Praxeology: Mises and Hayek

A reply to Alexander Malt’s essay on methodological individualism.

Alexander Malt has circulated a draft of his paper “Methodological Individualism: True and False” in which he aims to provide a Hayekian alternative to praxeology. In this paper I will address Malt’s foundational arguments related to praxeology. I find those foundational arguments to fall short in three important respects:

1. Malt’s critique of methodological individualism rests on the notion of action without judgement—the possibility of creating social objects unintentionally. However, methodological individualism, when properly understood, does not imply that all social objects are intentionally created. Methodological individualism is a theoretical procedure in which phenomena are examined from a first-person perspective.

2. There are two distinct strains in Mises’s praxeological thought: 1) Praxeology as chain-of-logical reasoning, and 2) Praxeology as study-of-mental categories or as study-of-the logical structure of the mind. Malt critiques the former but overlooks the latter.

3. In his writings, Hayek briefly discusses the possibility of two different praxeological methods: 1) Praxeology as tautological transformation of intentional objects, 2) Praxeology as the study of mental categories. Malt overlooks Hayek’s own praxeological suggestions not realizing that they constitute a praxeological alternative to Hayek’s spontaneous/emergent order program.

Methodological Individualism

Malt’s primary thesis is that methodological individualism is faulty because some social phenomena cannot be traced back to the intention of individual actors. He writes:

Hayek’s example of a path illustrates how the actions of individuals produces a structure which, first, those individuals did not intend to bring about and, second, influences those individuals’ subsequent actions:

At first everyone will seek for himself what seems to him the best path. But the fact that such a path has been used once is likely to make it easier to traverse and therefore more likely to be used again; and thus gradually more and more clearly defined tracks arise and come to be used to the exclusion of other possible ways. Human movements through the region come to conform to a definite pattern which, although the result of deliberate decisions of many people, has not been consciously designed by anyone. (Hayek 2010, 104)

Such a statement is at odds with the praxeologist’s reduction of complex social and economic phenomena to individuals and actions. Emergent social structures exert downward causation; they are not epiphenomena. Consequently, if there exist emergent economic institutions then explanation might be irreducible to individuals and actions, and must instead incorporate these institutions as basic elements.

Malt argues that it is possible for an individual or group of individuals to bring about a social phenomenon or social entity, such as a path, without intending to do so. Thus, methodological individualism, which would attempt to explain a path as something purposely created by individual actors, cannot be fruitfully applied.

However, Malt has misunderstood the principle of methodological individualism. Methodological individualism is not a procedure in which one attempts to conceive every social entity as purposely created by individual actors. Rather, methodological individualism is more accurately understood as a procedure in which one conceives every social attribute as a function of an individual attributor. The difference between these two conceptions can be easily illustrated.

In procedure #1, I observe a person making a path or contributing to the making of a path. I ask that person whether he intended to make the path. The person answers in the negative, and this proves that actors can create a social entity without purposely intending to create it.

This procedure entails an observer (actor 1), an observed person (actor 2), and an observed object (the path). The scientist (actor 1) attempts to provide a scientific explanation of the relationship between two social objects which he himself observes: actor 2 and the path. In this procedure, both actor 2 and the path are assumed to exist, objectively, as objects in spatial nature, in the same way that mountains and boulders are assumed to exist in spatial nature. Here, the social scientist does not examine the nature of his own observation of the two social objects he observes. Instead, he assumes, if only implicitly, that he is observing an objective situation.

If the issue of subjectivity arises, the scientist will assign the phenomenon of subjectivity to the relationship between actor 2 and the object. He will explain the subjective aspects involved in actor 2’s perception of the object. The scientist leaves the nature of the relationship between himself and the two social objects (actor 2 and the object) unaddressed. This creates the impression, typically unstated and unacknowledged, that the social scientist is observing and experiencing an objective world, while the actor observed by the social scientist is observing and experiencing a subjective world.

This way of looking at things is part of a specific scientific worldview. According to this worldview, both the social scientist and the physical scientist look out into the space in front of them in choosing their objects of study. The distinction between social science and physical science is that the social scientist chooses to study the social objects he observes in nature, while the physical scientist chooses to study the physical objects he observes in nature. Both sets of objects, the social and the physical, are assumed to exist in the objective sense; they are located in the space surrounding us; they have spatial coordinates. Social scientists isolate a specific subset of these objects, and this distinguishes their field of study from that of the physical scientist.

Now let us consider a second procedure. In procedure #2, I do not begin with the assumption that the social objects I observe exist objectively in nature. Instead, I begin with an analysis of my first-person experience of social objects as such. I observe another person or a path. How did I identify one object as an entity that possesses a consciousness similar to my own, and how did I identify another object as an entity that I may use for walking from one location to another? Do I identify them by their physical, objective, or intrinsic qualities? Or do I identify them by some other means? Hayek asked these same questions and arrived at the following important insights:

Are the human actions which we observe, and the objects of these actions, things of the same or a different kind because they appear physically the same or different to us, the observers—or for some other reason?

