Murray N. Rothbard, "Individualism and the Philosophy of the Social Sciences," Part II

[Page from the Introduction, written by F.A. Hayek.] This copy was purchased used from the Mises Institute. As you can see, it contains a humorous comment in the margins; who wrote this is unknown.

[Page from the Introduction, written by F.A. Hayek.] This copy was purchased used from the Mises Institute. As you can see, it contains a humorous comment in the margins; who wrote this is unknown.

Part II: Praxeology as the Method of the Social Sciences

1. The Praxeological Method

Rothbard begins by noting the mathematical turn in the economics profession, which he considers a lamentable development:

Let the nonspecialist in economics pick up a journal article or monograph today and contrast it with one of a generation ago, and the first thing that will strike him is the incomprehensibility of the modern product. The older work was written in ordinary language and. . . .was comprehensible to the layman” (31).

While this mathematical development has occurred throughout the social sciences, economics--ostensibly concerned with measurable quantities--adopted and embraced the development rapidly. The adoption of mathematical formalism in economics coincides with the sweeping of the profession by positivism, no doubt provoked by envy among the social sciences of the success physics has had in explaining the universe through resort to the scientific method. Rothbard describes the scientific method as follows:

  1. Observation of regular phenomena

  2. Construction of hypothetical generalizations

  3. Deduction of testable hypotheses out of the generalizations

  4. Adoption of phenomena that survive tests of falsifiability, and gradually replacing older theories with “new explanations covering a still wider range of phenomena” (32).

It is important that the third step involve controlled experiments to isolate the variable to be tested and allow for it to be repeatedly replicated. Rothbard importantly notes that in the positivistic method, we proceed from that which is known with certainty--the empirical regularities--ip through even wider and more tentative hypotheses” (32). This method lies in stark contrast to the praxeological method exposited by Ludwig von Mises in Human Action: A Treatise on Economics. In praxeology, the economist begins in a more advantageous position than the physicist: “He beings, not with detailed, quantitative, empirical regularities, but with broad empirical generalizations. . . .[which] he knows with certainty” resulting from the individual’s existence, from his vantage point as a conscious, acting human being. And from these broad empirical generalizations, the praxeologist can deduce a series of apodictically certain propositions about human action as such. Human beings “do not simply ‘move,’ as do unmotivated atoms or molecules; they act” using means to achieve their ends, ends which are ranked ordinally according to the individual's relative valuation at any particular point in time and space (35).

The problem with applying positivism from the social sciences can be summed up in the inability of the social scientist to conduct a controlled experiment, and the inability of positivism to distinguish between competing claims to explanation of particular historical episodes. Rothbard gives the example of the Great Depression:

Keynesian economists hold that depressions can be cured by massive doses of deficit spending by the government. The United States government engaged in large-scale deficit-spending to combat the depression in the late 1930s, but to no avail. The anti-Keynesians charge that this failure proves the incorrectness of Keynesian theory; the Keynesians reply that the doses were simply not massive enough, and that far greater deficits would have turned the tide (34).

How can the positivist distinguish meaningfully between these competing theories, each of which seem to fit the data?

Praxeology distinguishes itself from some other social sciences in its focus on the formal fact of human action, whereas ethics, technology, and psychology focus on the substantive content of values and actions (37). It is through the mental experiment, the praxeological analog to the controlled physical experiment, that the social scientist holds constant variables in his mind in order to find, using deductive logic, the relationship between supply and demand of a good, for example. In so doing, “economics arrives at ceteris paribus laws: Given the supply, the price will change in the same direction as demand; given the demand, price will change in opposite direction from supply” (38). At this point, Rothbard found it useful to interject the point that the laws of praxeology, and thus economics, are qualitative and not quantitative; while we can express that given the supply, the price will change in the same direction as demand, we cannot foresee the quantitative, empirical relations, i.e., we cannot say in any particular instance if demand increases by x, the price must increase by some determined quantity or proportion (39).

Next Rothbard delves into this qualitative-quantitative dichotomy between the social sciences and the physical sciences, again pointing to the primordial fact of individual consciousness and purposeful behavior as the difference between rocks and human beings that explains why we require a different method to study human action. In practice, if we were trying to determine what factors account for the change in supply and demand of a particular good, we would find innumerable factors, each of which “is subject to continuing and unpredictable change” (39). Thus we can see why “Even if one mammoth equation could be discovered to ‘explain’ [the price of a particular good over a span of time]. . . .there is no guarantee, and not even the likelihood, that the equation would have anything to do with the next month’s price” (39). Beating the empiricists at their own game, Rothbard finds that econometricians have had an abysmal record at forecasting future economic phenomena, and have likewise failed “to find one single quantitative constant in human affairs” (39).

