Mises on Popper

"The positivistic principle of verifiability as rectified by Popper is unassailable as an epistemological principle of the natural sciences. But it is meaningless when applied to anything about which the natural sciences canno supply any information [as in the case of the sciences of human action, including economics]." Ludwig von Mises, The Ultimate Foundation of Economic Science, page 108.

Market failure

A market failure is a situation in which the economist fails to understand the market.

On the Church

I guess that it can be told with respect to the Church what Mises told about the utilitarian philosophy, that it

"does not look upon the rules of morality as upon arbitrary laws imposed upon man by a tyrannical Deity with which man has to comply without asking any further questions. To behave in compliance with the rules that are required for the preservation of social cooperation is for man the only means to attain safely all those ends that he wants to attain." The Ultimate Foundation of Economic Science, page 95.

My summary of Hayek's "The Use of Knowledge in Society"

Even if equilibrium analysis is a useful preliminary to the study of the economic problem which society faces, namely the unavoidably imperfection of man's knowledge and the consequent need for a process by which knowledge is constantly communicated and acquired, it is high time to remember that it systematically leaves out the explanation of the very problem itself, of economic process.

Samuelson on Hayek

I want to thank Alejandro Jenkins for call my attention on this brief but interesting article by Paul Samuelson on Hayek. It resulted very interesting to me to see how a studied economist not agreeing with Hayek sees his work.

Not a science about needs

Economics is not about needs if they aren't expected to be satisfied through purposive behavior. Nevertheless, purposive behavior always imply need.

Causeffect

The "cause" of some historical situation is all other historical events. Indeed, there is no causation here but simultaneity. Calling something a cause and something an effect is arbitrary. There is just concatenate things happening.

Causation is logical, not chronological. Causation, in general, is not useful to forecast history. It's useful just to explain abstract features of simultaneous situations. As soon as causation is unavoidably established, future disappears. It is just present.

Mises paraphrasing Friedman's "The Methodology of Positive Economics"

"The answer to the question whether or not definite theorems of praxeology apply to a definite problem of action depends on the establishment of whether or not the special assumptions that characterize this theorem are of any value for the cognition of reality. To be sure, it does not depend on the answer to the question whether or not these assumptions correspond to the real state of affairs that the praxelolgists want to investigate. The imaginary constructions that are the main―or, as some people would rather say, the only—mental tool of praxeology describe conditions that can never be present in the reality of action. Yet they are indispensable for conceiving what is going on in this reality." Ludwig von Mises, The Ultimate Foundation of Economic Science, page 37.

A law of iterated preference

The self cannot choose a change in its own preferences. Changes in preferences can be only externally determined.

The mind, to be sure, can prefer that the body could react differently to stimuli. The mind could think: "I wished I could stop to eat disorderly" but that deals with the mind (the first "I") making reference to something external (the second "I"): the bodily reaction. It is not different, in essence, to having a pet animal and think "I wished my dog could stop eat disorderly".

But a preference on the own preferences cannot change those preferences. They already are what they are, by the very choice.

An application of this idea to the economic theory is that, an agent, by definition, cannot know about shifts in his own demand or supply curves.

This assertion (that the self cannot consciously change its own preferences) is comparable to the Law of Iterated Expectations: "if I expect to expect something at some date in the future, then I already expect that something at present (Nassim Taleb, The Black Swan).

Mises as a true conservative

"Faithfulness to tradition means to the historian observance of the fundamental rule of human action, namely, ceaseless striving to improve conditions." Ludwig von Mises, "Theory and History", page 296.

History and theory

There is either history based on either sound theory or wrong theory, but there's no such a thing as history without theory.

Mises the Great

The more I read Mises, the deeper I find his work.

Keynes versus Mises: a guess

The General Theory is by and large more famous than Human Action.

Currently, Human Action is by and large being more read than The General Theory.

Austrian School: not market extremists, not even market defenders, just market explainers

"[The law of comparative advantage] is indispensable for understanding the origin of civilization and the course of history. Contrary to popular conceptions, it does not say that free trade is good and protection is bad. It merely demonstrates that protection is not a means to increase the supply of goods produced. Thus it says nothing about protection's suitability or unsuitability to attain other ends, for instance to improve a nation's chance of defending its independence in war."

Ludwig von Mises. Theory and History. Page 30.

"If one deals with economic policies from the point of view of this distinction between long- and short-run interests, there is no ground for charging the economist with bias. He does not condemn featherbedding of the railroadmen because it benefits the railroadmen at the expense of other groups whom he likes better. He shows that the railroadmen cannot prevent featherbedding from becoming a general practice and that then, that is, in the long run, it hurts them no less than other people."