Take such things as tools, food, medicine, weapons, words, sentences, communications, and acts of production—or any one particular instance of any of these.

It is easily seen that all these concepts (and the same is true of more concrete instances) refer not to some objective properties possessed by the things, or which the observer can find out about them, but to views which some other person holds about the things.

[These concepts] can be defined only by indicating relations between three terms: a purpose, somebody who holds that purpose, and an object which that person thinks to be a suitable means for that purpose. If we wish we could say that all these objects are defined not in terms of their “real” properties but in terms of opinions people hold about them. In short, in the social sciences the things are what people think they are. Money is money, a word is a word, a cosmetic is a cosmetic, if and because somebody thinks they are. (IEO-59/60)

The insight that the attributes of objects are a function of the individual “attributor” is one of the central insights of Austrian economics. The Austrian School of economics was founded on the insight that an object’s “value” is not an intrinsic quality of the object, but rather a function

of the one who values it (i.e., the notion of subjective value). Malt quotes a similar insight of Descartes.

…if I look out of the window and see men crossing the square, as I just happen to have done, I normally say that I see the men themselves…Yet do I see any more than hats and coats which could conceal automatons? I judge that they are men. And so something which I thought I was seeing with my eyes is in fact grasped solely by the faculty of judgement which is my mind.

In other words, the attribute “manness” is supplied by Descartes in this example. Just as value is a function of me, the individual valuer, the attribute “manness” of the man I observe is a function of me, the observer. Mises makes the same insight:

We can see a crowd, i.e., a multitude of people. Whether this crowd is a mere gathering or a mass (in the sense in which this term is used in contemporary psychology) or an organized body or any other kind of entity is a question which can only be answered by understanding the meaning which they themselves attach to their presence. And this meaning is always the meaning of individuals. Not our senses, but understanding, a mental process, makes us recognize social entities. (HA-43)

In his book Minds, Brains and Science, John Searle expounded on the mental character of social phenomena:

So why can’t such social phenomena as wars and revolutions be systematically related to molecule movements in the same way that the relations between caloric inputs and fat deposits are systematic?

To see why this can’t be so we have to ask what features social phenomena have that enable us to bind them into categories. What are the fundamental principles on which we categorise psychological and social phenomena? One crucial feature is this: For a large number of social and psychological phenomena the concept that names the phenomenon is itself a constituent of the phenomenon. In order for something to count as a marriage ceremony or a trade union, or property or money or even a war or revolution people involved in these activities have to have certain appropriate thoughts. In general they have to think that’s what it is. So, for example, in order to get married or buy property you and other people have to think that is what you are doing. Now this feature is crucial to social phenomena.

‘Money’ refers to whatever people use and think of as money. ‘Promise’ refers to whatever people intend and regard as promises. I am not saying that in order to have the institution of money people have to have that very word or some exact synonym in

their vocabulary. Rather, they must have certain thoughts and attitudes about something in order that it counts as money and these thoughts and attitudes are part of the very definition of money.

The defining principle of such social phenomena set no physical limits whatever on what can count as the physical realization of them. And that means that there can’t be any systematic connections between the physical and the social or mental properties of the phenomenon. The social features in question are determined in part by the attitudes we take toward them. The attitudes we take toward them are not constrained by the physical features of the phenomena in question. Therefore, there can’t be any matching of the mental level and the level of the physics of the sort that would be necessary to make strict laws of the social sciences possible.

The main step in the argument for a radical discontinuity between the social sciences and the natural sciences depends on the mental character of social phenomena. (MBS-77-79)(emphasis added)

As we can see in these important passages from Hayek, Descartes, Mises, and Searle, there is an important sense in which we can trace the attribute of any given object to a person(s) who assigns or perceives that attribute. We could perhaps go even further and assert that in principle there is no attribute that cannot be traced to an attributor. This procedure, in which every attribute is traced to an attributor, is a type of methodological individualism. It is a procedure in which every phenomenon that is described or depicted is explicitly described or depicted from a first-person point of view. Attributes of objects or of phenomena are not conceived as having an independent existence; they are instead conceived as implying an “attributor,”—an agent that “holds” or “supplies” the attribute in question. If we consider the insights of the four authors listed above, we can see that all of them have to do with the way the social object appears from the point of view of the actor who observes or interacts with the object. The passages are clear in conveying that every social object X is social object X because it is regarded as such by some individual(s). None of these passages imply that every social object must be traced back to a person or group who intentionally created it.

Thus, we are dealing with two different conceptions of methodological individualism. In the conception of methodological individualism employed by Malt, social objects are conceived, implicitly, as having an objective, physical, existence in nature. We may refer to this conception as “objective” methodological individualism. According to this view of things, the social scientist studies the relationships between certain “social” objects found in nature (people, works of art, coins, markets, etc.), while the physical scientist studies the relationships between different, non-social objects found in nature (mountains, boulders, clouds, etc.).

