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Epistemological Problems of Economics
"The characteristic feature of this age of destructive wars and social disintegration is the revolt against economics." So says Ludwig von Mises in his most thorough defense of the method and scope of economic science. In this treatise, he argues that the core intellectual errors of statism, socialism, protectionism, racism, irrationalism can be found in a revolt against economic logic and its special character. Epistemological Problems of Economics was original published in 1933, a period when the social sciences and economic policy were undergoing upheaval. The classical view of economics as a deductive science, along with the laissez-faire policies implied by that view, were being displaced by positivism and economic planning. Mises set out to put the classical view on a firmer foundation. In so doing, he examines a range of philosophical problems associated with economics. He goes further to delineate the scope of the general science of human action. This treatise, out of print for many years, is now brought back by the Mises Institute in a 3rd edition, with a comprehensive introduction by Jörg Guido Hülsmann, senior fellow of the Mises Institute. He observes that "the great majority of contemporary economists, sociologists, political scientists, and philosophers are either completely unaware of Mises's contributions to the epistemology of the social sciences or think they can safely neglect dealing with them. They are in error. One can ignore a thinker, but the fundamental problems of social analysis remain. There will be no progress in these disciplines before the mainstream has fully absorbed and digested Mises's ideas."
341 pages, Hardcover
First published January 1, 1981
About the author
Ludwig von Mises
146 books1,083 followersLudwig Heinrich Edler von Mises (German pronunciation: [ˈluːtvɪç fɔn ˈmiːzəs]; September 29, 1881 – October 10, 1973) was an Austrian economist, historian, philosopher, author, and classical liberal who had a significant influence on the Austrian government's economic policies in the first third of the 20th century, the Austrian School of Economics, and the modern free-market libertarian movement.
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Displaying 1 - 7 of 7 reviews
January 28, 2019
Mises, once again, starts with clarifying the purpose and methodological approach to sound economics, namely that of the subjective theory of value. By placing the result of prices on individual valuations, he removes the perpetual question of where does prices arise: individual value goods and services through a hierarchical, ordinal ranking system at each point of their life. For Mises, as explained further in his magnus opus Human Action, all individual action is rational. Humans attempt to move from a state of less satisfaction to a state of greater satisfaction. However, due to the fallibility of human reasoning and knowledge, individuals may be mistaken or through unfortunate events and arrive at a state less satisfactory than they imagined. This does not refute the point all of human action is rational, as the action was intentional and purposeful.
In the first half of the book, Mises expounds the differences and similarities between history, economics, and sociology. History is an ad hoc explanation of past events, created by specific individuals, under specific circumstances, at a specific geographical location. Although useful in other academic pursuits, it can not be used to deduce economic nor any other universal scientific law. Sociology attempts, as the father of sociology August Comte intended, to formulate universal laws of human society. Modern sociological research, however, has attempted instead the same path of history, in that it studies only specific human groups, in specific locations and times. Economics is a branch of sociology, specifically pertaining to the goal of finding universal laws between individuals and their relation with scarce resources, including most importantly, time.
In clarifying economic laws, Mises attacks the senselessness of historicism, empiricism, naturalism, Marxism (particularly, socialism and polylogism), and the classical economic assumptions of a homo economicus. Throughout the book, Mises repeatedly crushes the doctrine of interventionism. By pursuing government policies into the economy, the advocates ignore economic laws, perpetuating the ills of the world they seek to alleviate. For example, the imposition of mandatory minimum wage controls, will undoubtedly create greater unemployment for the poor and the unfortunate workers, rather than increasing their standard of living. Price controls must, at some level, create less than what would normally be produced, if the price control is below market pricing. Interventionists have attempted to transform economic ideas which support their views that such policies will help, but when they inevitably fail, they blame economics for political bias. Furthermore, economics has refuted the belief held that merchants and businessmen must, through the accumulation of their wealth, have harmed other(s). Wealth generated voluntarily and without coercion, explained through economic theory, has a net benefit, for both the seller and the buyer. Though wealthy merchants and businessmen often collude with the powerful and the state to enact detrimental policy, this is the fault of allowing the state to interfere which results in this problem. Always, the wealthy, the influential, the authoritarians will try to sway the state to favor their interests. The goal of the common people should be that of limiting the state and thereby constricting such influence. Human prosperity can only exist and continue to exist through voluntary, cooperative, and peaceful measures.