Idem. Page 33.

The Austrian School as mainstream economics

For many people, Austrian and Neoclassical schools are like oil and water. However, it's very interesting that Mises often distinguishes instead between Classical and Modern schools, the boundary being the Marginalist Revolution by Jevons, Menger, and Walras.

"The history of modern economics begins with the resolution of the paradox of value by Menger, Jevons, and Walras." (1)


Also, in spite of Mises's criticism of the Classical School, it is meaningful to quote him at length on his opinion about the Classic School:

"Once one has correctly grasped the position of the concept of cost within the framework of modern science, one will have no difficulty in seeing that economics exhibits a continuity of development no less definite than that presented by the history of other sciences. The popular assertion that there are various schools of economics whose theories have nothing in common and that every economist begins by destroying the work of his predecessors in order to construct his own theory on its ruins is no more true than the other legends that the proponents of historicism, socialism, and interventionism have spread about economics. In fact, a straight line leads from the system of the classical economists to the subjectivist
economics of the present. The latter is erected not on the ruins, but on the foundations, of the classical system. Modern economics has taken from its predecessor the best that it was able to offer. Without the work that the classical economists accomplished, it would not have been possible to advance to the discoveries of the modern school. Indeed, it was the uncertainties of the objectivistic school itself that necessarily led to the solutions offered by subjectivism. No work that had been devoted to the problem was done in vain. Everything that appears to those who have come afterward as a blind alley or at least as a wrong turning on the way toward a solution was necessary in order to exhaust all possibilities and to explore and think through to its logical conclusion every consideration to which the problems might lead." (2)


Plus, take the "mainstream" definition of economics by Lord Robbins: "Economics is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses." (3) Immediately following the definition, Robbins gives a list of 5 books in order to show that his definition was actually already being used by other economists. The two first books quoted are Menger's Grundsätze and Mises's Gemeinwirtschaft (Socialism). Compare that definition with Mises's definition of praxeology as "the general theory of human action" (4), this is of "purposeful behavior" (5). Then work out a little Mises's definition as to arrive at the fact that only scarce means can be the object of purposeful behavior; this is, of economizing, and you realize that some definitions amount at economics as the study of the same phenomenon, although Mises's definition seems to me easier to begin with in studying that phenomenon.

Of course, you have differences in the appreciation of such tools as mathematics, but this seems to me a solvable problem within the theory, given the method imposed by the study subject.

At the end, it's my appreciation that there's no insurmountable differences between the Austrian School and mainstream economics. The difference is rather on emphasis: Austrian scholars are particularly rigorous on methodology and being consequent on the use of definitions.


(1)MISES, Ludwig von. Epistemological Problems of Economics. Page 227.
(2) Idem. Page 175.
(3)ROBBINS, Lionel. An Essay on the Nature and Significance of Economic Science. Second edition. Page 16.
(3)MISES. Human Action. The scholar's edition. Page 3.
(4) Idem. Page 11.

Christianity as a techninque

It is absurd to judge Christianity on grounds of it imposing wrong ends on individuals. Christianity is a technique through which advice is given on how to reach final ends whatsoever. Yes, it's true that in doing this Christianity disentangles some apparent final ends and demonstrates that they are wrong means to reach truly final ends, truly being understood in a purely formal sense as anything which brings closer happiness to the individual.

Garrison and Hicks

Roger Garrison is the John Hicks of the Austrian School. In his renowned Time and Money, he expounds Hayek's conjuncture theory in a way easy to understand by means of a graphic analysis which to a large extent is a personal interpretation who puts Hayek theory to a Procrustean bed in as very the same fashion as John Hicks aspires to be Keynes's oracle in his Mr. Keynes and the "Classics"; A Suggested Interpretation.

No wonder that professor Garrison's work has be so widely accepted among Austrians. It says like "hey, you can be popular too, you can have graphs and even the promise of a mathematical model in the fashion of an equations' system and join your Keynesian macroeconomic buddies in their own playground".

In this context, it's good to remember the standard critique to Hicks: he could be mis-interpreting Keynes. Is Garrison mis-interpreting Hayek? Are we accepting more academic palatability in exchange for sacrificing the venerable methodology tuned up by Mises?

On the hardship of studying economics

Economics is not for pussies.

Neither risk aversion nor risk tolerance

In their minds, all agents are risk-neutral. What we call "risk-averse" or "risk-tolerant" are agents' ways of deciding which include subjective valuative differences in weighing risks with respect to some ultimately arbitrary benchmark which we, as analysts, create.

Holmes' economics

The reason why there are secrets is mostly a lack of observation.