In the second conception, which we will refer to as “subjective” methodological individualism (SMI), social objects are not conceived as having an objective, physical existence. Rather, social objects are conceived as a function of the individual who observes, perceives, or discerns those objects. Specifically, social objects are considered phenomena of consciousness, or “subjective” phenomena.

The first conception is essentially a physical interpretation of social science. The implicit assumption is that social science studies physical objects of a certain kind. The second conception is essentially a mental interpretation of social science. In this “epistemological” or “phenomenological” conception, social science studies the way social phenomena are constituted in conscious experience.

The mental interpretation of social science was central to Mises’s social thought. Unfortunately, during the transition to Rothbardian and Hayekian Austrian School social thought in the second half of the twentieth century, the mental interpretation of social science was abandoned in favor of the physical, objective, interpretation. In the Rothbardian/Hayekian approach, reference to the attributing/perceiving agent is generally absent, implying that the social object or phenomenon in question has an independent, objective existence. Malt’s critique of praxeology assumes a physical or “objective” interpretation of social phenomena, and Malt rightly assumes that the Rothbardians he critiques share this same objective interpretation.

Why was subjective methodological individualism abandoned? Probably because people held (and hold) one or more of the following beliefs about it.

1. SMI is solipsistic. It denies the existence of other minds, and denies the objective existence of things. Therefore, this approach is misguided as a scientific approach, and immoral or inhumane in its implications.i

2. SMI studies what is in a person’s mind but does not study reality. This kind of mental study may give us information about mental processes, but gives us little information about reality.

3. Descriptive study of mental phenomena is not hard science, but is more akin to “philosophy.” It can only produce unprovable speculations about thoughts and perceptions and cannot give us actionable cause-and-effect information about the way the world works.

Rather than attempting to refute these mistaken beliefs individually, it may be more instructive to explain subjective methodological individualism positively. Briefly, the positive case for SMI is the following:

In addition to the tangible and perceptual aspects of the things we experience and observe, there appear to be fundamental “laws” governing or ordering their appearance. Important examples of fundamental laws are the physical law(s) of conservation and the economic law(s) of supply and demand. One reason fundamental laws are important is that knowledge of them instructs us on what things to avoid doing if we want to achieve a specific goal. For example, if I want to touch the ceiling in my house, I will not attempt to rise toward the ceiling by placing my hands under my feet and pulling upward. Eliminating certain methods of trying for goal X from the outset allows me to try other methods of achieving goal X which potentially have a chance of success.

Contemporary wisdom holds that the fundamental laws are laws of the “universe.” In our contemporary scientific culture, we believe that the fundamental laws are essentially laws of the physical, spatial, universe, and so that is where we search for them. By contrast, those who subscribe to the “epistemological” approach to science, hold that the fundamental laws are in fact laws of consciousness, or they hold that discovering and understanding the fundamental laws is best accomplished by conceiving these laws as laws of consciousness (See: Edington, The Philosophy of Physical Science, 1978)

If the fundamental laws are laws of consciousness, or best understood as laws of consciousness, this implies they are to be found by examining the structure of consciousness from a first-person perspective. This is why Mises writes:

The only way to a cognition of these theorems is logical analysis of our inherent knowledge of the category of action. We must bethink ourselves and reflect upon the structure of human action. Like logic and mathematics, praxeological knowledge is in us; it does not come from without.(HA-64)

Thus, subjective methodological individualism is simply a proposed methodological procedure for better understanding the fundamental regularities (laws) we intuit as manifesting in social and physical phenomena.

Historically, there have been two important barriers to the intensification of subjective methodological individualism:

1) When social thinkers arrived at the insight that social attributes are a function of the attributing agent, they generally spoke of this in terms of the relationship between an observed actor (A) and the object of the observed actor’s action (X). In this conception, the social thinker took the point of view of the observer, and noted that from the “subjective” point of view of observed actor A, object X is object X not because of its physical properties, but instead because A believes, or thinks, or intends it as such. In framing the situation this way, the social thinker left unanswered the question of his own observation of A and X. In leaving this question

unanswered, the impression was given that the social thinker himself was observing two social objects that had an independent, objective, existence. He failed to apply the principle he was enunciating—the subjective nature of social phenomena—to his own observation of A and X. He thus fell victim to Pareto’s fallacious analytical construct in which the person assumed to have greater knowledge (the social scientist) speaks from an objective point of view, while the person assumed to have lesser knowledge (the observed person) speaks merely from his own “subjective” point of view.ii This faulty construct resulted in a scholarly tendency or habit, in which the subjective nature of social phenomena was acknowledged in isolated passages of a text, while the remainder of the text was written under the implicit assumption that social phenomena were objective phenomena. The subjective nature of social phenomena was acknowledge in passing, but was not rigorously adhered to as a principle of social-scientific investigation.

