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Epistemological Problems of Economics
Ludwig von Mises

1
The Task and Scope of
the Science of Human Action

I. The Nature and Development of the Social Sciences

5. The Standpoint of Empiricism

It is indisputable that there is and must be an aprioristic theory of human action. And it is equally indisputable that human action can be the subject matter of historical investigation. The protest of the consistent representatives of historicism, who do not want to admit the possibility of a theory that would be independent of time and place, need disturb us no more than the contention of naturalism, which wants to challenge the scientific character of history so long as it has not reached the point where it can establish historical laws.

Naturalism presupposes that empirical laws could be derived a posteriori from the study of historical data. Sometimes it is assumed that these laws are valid without respect to time or place, sometimes that they have validity only for certain periods, countries, races, or nationalities.[9] The overwhelming majority of historians reject both varieties of this doctrine. Indeed, it is generally rejected even by those who are in accord with historicism and who do not want to admit that, without the aid of the aprioristic theory of human action, the historian would be completely at a loss to deal with his material and would be unable to solve any of his problems. Such historians generally maintain that they are able to carry on their work completely free of theory.

We need not enter here into the investigation of whether historicism must lead necessarily to the one or to the other of these two views. Whoever is of the opinion that the doctrine of historicism cannot be consistently thought through to its conclusion will consider it futile to undertake such an investigation. The only point worth noting is that a sharp opposition exists between the view of the adherents of the Historical School and that of the majority of historians. Whereas the former believe that they can discover empirical laws from the data of history and want to call the compilation of such laws sociology and economics, most historians would not be willing to agree that this can be done.

The thesis of those who affirm the possibility of deriving empirical laws from historical data we shall call empiricism. Historicism and empiricism are, consequently, not the same thing, As a rule, though certainly not always, if they take any position on the problem at all, historians profess their adherence to historicism. With few exceptions (Buckle, for example) they are opponents of empiricism. The adherents of the Historical and the Institutionalist Schools take the point of view of historicism, although they find it impossible to maintain this doctrine in its purity as soon as they attempt to state it in a logically and epistemologically coherent manner; they are almost always in accord with empiricism. Thus, a sharp contrast of view generally exists between the historians and the economists and sociologists of the Historical School.

The question with which we are now concerned is no longer whether a prevailing regularity can be discovered in human action, but whether the observation of facts without any reference to a system of aprioristic knowledge of human action can be considered a method capable of leading us to the cognition of such a regularity. Can economic history furnish "building stones" for an economic theory, as Schmoller maintains?[10] Can the "findings of economic history's specialized description become elements of theory and lead to universal truths"? In this connection we shall not take up the question of the possibility of universal "historical laws" (which would therefore not be economic laws) that has often been exhaustively discussed.[11] We shall limit ourselves to examining whether, by means of the observation of facts, that is, by an a posteriori method, we could arrive at statements of the kind sought for by the system of economic theory.

The method used by the natural sciences for the discovery of the laws of phenomena begins with observation. However, the decisive step is taken only with the construction of an hypothesis: a proposition does not simply emerge from observation and experience, for these always present us only with complex phenomena in which various factors appear so closely connected that we are unable to determine what role should be attributed to each. The hypothesis is already an intellectual elaboration of experience, above all in its claim to universal validity, which is its decisive characteristic. The experience that has led to the construction of the proposition is always limited to the past; it is always an experience of a phenomenon that occurred in a particular place and at a particular time. However, the universal validity claimed for the proposition also implies applicability to all other past and future occurrences. It is based on an imperfect induction. (No universal theorems emerge from perfect induction, but only descriptions of an event that occurred in the past.)

Hypotheses must be continually verified anew by experience. In an experiment they can generally be subjected to a particular method of examination. Various hypotheses are linked together into a system, and everything is deduced that must logically follow from them. Then experiments are performed again and again to verify the hypotheses in question. One tests whether new experience conforms to the expectations required by the hypotheses. Two assumptions are necessary for these methods of verification: the possibility of controlling the conditions of the experiment, and the existence of experimentally discoverable constant relations whose magnitudes admit of numerical determination. If we wish to call a proposition of empirical science true (with whatever degree of certainty or probability an empirically derived proposition can have) when a change of the relevant conditions in all observed cases leads to the results we have been led to expect, then we may say that we possess the means of testing the truth of such propositions.