Often, in Mises' works, particularly his later ones, he may seem frustrated, seeing the capability and potential of human society bleed into waste, through ideas which he, and other notable thinkers, spent a lifetime fighting and refuting. The epistemological problems of economics continue to perpetuate among the economic field, and Mises himself, through no fault of his own or by any detriment to his reputation as a great economist and thinker, also contributes to some incorrect economic thinking. For instance, a small example, Mises introduces and uses the distinction between monopoly and competitive pricing, when no such distinction exist.
With the existence of natural laws, biological, chemical, and physical, it should be no surprised there should be social and economic laws, though the methods for discovering these laws differ, though scientists and philosophers disagree, sometimes widely, on how methods between natural and social sciences should operate. Utopians who attempt to implement their world on everyone else disregard such universal laws and consequently revolt against reason, logic, and science. Science, if the goal is to discover truth and knowledge, should be, most importantly, value free. It can only say if such an action, phenomenon, or event should occur, then another action, phenomenon, or event should follow; not whether this is good or bad. Individuals may hold such beliefs and argue such events would be beneficial, but not the scientific theory. In other words, only humans can giving meaning to events and ideas in our lives, science cannot go beyond its own sphere.
Mises is enlightening to read and touches upon interdisciplinary fields, including epistemology, philosophy, political science, economics, history, sociology, and others. Mises deals with thinkers and ideas whose origins may be forgotten but the underlying ideas still exist in current academia. In reading Mises, it will become apparent the parallels of problems and thinking between his time and contemporary time.
In the first half of the book, Mises expounds the differences and similarities between history, economics, and sociology. History is an ad hoc explanation of past events, created by specific individuals, under specific circumstances, at a specific geographical location. Although useful in other academic pursuits, it can not be used to deduce economic nor any other universal scientific law. Sociology attempts, as the father of sociology August Comte intended, to formulate universal laws of human society. Modern sociological research, however, has attempted instead the same path of history, in that it studies only specific human groups, in specific locations and times. Economics is a branch of sociology, specifically pertaining to the goal of finding universal laws between individuals and their relation with scarce resources, including most importantly, time.
In clarifying economic laws, Mises attacks the senselessness of historicism, empiricism, naturalism, Marxism (particularly, socialism and polylogism), and the classical economic assumptions of a homo economicus. Throughout the book, Mises repeatedly crushes the doctrine of interventionism. By pursuing government policies into the economy, the advocates ignore economic laws, perpetuating the ills of the world they seek to alleviate. For example, the imposition of mandatory minimum wage controls, will undoubtedly create greater unemployment for the poor and the unfortunate workers, rather than increasing their standard of living. Price controls must, at some level, create less than what would normally be produced, if the price control is below market pricing. Interventionists have attempted to transform economic ideas which support their views that such policies will help, but when they inevitably fail, they blame economics for political bias. Furthermore, economics has refuted the belief held that merchants and businessmen must, through the accumulation of their wealth, have harmed other(s). Wealth generated voluntarily and without coercion, explained through economic theory, has a net benefit, for both the seller and the buyer. Though wealthy merchants and businessmen often collude with the powerful and the state to enact detrimental policy, this is the fault of allowing the state to interfere which results in this problem. Always, the wealthy, the influential, the authoritarians will try to sway the state to favor their interests. The goal of the common people should be that of limiting the state and thereby constricting such influence. Human prosperity can only exist and continue to exist through voluntary, cooperative, and peaceful measures.
Often, in Mises' works, particularly his later ones, he may seem frustrated, seeing the capability and potential of human society bleed into waste, through ideas which he, and other notable thinkers, spent a lifetime fighting and refuting. The epistemological problems of economics continue to perpetuate among the economic field, and Mises himself, through no fault of his own or by any detriment to his reputation as a great economist and thinker, also contributes to some incorrect economic thinking. For instance, a small example, Mises introduces and uses the distinction between monopoly and competitive pricing, when no such distinction exist.