2) On the most fundamental level, physical science is founded on the distinction between two observations. We distinguish between object or event 1 and object or event 2 by means of the observable characteristics of 1 and 2. Physical science is founded on a comparison of the characteristics (in the most broad sense) of two or more states of affairs.

Social science in the Misesian sense is not founded on the comparison of two states of affairs. It is founded on the relationship between a state of affairs facing an actor (1), and that actor’s want or desire (0) for a different state of affairs. The two entities (the situation facing the actor (1), and the actor’s desire (0) for a different situation) are not temporally separated; they are contemporaneous (copresent).

The situation facing the actor, as such, is assumed to have perceivable or observable characteristics. The situation facing the actor is something he can see, hear, feel, imagine, etc. This situation stands in relation to the actor’s desire for a different situation. It is here that a fundamental theoretical problem arises. If we conceive that the actor’s desire for a different situation has observable characteristics (attributes that he may perceive or observe—for example, some kind of urge that he feels, some kind of mental image that he forms, etc.), and if a comparison of these two entities (the situation and the desire) forms the structural foundation of our system, we have now inadvertently set our system on a physical basis (the comparison of the characteristics or attributes of two observable entities). Thus, since we assume that the situation facing the actor has observable characteristics, and since the basis of our system cannot be a physical basis (i.e., cannot be the comparison of the characteristics of two entities), the actor’s desire for a different situation cannot be conceived as an entity having distinguishable (perceivable, observable) characteristics or attributes. In contrast to the observable and perceivable situation that faces me, the actor, my desire that the situation be different must be conceived as fundamentally unobservable and fundamentally unperceivable.

Thus, the structural difference between physical science and social science may be reduced to the following general formula. Physical science (in the classical sense) is founded on the notion of two observations where both observed events are conceived as taking place in nature independent of any particular consciousness. The foundation of social science consists of one observable and one unobservable, and both taken together are considered constitutive of consciousness, not independent of it. The entirety of my perceivable/observable current situation, coupled with my unperceivable desire for a different situation, constitutes the entirety of my consciousness or conscious awareness.

Because the difference between physical science and social science was not clearly defined on an epistemological level, most social theory was unknowingly undertaken on the basis of a physical epistemology. This in turn compromised the position of social scientists as they tried to differentiate social science from physical science while sharing the same epistemological foundation. The making of physical distinctions—higher/lower, more/less, internal/external, nearer/farther, sooner/later, etc.—is the essence and foundation of physical science.iii

These two obstacles—1) the subjective nature of social phenomena from the point of view of the social scientist himself, and 2) the epistemological differentiation of physical science from social science—served to inhibit the extension of the epistemological or phenomenological approach to social phenomena.

Methodological Individualism: Conclusion

Methodological individualism does not reduce to a claim that all social objects are the intentional creation of individual actors. Rather, methodological individualism is a procedure in which the various aspects of the social and physical world are conceived as perceptions and observations of perceiving and observing agents. Methodological individualism is methodological subjectivism. The alternate method, in which the phenomena of the physical and social world are conceived as having an independent existence detached from any perceiving or observing agent, is a form of objectivism. When social analysis is objectivistic, methodological individualism loses its clear meaning

Praxeology as Chain-of-Logical Reasoning

In his paper, Malt addresses a particular conception of praxeology: praxeology as chain-of-logical reasoning. This is the familiar “deductive” conception of praxeology in which praxeology consists of a foundational premise or axiom (the so-called “action axiom”) and the deductions proceeding from that axiom. As explained in Malt’s paper “A chain of reasoning starting from a self-evident truth and proceeding deductively via a sequence of valid arguments, will produce certain knowledge.”

The deductive conception of praxeology is definitely part of Mises’s philosophy as evidenced by the following passage provided by Malt:

He who wants to attack a praxeological theorem has to trace it back, step by step, until he reaches a point in which, in the chain of reasoning that resulted in the theorem concerned, a logical error can be unmasked. But if this regressive process of deduction ends at the category of action without having discovered a vicious link in the chain of reasoning, the theorem is fully confirmed. (Mises 1962 71-2)

Thus, it is fair to characterize Mises as a rationalist and as a proponent of deductive social science.iv But this is only part of the story. Throughout Mises’s writings we find a second strain of thought in which Mises advances the thesis that the regularity in social phenomena is a function of the logical structure of the human mind.