With regard to historical experience, however, we find ourselves in an entirely different situation. Here we lack the possibility not only of performing a controlled experiment in order to observe the individual determinants of a change, but also of discovering numerical constants. We can observe and experience historical change only as the result of the combined action of a countless number of individual causes that we are unable to distinguish according to their magnitudes. We never find fixed relationships that are open to numerical calculation. 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.

Whoever wants to derive laws of human action from experience would have to be able to show how given situations influence action quantitatively and qualitatively. It is psychology that generally has sought to provide such a demonstration, and for that reason all those who assign this task to sociology and economics are prone to recommend to them the psychological method. What is more, by the psychological method they understand not what was called psychological?in a rather inappropriate and even misleading sense?in the method of the Austrian School, but rather the procedures and discoveries of scientific psychology itself.

However, psychology has failed in this sphere. With the use of its methods it can, of course, observe unconscious reactions to stimuli in the manner of the biological sciences. Beyond this it can accomplish nothing that could lead to the discovery of empirical laws. It can determine how definite men have behaved in definite situations in the past, and it infers from its findings that conduct will be similar in the future if similar men are placed in a similar situation. It can tell us how English school boys behaved in the last decades when confronted with a definite situation, for example, when they encountered a crippled beggar. Such information tells us very little about the conduct of English school children in the coming decades or about the conduct of French or German school children. Psychology can establish nothing more than the occurrence of an historical incident: the cases observed have shown such and such; but the conclusions drawn from the observed cases, which refer to English school children of a definite period, are not logically justified when applied to other cases of the same historical and ethnological character that have not been observed.

All that observation teaches us is that the same situation has a different effect on different men. The attempt to arrange men in classes whose members all react in the same way has not been successful because even the same men react differently at different times, and there is no means of ascribing unequivocally definite modes of reaction to different ages or other objectively distinguishable periods or conditions of life. Consequently, there is no hope of achieving knowledge of a regularity in the phenomena by this method. This is what one has in mind when one speaks of free will, of the irrationality of what is human, spiritual, or historical, of individuality in history, and of the impossibility of rationally comprehending life in its fullness and diversity. One expresses the same idea in pointing out that it is not possible for us to grasp how the action of the external world influences our minds, our will, and, consequently, our action. It follows from this that psychology, in so far as it deals with such things, is history or, in the terminology of current German philosophy, a moral science.

Whoever declares that the method of historical understanding used by the moral sciences is appropriate also for economics should be aware of the fact that this method can never lead to the discovery of empirical laws. Understanding is precisely the method that the historical sciences (in the broadest sense of the term) employ in dealing with the unique, the non-repeatable, that is, in treating what is simply historical. Understanding is the mental grasp of something that we are unable to bring under rules and explain through them.[12] This is true not only of the field traditionally designated as that of universal history, but also of all special fields, above all that of economic history. The position taken by the empiricist school of German economics in the struggle against economic theory is untenable also from the standpoint of the logic of the historical sciences as developed by Dilthey, Windelband, Rickert, and Max Weber.

In the empirical sciences the controlled experiment is indispensable for the a posteriori derivation of propositions whenever experience presents only complex phenomena in which the effect is produced by several interlinked causes. In historical experience we can observe only complex phenomena, and an experiment is inapplicable to such a situation. Sometimes it is said that a mental experiment (Gedankenexperiment) could take its place. However, a mental experiment, logically considered, has an entirely different meaning from a real experiment. It involves thinking through the implications of a proposition in the light of its compatibility with other propositions that we accept as true. If these other propositions are not derived from experience, then the mental experiment makes no reference to experience.

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[9] For a critique of this second point of view, cf. below pp. 25 ff. and pp. 119 ff.

[10] Schmoller, "Volkswirtschaft, Volkswirtschaftslehre und Methode," Handw?rterbuch der Staatswissenschaften (3rd ed.), VIII, 464.

[11] Concerning historical laws, cf. below pp. 109 ff.

[12] Cf. below pp. 130 ff.

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