Rothbard then grounds the method of praxeology firmly in the soil of the natural sciences, noting that each science does not seek to predict the future, but to explain what would happen under specified conditions. Furthermore, he criticizes the positivists for treating historical events as homogenous to other events and thus predictable, whereas the praxeologist recognizes that “each historical event is the highly complex result of a large number of causal forces and, further, that it is unique and cannot be considered homogenous to any other event” (42); hence, the praxeologist rules out the possibility of historical “laws” of human action distinct from the laws of the purely natural, mechanistic world.

The work of the historian, consisting largely of verstehen, or a common-sense specific understanding, is, however, capable of applying both the physical sciences and those sciences related to the content of human action and choice to the causal understanding of past events. “The economic historian combines all of his scientific knowledge with his understanding of motives and choices to attempt to explain the complex historical phenomena” of prices throughout history, for example. This work is more of an art than a science, however, because “While historians may well agree on the enumeration of all the relevant causal factors in the problem, they will differ on the weight to be attached to each factor”; therefore, economic historians “can come to qualitative but not quantitative agreement” (42-43).

2. The Praxeological Tradition

In this section, Rothbard outlines the great economists whose work was in the praxeological tradition of deduced economic law. First, there is French political economist Jean-Baptiste Say, who found that economics had at its foundation a few fundamental principles--derived from general facts--from which numerous other corollaries could be drawn (45-46). Say disputed  the utility of statistics without political economy, for a set of facts is meaningless without sound reasoning attached to them that reveals their implications (47). Say also recognized the qualitative-quantitative distinction, coming down in favor of the qualitative method for political economy. Because man’s values were “subject to the influence of the faculties, the wants and the desires of mankind, they are not susceptible of any rigorous appreciation, and cannot therefore furnish any data for absolute calculations” (47).

Rothbard then moves on to John E. Cairnes, a nineteenth century political economist concerned with methodology, who wrote that in the physical sciences, “mankind have no direct knowledge of ultimate physical principles,” while in economics “The economist starts with a knowledge of ultimate causes,” paralleling the point made by Rothbard about the relative advantage of the praxeologist, who is “in the know” and realizes the basic truth that mankind exists, has consciousness, and acts, compared to the physicist, who is relegated merely to observing complex external phenomena that he has no special insight into (49). Cairnes also had an aversion to the idea that individual value was capable of objective measurement, which he found impossible to determine precisely (50). Nassau Senior, a relative contemporary of Cairnes, believed in the a priori truth that man is never completely satisfied, given that he acts, and continually seeks to remove felt uneasiness and increase his satisfaction (50). Senior also believed that some economic propositions were self-evident truths and that economics was a mental science where the controlled experiment takes place in the mind (51). He then connects the Austrian school of Carl Menger, Eugen von Bohm-Bawerk and Ludwig von Mises to praxeology, and their differences with the Lausanne school started by Leon Walras, who independently discovered marginal utility around the same time as Menger, but who saw utility, or value, as something measurable and calculable, rather than as an ordinal relationship (51-54). Rothbard concludes the section by parsing through the debate at the turn of the twentieth century between Benedetto Croce and Vilfredo Pareto. The debate centered around how to appropriately study economics, with Croce asserting “that the true data of economics are not ‘physical things and objects, but actions,’” while Pareto believed that the concept of value was incomprehensible, and that “the equations of pure economics establish relations between quantities of things, hence objective relations, and not relations between more or less precise concepts of our minds” (54-55).

3. Methodological Individualism

In his final section, Rothbard sets out the principle of methodological individualism, which says that only individuals act, hence collectives do not act, except insofar as they can be reduced to the actions of discrete individuals (57). Collectives do not have an independent existence, although the minds of individuals may attach special significance to the collective organization. The notion of collective “action” is itself a mechanism by which individual actors are absolved of personal responsibility for their actions, while those who were not responsible for particular actions are held responsible when “society” is blamed for anti-social behavior, Rothbard says. Bringing the discussion full circle, he notes that the treatment of society as a “biological organism,” for instance “overlook[s] or even negate[s] individual will and consciousness in social and economic affairs,” tending towards a deterministic view as society is analogized to an organism devoid of consciousness and thus purely physical and capable of prediction. For Rothbard, methodological individualism is the only valid way to study human action; once we realize the truth of the action axiom, all else follows.