With the existence of natural laws, biological, chemical, and physical, it should be no surprised there should be social and economic laws, though the methods for discovering these laws differ, though scientists and philosophers disagree, sometimes widely, on how methods between natural and social sciences should operate. Utopians who attempt to implement their world on everyone else disregard such universal laws and consequently revolt against reason, logic, and science. Science, if the goal is to discover truth and knowledge, should be, most importantly, value free. It can only say if such an action, phenomenon, or event should occur, then another action, phenomenon, or event should follow; not whether this is good or bad. Individuals may hold such beliefs and argue such events would be beneficial, but not the scientific theory. In other words, only humans can giving meaning to events and ideas in our lives, science cannot go beyond its own sphere.
Mises is enlightening to read and touches upon interdisciplinary fields, including epistemology, philosophy, political science, economics, history, sociology, and others. Mises deals with thinkers and ideas whose origins may be forgotten but the underlying ideas still exist in current academia. In reading Mises, it will become apparent the parallels of problems and thinking between his time and contemporary time.
April 14, 2016
More crystal-clear philosophy of knowledge from Mises.
October 23, 2023
A COLLECTION OF EARLY TECHNICAL ESSAYS BY MISES
The Foreword to this 1933 book by Ludwig M. Lachmann explains, “In 1960 in the preface to the first English-language edition of this volume of essays, Mises wrote, ‘They represent… the necessary preliminary study for the thorough scrutiny of the problems involved such as I tried to provide in my book ‘Human Action’… Most of the other essays originally appeared in German journals … in the late 1920s… Almost half a century has passed since these essays saw the light of day. To appreciate them, we have to recall not only the circumstances of the time in which they were written, but also Mises’ own position and temperament as a man of ideas. The essays were written in the last years of the Weimar Republic and were addressed to a German academic audience in which support for, and understanding of, the market economy… had almost vanished…”
Mises wrote in the first essay, “It is indisputable that there is and must be an aprioristic theory of human action. And it is equally indisputable the human action can be the subject matter of historical investigation…” (Pg. 7) Later, he adds, “The long cherished assumption that a proportional relationship, which could be expressed in an equation, exists between prices and the quantity of money has proved fallacious; and as a result the doctrine that knowledge of human action can be formulated in quantitative terms has lost its only support.” (Pg. 10)
He continues, “The science of human action that strives for universally valid knowledge is the theoretical system whose hitherto best elaborated branch is economics. In all of its branches this science is a priori, not empirical. Like logic and mathematics, it is not derived from experience; it is prior to experience. It is, as it were, the logic of action and deed.” (Pg. 12-13) He goes on, “However, what we know about our action under given conditions is derived not from experience, but from reason. What we know about the fundamental categories of action---action, economizing, preferring, the relationship of means and ends, and everything else that, together with these, constitutes the system of human action---is not derived from experience. We conceive all this from within, just as we conceive logical and mathematical truths a priori, without reference to any experience. Nor could experience ever lead anyone to the knowledge of these things if he did not comprehend them from within himself.” (Pg. 13-14)
He states, ‘science is not at all concerned with determining what society is, but with the effect of labor performed under conditions of social cooperation. And its first statement is that the productivity of social cooperation surpasses in every respect the sum total of the production of isolated individuals.” (Pg. 43)
He asserts, “The one declaration of the science of ‘happiness’ is that it is purely subjective. In this declaration there is, therefore, room for all conceivable desires and wants. Consequently, no statement about the quality of the ends aimed at by men can in any way affect of undermine the correctness of our theory.” (Pg. 57)
He says, “The body responds reactively to poisons, but, in addition, action can also respond meaningfully by taking an antidote. Only meaningful action … responds to an increase in market prices. From the point of view of psychology, the boundary between meaningful and reactive behavior is indeterminate, as is the boundary between consciousness and unconsciousness. However, it maybe that only the imperfection of our thinking prevents us from discovering that action and reaction to stimuli are essentially alike and that the difference between them is merely one of degree.” (Pg. 83)