For as must be emphasized again, the reality the elucidation and interpretation of which is the task of praxeology is congeneric with the logical structure of the human mind. (U-65)

Human knowledge is conditioned by the structure of the human mind. If it chooses human action as the subject matter of its inquiries, it cannot mean anything else than the categories of action which are proper to the human mind and are its projection into the external world of becoming and change. All the theorems of praxeology refer only to these categories of action and are valid only in the orbit of their operation. (HA-36)

The only way to a cognition of these theorems is logical analysis of our inherent knowledge of the category of action. We must bethink ourselves and reflect upon the structure of action. Like logic and mathematics, praxeological knowledge is in us; it does not come from without. (HA-64)

Thus, there are two distinct strains of Mises’s praxeological thought. Mises’s praxeology is part deductive rationalism and part phenomenology. That Mises is a phenomenologist can easily be seen by comparing the definition of phenomenology to an important passage from Human Action.

The discipline of phenomenology may be defined initially as the study of structures of experience, or consciousness. Literally, phenomenology is the study of “phenomena”: appearances of things, or things as they appear in our experience, or the ways we experience things, thus the meanings things have in our experience. Phenomenology studies conscious experience as experienced from the subjective or first person point of view. (http://plato.stanford.edu/entries/phenomenology/)

Compare to:

We can see a crowd, i.e., a multitude of people. Whether this crowd is a mere gathering or a mass (in the sense in which this term is used in contemporary psychology) or an organized body or any other kind of entity is a question which can only be answered by understanding the meaning which they themselves attach to their presence. And this meaning is always the meaning of individuals. Not our senses, but understanding, a mental process, makes us recognize social entities. (HA-43)

Mises believed there were two possible paths to praxeological knowledge. In the epistemological approach, one begins with, and proceeds from, an analysis of the structure of our knowledge.v In the “rational arguments” approach, one begins with a given scientific concept or proposition and examines its logical validity.

There are two different ways of setting methodological and epistemological investigations upon a secure foundation. One can attempt to reach solid ground by undertaking to deal directly with the ultimate problems of epistemology. This procedure would no doubt be the best if it offered any promise of success, so that one could hope to find truly firm ground at that deep level. However, one can also take another path, by starting from the definite concepts and propositions of science and verifying their logical character. It is evident that cognition of the ultimate foundations of our knowledge can never be attained in this manner. But neither does the first way offer such a possibility. On the other hand, the second way protects us from the fate that has befallen most investigations that have been concerned with the methodological and epistemological questions of economics in recent years. These investigations became so badly bogged down in the difficulty of the ultimate problems of epistemology that they never reached the point where they could deal with the logical problems of sociology, which are comparatively easier to solve. (EP-70)

As we can see, Mises believed that the epistemological approach to knowledge is superior, in principle, to the rational arguments approach, but he thought that the epistemological approach had little chance of practical success. In practice then, Mises was forced to resort to rational arguments approach in his own writings in economics and praxeology. This explains the two distinct strains in Mises’s praxeological writings. On the one hand, Mises continually refers to mental categories and to the structure of the human mind. In this sense, Mises is an epistemologist or phenomenologist. On the other hand, Mises insists on the use of deductive or rational arguments. In this sense, Mises is a rationalist.

The passage above also helps to explain why Human Action, Mises’s treatise on economics, does not contain an example of an economic law deduced step by step from the category of

action.vi Mises asserts that the attempt to deal directly with the ultimate mental categories (such as the category of action) is likely to become bogged down and never reach the point at which the problems of economics and praxeology can be addressed. Therefore, Mises did not deduce economic laws directly from the category of action. Instead, when Mises turns to explain the important laws of economics (The Law of Marginal Utility, The Law of Returns, The Ricardian Law of Association) we see that he employs the “rational arguments” approach. He advances various rational arguments in support of the logical validity of these laws. Mises uses the same rational arguments approach in explaining the relationship between credit expansion and the business cycle, and in explaining the problem of socialist calculation. He does not demonstrate how these economic laws or economic phenomena are deduced from the category of action.

Malt’s critique focusses solely on the rational arguments conception of praxeology, a conception from which theoretical subjectivism, epistemology, and phenomenology have been removed. What remains is essentially an objectivist, “Rothbardian” conception of praxeology. Malt entirely ignores epistemological praxeological theory. In this sense, not much has changed from the 1940’s when Mises wrote “The importance of phenomenology for the solution of the epistemological problems of praxeology has not been noticed at all.” (MO-19)

Hayek’s Praxeological Alternative to Spontaneous/Emergent Order Research

Malt, citing Hayek, argues that the rationalist/individualist approach to social phenomena makes it difficult to understand or study social phenomena such as spontaneous orders.

Hayek (1946) argued that adopting the rationalist conception of individuals makes it difficult to understand spontaneous orders and non-compulsory conventions, and stated that Mises’ characterisation always made him feel uneasy (1978, xxiii).

If the goal is to better understand spontaneous orders and similar social phenomena, a praxeologist may reasonably ask: What about the analytical or phenomenological methods of study that Hayek discusses in his two important essays “Economics and Knowledge” and “The Facts of the Social Sciences”? In these essays, Hayek envisages at least two different types of praxeological social analysis: the tautological/intentional, and the mental/categorical.

