The Empirical Nature of the Praxeological Method

The praxeological method has long been a category of Austrian economics that brings great interest to me. Originally, it was the “shiny” aspects of the school that drew me to Austrianism. Business cycle theory is just one such example. However, a more comprehensive understanding of Austrian economics has led me to agree with Walter Block, when he stated at this year’s Rothbard University, that praxeology is the defining aspect of the Austrian school. It is the foundation from which all other Austrian insight is derived; and thus, one should hope that we have a strong understanding of what praxeology is, and is not.

Unfortunately, having such an understanding is difficult in a topic that is perhaps the most complex and nuanced of all subjects within the Austrian school. Indeed, there is little consensus of what place praxeology ought to hold, likely caused by this complexity.

Consequently, I will make my attempt to offer some clarification on the subject of praxeology; specifically in regards to the role that empiricism plays. Contrary to Mises’ claim that praxeology is a priori, I argue that it is precisely the opposite; that in fact, praxeology relies on empiricism as much as it does rationalism.

First, it is necessary to establish that Mises himself would agree that praxeology, to be used at anything other than a theoretical level, must involve some degree of empiricism, so as to be a science relevant to the experiential world:

“…it would be possible to construct, by the use of the axiomatic method, a universal praxeology so general that its system would embrace not only all the patterns of action in the world that we actually encounter, but also patterns of action…whose conditions are purely imaginary…Because we study science for the sake of real life…we are satisfied with the less universal system that refers to the conditions given in the world of experience.”[1] (Mises, 15-16)

Mises is willing to sacrifice a wholly rationalist praxeological system not involving empirical observations for one that corresponds with the real world. One such real world conclusion a praxeologist can draw is the disutility of labour. We know empirically that there is a point at which man will prefer an hour of leisure against an additional hour of labour.

But one may now be asking why this discussion is relevant at all. Any praxeologist would quickly agree this is all non-controversial, that occasionally we introduce basic empirical facts to gather useful deductions. However, I am not suggesting that the use is occasional, as I believe Mises and most other praxeologists would; rather, that it is ubiquitous throughout the chain of logic in praxeology.

Allow me to illustrate with a syllogism:

  1. All flowers are coloured red
  2. Dandelions are flowers
  3. Therefore, all dandelions are coloured red

In this syllogism, our conclusion (3) is apodictic, or necessarily true based on the structure of the syllogism. A man alien to life on earth would believe this conclusion to be of absolute certainty, to be irrefutable. However, experience tells us that this conclusion is incorrect.

Thus, using this syllogism, we see that a praxeologist might make two different types of errors. The first is an error of universality, shown by premise (1), as not all flowers are coloured red, something we understand empirically. The second is an error of applying an inaccurate definition, shown by premise (2). Dandelions are not classified as flowers, but as weeds. Yet, as we found out, this subtlety of definition gave us a drastically incorrect conclusion.

I will only speak of the second error in this example, as I am of the opinion it is significantly more relevant to Austrian economics. An example will be given to illustrate.

The subjects of my example are the Austrian ideas of time and time preference. First, it is important to note that Mises thought of time as an empiric categorical condition of action:

“The fact that the passage of time is one of the conditions under which action takes place is established empirically and not a priori.”[2] (Mises, 25)

Thus, a praxeologist understands time from experience. But Mises then proceeds to make this bold claim:

“Whatever follows necessarily from empirical knowledge–e.g., the propositions of the agio theory of interest–lies outside the scope of empiricism.”[3] (Mises, 26)

This, however, cannot be true. Returning to our syllogism earlier, we determined that our conclusion, arrived at from the same deductive process that praxeology uses, was false due to empirical and definitional issues in the premises. Similarly, our definition of time and also time preference, which is entirely empirical knowledge as Mises himself says, can dramatically alter the deductions we draw from it.

A telling example of issues arising from an empirical understanding of time is the definition of time preference. As Bob Murphy has pointed out, Austrian economists have used multiple definitions of time preference over the years bringing differing conclusions, from an identical praxeological process I might add. Precisely contrary to Mises’ words, the propositions of the agio theory of interest lie directly within the scope of empirics based on our posteriori understanding and subsequent defining of it.

To conclude, I am of the opinion that praxeology, while certainly using a rationalist, deductive method, actually relies far more significantly on posteriori knowledge than Mises and other praxeologists believe it to. One might think of other definitions, such as that of action, or of the factors of production (and particularly Rothbard’s distinction between land and capital goods), that have an empirical influence potentially providing us errant conclusions. And should this argument hold to be true, Austrians must perhaps tread lightly when criticizing the mainstream for its use of empirical work, though the nature of the use of empirics between Austrianism and the mainstream do appear to be fundamentally different

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[1] Mises, Ludwig von. 1960. Epistemological Problems of Economics. Auburn, Alabama: Ludwig von Mises Institute.

[2] Ibid.

[3] Ibid.