of presenting not merely the laws’ of economic phenomena to us, but also their ‘general nature.’ (p. 198) Menger later, in a letter to Leon Walras, defended nonmathematical methods of economic theorizing as the only way to study “the nature of economic phenomena . . . (e.g., the nature of value, rent, profit, the division of labor, bimetallism, etc.).” An emphasis on essentialist understanding and explanation through verbal methods has been characteristic of the Austrian School from Menger down to the present. With respect to essentialism Menger’s methodological views are very much alive in modern Austrian economics.
• 7In particular, Imre Lakatos has written: “All scientific research programmes may be characterized by their ‘hard core’…. This ‘core’ is ‘irrefutable’ by the methodological decision of its protagonists: anomalies must lead to changes only in the ‘protective’ belt of auxiliary, ‘observational’ hypothesis and initial conditions.” Lakatos, “Falsification and the Methodology of Scientific Research Programmes,” in Imre Lakatos and Alan Musgrave, eds., Criticism and the Growth of Knowledge (London: Cambridge University Press, 1970), p. 133. Lakatos (ibid, pp. 128–130) gives an example from chemistry that fits neatly Menger’s conception of exact theory prevailing over attempted refutation by observation of actual (non-pure) elements. For a comparison of Lakatos with Mises see Mario J. Rizzo, “Mises and Lakatos: A Reformulation of Austrian Methodology,” in Israel M. Kirzner, ed., Method, Process, and Austrian Economics: Essays in Honor of Ludwig von Mises (Lexington, MA: D.C. Heath, 1982), pp. 53–73. Mises, as noted already, held that the core propositions of economics are not falsifiable.
• 8See Ludwig von Mises, Epistemological Problems of Economics (New York: New York University Press, 1981), p. 124 n. 5, for the statement that Menger’s Investigations defends classical rather than modern economics. This is cited and endorsed by Ludwig M. Lachmann, “The Significance of the Austrian School of Economics in the History of Ideas,” in Capital, Expectations, and the Market Process, ed. Walter E. Grinder (Kansas City: Sheed Andrews and McMeel, 1977), p. 48. It was Lionel Robbins’s The Nature and Significance of Economic Science [2nd ed. (London: Macmillan, 1935)] which, borrowing from Mises and other Austrians, decisively broadened modern economists’ conception of their discipline from that of a science of material welfare to that of a science of allocative behavior generally. On this see Israel M. Kirzner, The Economic Point of View, 2nd. ed. (Kansas City: Sheed and Ward, 1976), ch. 6. Kirzner (ibid., eh. 7) points out that Mises’s conception of economics as a science of human action is broader still.
• 9Mises has criticized Menger’s views on this in detailed fashion in Epistemological Problems of Economics, pp. 171–174.
• 10The locus classicus here is Milton Friedman, “The Methodology of Positive Economics,” in Essays in Positive Economics (Chicago: University of Chicago Press, 1953), esp. pp. 7, 41.
• 11Quoted in William Jaffé, “Unpublished Papers and Letters of Leon Walras,” Journal of Political Economy 43 (April 1935), p. 200.
• 12For a recent reconstruction of the methodological case for this approach see Don Lavoie, “The Interpretative Dimension of Economics: Science, Hermeneutics, and Praxeology,” Center for the Study of Market Processes Working Paper 1985–15.