Analysis by Tautological Transformation of Intentional Objects

In his essay “Economics and Knowledge,” Hayek describes a type of deductive social analysis which he refers to as the Pure Logic of Choice. This “analysis by tautological transformation” is a method in which one begins with a “datum” present from the point of view of an actor (a fact, object, or situation), and then proceeds to draw analytical conclusions from this assumed datum. According to Hayek, the propositions obtained in this type of analysis are a priori true

because they are simply “tautologies—those series of propositions which are necessarily true because they are merely transformations of the assumptions from which we start.” The method of analysis Hayek has in mind is subjective in nature. As he explains:

It is important to remember that the so-called “data,” from which we set out in this sort of analysis, are (apart from his tastes) all facts given to the person in question, the things as they are known to (or believed by) him to exist, and not, strictly speaking, objective facts. It is only because of this that the propositions we deduce are necessarily a priori valid and that we preserve the consistency of the argument.

What Hayek means is that the analysis will draw an analytical conclusion from an assumed fact as that fact appears from the point of view of the actor (A), not as that fact appears from the point of view of one who observes that actor (B). For example, if from A’s point of view he is moving toward location X, we may analytically conclude that he is moving away from some location Y. The analytical conclusion that A is moving away from some location Y cannot, however, be deduced from assumed datum present to observer B if from B’s point of view A is not moving but stationary. Therefore, Hayek reiterates:

“data” meant those facts, and only those facts, which were present in the mind of the acting person, and only this subjective interpretation of the term “datum” made those propositions necessary truths. “Datum” meant given, known, to the person under consideration.

In “The Facts of the Social Sciences” Hayek expounded further.

From the fact that whenever we interpret human action as in any sense purposive or meaningful, whether we do so in ordinary life or for the purposes of the social sciences, we have to define both the objects of human activity and the different kinds of actions themselves, not in physical terms but in terms of the opinions or intentions of the acting persons, there follow some very important consequences; namely, nothing less than that we can, from the concepts of the objects, analytically conclude something about what the actions will be. If we define an object in terms of a person’s attitude toward it, it follows, of course, that the definition of the object implies a statement about the attitude of the person toward the thing. When we say that a person possesses food or money, or that he utters a word, we imply that he knows that the first can be eaten, that the second can be used to buy something with, and that the third can be understood—and perhaps many other things.

Thus, Hayek presents a methodologically individualistic type of social analysis in which we draw analytical conclusions from facts, objects, or situations that we assume as given for the actor in question. Of course, if we may draw analytical conclusions starting from social objects such as

food, money, or words, as Hayek suggests, we may also draw analytical conclusions starting from other social entities such as paths, prices, or markets. In principle, we should be able to apply this method to any social entity, including spontaneous or emergent social entities.

Analysis by Mental Categories

In “The Facts of the Social Sciences” Hayek describes a second method of social analysis which we may call the epistemological method. The epistemological method is based on the thesis that the regularity we experience in social and physical phenomena (and which science tries to conceive in terms of scientific laws) is a function of the structure of our mind or consciousness. Phenomena repeat in regular patterns because our mind or consciousness is “structured” in a certain way. Hayek explains:

If we consider for a moment the simplest kinds of actions where this problem arises, it becomes, of course, rapidly obvious that, in discussing what we regard as other people’s conscious actions, we invariably interpret their action on the analogy of our own mind: that is, that we group their actions, and the objects of their actions, into classes or categories which we know solely from the knowledge of our own mind. We assume that the idea of a purpose or a tool, a weapon or food, is common to them with us, just as we assume that they can see the difference between different colors or shapes as well as we. We thus always supplement what we actually see of another person’s action by projecting into that person a system of classification of objects which we know, not from observing other people, but because it is in terms of these classes that we think our selves.

Hayek then continues:

The claim to which I have referred follows directly from this character of the first part of our task as a branch of applied logic. But it sounds startling enough at first. It is that we can derive from the knowledge of our own mind in an “a priori” or “deductive” or “analytic” fashion, an (at least in principle) exhaustive classification of all the possible forms of intelligible behavior.

Yet when we reflect that, whenever we discuss intelligible behavior, we discuss actions which we can interpret in terms of our own mind, the claim loses it startling character and in fact becomes no more than a truism. If we can understand only what is similar to our own mind, it necessarily follows that we must be able to find all that we can understand in our own mind.

The idea Hayek is discussing here is relatively simple. Consider the “categories” happiness and unhappiness. When I locate or identify another person, in Hayek’s words, I “supplement” what I

actually see (a body, clothing, etc.) with a “projection” of the categories happiness and unhappiness. I assume that “happiness” and “unhappiness” somehow exist with the person I see in front of me. As Hayek explains, the happiness and unhappiness that I attribute to the person in front of me do not derive not from my observing these attributes in that person. Rather, it is in terms of the categories happiness and unhappiness (and perhaps others) that I myself experience the world around me. I “project” the categories happiness and unhappiness into the person I observe because it is according to these categories that my conscious experience is organized.