He explains, “Two propositions follow from the subjective theory of value that make a precise separation between the ‘economic’ and the ‘noneconomic’ … appear impracticable. First, there is the realization that the economic principle is the fundamental principle of all rational action… All rational action is therefore an act of economizing. Secondly, there is the realization that every … meaningful action is rational. Only the ultimate goals … at which action aims are beyond rationality and, indeed, always and without exception must be.” (Pg. 148)
He notes, “Monetary calculation is not the calculation, and certainly not the measurement of value. Its basis is the comparison of the most important and the less important. It is an ordering according to rank, an act of grading… and not an act of measuring. It was a mistake to search for a measure of the value of goods. In the last analysis, economic calculation does not rest on the measurement of values, but on their arrangement in an order of rank.” (Pg. 160)
He argues, “The subjective theory of value traces the exchange ratios of the market back to the consumers’ subjective valuations of economic goods… What is alone decisive is that the parties on the market are prepared to pay or to accept this price for bread and that price for milk. Individuals as consumers value goods exactly so much and no more or less at a given moment because of the operation of the social and the natural forces that determine their lives. The investigation of these determining factors is the task of other sciences, not that of economics… For the market, the motivation of the buyers’ actions is indifferent. All that counts is that they are prepared to spend a definite sum. This and nothing else is the essential element of the economic theory of wants.” (Pg. 168)
He states, ‘By means of its subjectivism the modern theory becomes objective science. It does not pass judgment on action, but takes it exactly as it is; and it explains market phenomena not on the basis of ‘right’ action, but on the basis of given action. It does not seek to explain the exchange rations that would exist on the supposition that men are governed exclusively by certain motives and that other motives, which do in fact govern them, have effect. It wants to comprehend the formation of the exchange ratios that actually appear in the market.” (Pg.180-181)
This book will mostly appeal to those making a serious study of Mises’ thought.
The Foreword to this 1933 book by Ludwig M. Lachmann explains, “In 1960 in the preface to the first English-language edition of this volume of essays, Mises wrote, ‘They represent… the necessary preliminary study for the thorough scrutiny of the problems involved such as I tried to provide in my book ‘Human Action’… Most of the other essays originally appeared in German journals … in the late 1920s… Almost half a century has passed since these essays saw the light of day. To appreciate them, we have to recall not only the circumstances of the time in which they were written, but also Mises’ own position and temperament as a man of ideas. The essays were written in the last years of the Weimar Republic and were addressed to a German academic audience in which support for, and understanding of, the market economy… had almost vanished…”
Mises wrote in the first essay, “It is indisputable that there is and must be an aprioristic theory of human action. And it is equally indisputable the human action can be the subject matter of historical investigation…” (Pg. 7) Later, he adds, “The long cherished assumption that a proportional relationship, which could be expressed in an equation, exists between prices and the quantity of money has proved fallacious; and as a result the doctrine that knowledge of human action can be formulated in quantitative terms has lost its only support.” (Pg. 10)
He continues, “The science of human action that strives for universally valid knowledge is the theoretical system whose hitherto best elaborated branch is economics. In all of its branches this science is a priori, not empirical. Like logic and mathematics, it is not derived from experience; it is prior to experience. It is, as it were, the logic of action and deed.” (Pg. 12-13) He goes on, “However, what we know about our action under given conditions is derived not from experience, but from reason. What we know about the fundamental categories of action---action, economizing, preferring, the relationship of means and ends, and everything else that, together with these, constitutes the system of human action---is not derived from experience. We conceive all this from within, just as we conceive logical and mathematical truths a priori, without reference to any experience. Nor could experience ever lead anyone to the knowledge of these things if he did not comprehend them from within himself.” (Pg. 13-14)
He states, ‘science is not at all concerned with determining what society is, but with the effect of labor performed under conditions of social cooperation. And its first statement is that the productivity of social cooperation surpasses in every respect the sum total of the production of isolated individuals.” (Pg. 43)
He asserts, “The one declaration of the science of ‘happiness’ is that it is purely subjective. In this declaration there is, therefore, room for all conceivable desires and wants. Consequently, no statement about the quality of the ends aimed at by men can in any way affect of undermine the correctness of our theory.” (Pg. 57)