Hayek’s meaning in these passages is clear. He’s explaining a sense in which the attributes of social objects derive from our act of observation. He chooses to illustrate this epistemological principle using a few simple examples, and thus it is easy to overlook the full implications of what he is explaining. The “object” of a person’s action is any object that a person is engaged with from his own first-person point of view. The object of my action can be a coin or a price. The object of my action can be a family or a marketplace. In sort, the object of my action is any object I may observe, perceive, or engage with in any way. The principle Hayek enunciates is not limited to the small number of examples he cites. The principle applies to any conceivable social object, including “spontaneous” or “emergent” social objects. If we group the objects and actions we observe into classes or categories which we know solely from the knowledge of our own mind, this principle applies to all objects and all actions regardless of their assumed historical genesis (regardless whether the observed entities were intentionally created or emerged spontaneously).

If I group social objects according to classes or categories in terms of which I think myself, this means that in studying my own mental categories I study essential aspects of the objects of my conscious awareness, including both social objects and physical objects. Since “spontaneous” and “emergent” social objects—to the extent I perceive or observe them—are objects of my conscious awareness, when I study my own mental categories, I thereby study essential aspects of these particular social objects. Therefore, what Hayek describes is a “praxeological” method of studying various social entities including emergent and spontaneous social entities.

Conclusion

Philosophical objectivism is based on the assumption that we can satisfactorily describe the workings of the world without any reference to ourselves.vii A fundamental assumption of this worldview is that the sensory and intellectual equipment we use to observe the world around us does not shape or limit our observations in any significant way. We are therefore free to embark on a predominantly outward-looking investigation of the physical and social worlds “as they exist in reality.”

The assumptions of objectivism came under heavy scrutiny in the first half of the twentieth century.viii In social science, the critique of objectivism led to the insight that we can study social phenomena by studying our own “mental categories.” However, theoretical subjectivism was only taken seriously by a relatively small number of social and physical scientists. The larger scientific community remained resolutely objectivist. By the second half of the twentieth century, theoretical subjectivism and the epistemological approach were largely forgotten. Without theoretical subjectivism and epistemology, the conception of praxeology changed, and the discipline that was once conceived as a general science of human action dwindled into a debate about the method of economics.

i On Solipsism, Eddington writes: “The externality of the physical world results from the fact that it is made up of structures found in different consciousnesses. Thus, the recognition of sensations other than our own, though not required until a rather later stage of the discussion, is essential to the derivation of an external physical universe. Our direct awareness of certain aural and visual sensations (words heard and read) is postulated to be an indirect knowledge of quite different sensations (described by the words heard and read) occurring elsewhere than in our own consciousness. Solipsism would deny this; and it is by accepting this postulate that physics declares itself anti-solipsistic.” (PPS-198/199)

As a clarification, it is important to note that subjective methodological individualism does not require the denial or the affirmation of unobserved entities. In the procedure we have in mind, we class as unobserved entities those things we refer to (in our thought, speech, and writing) but do not observe—entities such as other minds, concepts, the future, the back side of things, etc. As these entities are unobserved, they have, as such, no observable characteristics with which to differentiate one from the other. Thus, we place each of these entities in a singular “unobservable” category. From our theoretical point of view, there is no basis for distinguishing between various assumed or postulated entities, each of which has no observable characteristics or attributes. These several entities become in our theory one unitary thing, i.e., the unobservable aspect of consciousness. We do not deny or affirm the existence of such entities, we simply classify them according to our classification scheme.

ii See Talcott Parsons: “As a preliminary it is important to note that Pareto immediately lays down the possibility of studying social phenomena from two different points of view which he calls the objective and the subjective, respectively. The objective is first characterized as what the phenomenon “is in reality” and opposed to the way it appears “in the mind of certain persons.” The further development of the distinction, however, especially linking the objective aspect with the way in which action appears “for those who have extended knowledge” makes it legitimate to infer that the objective point of view is that of the scientific observer, while the subjective is that of the actor.”(SSA-187-189)iii This problem of social science was noticed, but never solved. For example, Talcott Parsons, in describing the structure of social science, writes:

“It may be said that all empirical science is concerned with the understanding of the phenomena of the external world. Then the facts of action are, to the scientist who studies them, facts of the external world—in this sense, objective facts. That is, the symbolic reference of the propositions the scientist calls facts is to phenomena “external” to the scientist, not to the content of his own mind. But in this particular case, unlike that of the physical sciences, the phenomena being studied have a scientifically relevant subjective aspect. That is, while the social scientist is not concerned with studying the content of his own mind, he is very much concerned with that of the minds of the persons whose action he studies.” (SSA-46)

Parsons provides here a typical conception of the structure of social science. In this conception, the social scientist studies facts “external” to the social scientist himself. What differentiates social science from physical science is that the external objects studied by the social scientist have a scientifically relevant subjective aspect. In a plain reading of Parsons’ passage we would understand him to mean that the “external” objects studied by the social scientist are external in a spatial sense. That is, the social scientist does not study phenomena that are located within the confines of his own skull, but instead studies objects that are to be found in the spatial region external to his own skull. The objects studied by the social scientist, and which have a relevant subjective aspect, are distributed in the space external to the scientist himself, not within the space that the social scientist occupies.

Though this meaning would be the plain meaning of Parsons’ passage, it is not his intended meaning, as he provides the following clarification about his use of the term “external” in a footnote:

“Epistemologically, not spatially “external.” The external world is not “outside” the knowing subject in a spatial sense. The subject-object relation is not a relation in space. (SSA-46)

Thus, Parsons explains that his use of the term “external” does not refer to a spatial relationship. However, the qualifier “epistemologically” in the phrase “epistemologically external” does not eliminate the spatial relationship expressed by the phrase. The qualifier simply introduces ambiguity. For example, if I write a paragraph that repeats the term “chocolate,” and then later explain that by chocolate I do not mean milk chocolate but “epistemological chocolate,” I have not thereby indicated a new, non-food meaning of the term “chocolate.” I have simply created an ambiguous term. The terms “epistemological chocolate” and “epistemologically external” have no known meaning. And thus, while Parsons has

correctly realized that there is a theoretical problem in employing physical distinctions in social science (internal/external, higher/lower, more/less, etc.), he has not solved the problem. He has stated that the distinction in question is not a spatial distinction, but he has not provided a valid alternative distinction.

Mises too realizes the problem with employing physical distinctions in social science, and he belatedly begins to address the issue:

“We may define the external world as the totality of all those things and events that determine the feasibility or unfeasibility, the success or failure, of human action.” (U-6)

Thus, Mises’s solution would have been to translate physical concept pairs such as internal/external, near/far, higher/lower, etc., into social-scientific concept pairs such as success/failure. The passage above, however, was written when Mises was over eighty years old. His major works had already been written by this time, and these works employed many of the physical distinctions at issue.

iv It is noteworthy that in this passage Mises speaks not merely of a process of deduction, but more specifically, of a process of deduction in which one terminus is the “category of action.” If we think of deduction in the Hayekian sense as tautologies, “those series of propositions which are necessarily true because they are merely transformations of the assumptions from which we start”(IEO-34), what Mises is saying is that the deduced propositions of praxeology are essentially tautological transformations proceeding from the “category of action.” A simple tautological transformation in our understanding of the term is the mathematical equation 136 = 17 x 8. If I assume that I have one hundred and thirty six of something, it is not immediately apparent to me that I have therefore, seventeen sets of eight of that same thing. I can find out that my having 136 of something means I also have 17 sets of 8 of that thing by a process of “deduction,” a process by which I “tautologically transform” the assumed 136 into the implied 17 x 8. Mises sees praxeology as performing essentially the same function with respect to the assumed “category of action.” Praxeology seeks to deduce (to tautologically transform) the implications of action; the assumption that an actor attempts to replace the situation facing him with a different situation.v In Mises’s philosophy, the epistemological approach to knowledge means primarily the study of the mind and of mental categories. “The a priori categories are the mental equipment by dint of which man is able to think and to experience and thus to acquire knowledge. Their truth or validity cannot be proved or refuted as can those of a posteriori propositions, because they are precisely the instrument that enables us to distinguish what is true or valid from what is not. What we know is what the nature or structure of our senses and of our mind makes comprehensible to us. We see reality, not as it “is” and may appear to a perfect being, but only as the quality of our mind and of our senses enables us to see it.” (U-18) “For, as must be emphasized again, the reality the elucidation and interpretation of which is the task of praxeology is congeneric with the logical structure of the human mind.” (U-65)vi By this I mean there is no isolated section or passage in which a rigorous deduction is performed, beginning from the category of action, and ending in a widely recognized economic law or phenomenon.vii “It may be said that classical physics is just that idealization in which we can speak about parts of the world without any reference to ourselves. Its success has led to the general idea of an objective description of the world. Objectivity has become the first criterion for the value of any scientific result.” (PP-55)viii See: Heisenberg, Physics and Philosophy, Eddington, The Philosophy of Physical Science.

Key

EP – Mises, Epistemological Problems of Economics, 1976

HA – Mises, Human Action, 1966

IEO – Hayek, Individualism and Economic Order, 1980

MBS – Searle, Minds, Brains and Science, 2003

MO – Mises, Money, Method, and the Market Process, 1990

PP – Heisenberg, Physics and Philosophy, 1962

PPS – Eddington, The Philosophy of Physical Science, 1978

SSA – Parsons, The Structure of Social Action, Volume 1, 1968

U – Mises, The Ultimate Foundation of Economic Science, 2002