He says, “The body responds reactively to poisons, but, in addition, action can also respond meaningfully by taking an antidote. Only meaningful action … responds to an increase in market prices. From the point of view of psychology, the boundary between meaningful and reactive behavior is indeterminate, as is the boundary between consciousness and unconsciousness. However, it maybe that only the imperfection of our thinking prevents us from discovering that action and reaction to stimuli are essentially alike and that the difference between them is merely one of degree.” (Pg. 83)
He explains, “Two propositions follow from the subjective theory of value that make a precise separation between the ‘economic’ and the ‘noneconomic’ … appear impracticable. First, there is the realization that the economic principle is the fundamental principle of all rational action… All rational action is therefore an act of economizing. Secondly, there is the realization that every … meaningful action is rational. Only the ultimate goals … at which action aims are beyond rationality and, indeed, always and without exception must be.” (Pg. 148)
He notes, “Monetary calculation is not the calculation, and certainly not the measurement of value. Its basis is the comparison of the most important and the less important. It is an ordering according to rank, an act of grading… and not an act of measuring. It was a mistake to search for a measure of the value of goods. In the last analysis, economic calculation does not rest on the measurement of values, but on their arrangement in an order of rank.” (Pg. 160)
He argues, “The subjective theory of value traces the exchange ratios of the market back to the consumers’ subjective valuations of economic goods… What is alone decisive is that the parties on the market are prepared to pay or to accept this price for bread and that price for milk. Individuals as consumers value goods exactly so much and no more or less at a given moment because of the operation of the social and the natural forces that determine their lives. The investigation of these determining factors is the task of other sciences, not that of economics… For the market, the motivation of the buyers’ actions is indifferent. All that counts is that they are prepared to spend a definite sum. This and nothing else is the essential element of the economic theory of wants.” (Pg. 168)
He states, ‘By means of its subjectivism the modern theory becomes objective science. It does not pass judgment on action, but takes it exactly as it is; and it explains market phenomena not on the basis of ‘right’ action, but on the basis of given action. It does not seek to explain the exchange rations that would exist on the supposition that men are governed exclusively by certain motives and that other motives, which do in fact govern them, have effect. It wants to comprehend the formation of the exchange ratios that actually appear in the market.” (Pg.180-181)
This book will mostly appeal to those making a serious study of Mises’ thought.
January 14, 2024
In “Epistemological Problems of Economics,” Ludwig von Mises explores the intellectual errors of interventionism, protectionism and socialism that can be found in a revolt against logic and science.
“Epistemological Problems of Economics” was published in 1933, a period when the social sciences were experiencing a transformation of methodology. Mises argues effectively that economics is an apriori, deductive science, whose theorems can be derived by the fundamental axiom of action: that is, individuals act and engage in knowing actions toward chosen goals. This view was challenged by the positivism of econometrics and the dogma of economic planning. Mises examines a range of philosophical problems associated with economics, and he destroys the pretensions of all schools antithetical to human freedom.
Mises’s Vienna symposium can not be replicated. If one can criticize this work, it issues from the turgid, Kantian prose of Mises. One can ignore Mises, but the fundamental problems of epistemology remain. A serious book, for serious people.
“Epistemological Problems of Economics” was published in 1933, a period when the social sciences were experiencing a transformation of methodology. Mises argues effectively that economics is an apriori, deductive science, whose theorems can be derived by the fundamental axiom of action: that is, individuals act and engage in knowing actions toward chosen goals. This view was challenged by the positivism of econometrics and the dogma of economic planning. Mises examines a range of philosophical problems associated with economics, and he destroys the pretensions of all schools antithetical to human freedom.
Mises’s Vienna symposium can not be replicated. If one can criticize this work, it issues from the turgid, Kantian prose of Mises. One can ignore Mises, but the fundamental problems of epistemology remain. A serious book, for serious people.
January 5, 2012
A brilliant book about the nature and scope of economics and a brilliant attack on those who want to smuggle socialism into economics as a political tactic.
However, didn't enjoy too much the last sections of the book, which seemed out of place.
However, didn't enjoy too much the last sections of the book, which seemed out of place.
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September 23, 2010Epistemological Problems of Economics by Ludwig von Mises (2003)
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