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Epistemological Problems of Economics
Ludwig von Mises

1
The Task and Scope of
the Science of Human Action

II. The Scope and Meaning of the System of A Priori Theorems

1. The Basic Concept of Action and its Categorial Conditions

The starting point of our reasoning is not behavior, but action, or, as it is redundantly designated, rational action. Human action is conscious behavior on the part of a human being. Conceptually it can be sharply and clearly distinguished from unconscious activity, even though in some cases it is perhaps not easy to determine whether given behavior is to be assigned to one or the other category.

As thinking and acting men, we grasp the concept of action. In grasping this concept we simultaneously grasp the closely correlated concepts of value, wealth, exchange, price, and cost. They are all necessarily implied in the concept of action, and together with them the concepts of valuing, scale of value and importance, scarcity and abundance, advantage and disadvantage, success, profit, and loss. The logical unfolding of all these concepts and categories in systematic derivation from the fundamental category of action and the demonstration of the necessary relations among them constitutes the first task of our science. The part that deals with the elementary theory of value and price serves as the starting point in its exposition. There can be no doubt whatever concerning the aprioristic character of these disciplines.

The most general prerequisite of action is a state of dissatisfaction, on the one hand, and, on the other, the possibility of removing or alleviating it by taking action. (Perfect satisfaction and its concomitant, the absence of any stimulus to change and action, belong properly to the concept of a perfect being. This, however, is beyond the power of the human mind to conceive. A perfect being would not act.) Only this most general condition is necessarily implied in the concept of action. The other categorial conditions of action are independent of the basic concept; they are not necessary prerequisites of concrete action. Whether or not they are present in a particular case can be shown by experience only. But where they are present, the action necessarily falls under definite laws that flow from the categorial determinacy of these further conditions.

It is an empirical fact that man grows old and dies and that therefore he cannot be indifferent to the passage of time. That this has been man's experience thus far without exception, that we do not have the slightest evidence to the contrary, and that scarcely any other experience points more obviously to its foundation in a law of nature?all this in no way changes its empirical character. The fact that the passage of time is one of the conditions under which action takes place is established empirically and not a priori. We can without contradiction conceive of action on the part of immortal beings who would never age. But in so far as we take into consideration the action of men who are not indifferent to the passage of time and who therefore economize time because it is important to them whether they attain a desired end sooner or later, we must attribute to their action everything that necessarily follows from the categorial nature of time. The empirical character of our knowledge that the passage of time is a condition of any given action in no way affects the aprioristic character of the conclusions that necessarily follow from the introduction of the category of time. Whatever follows necessarily from empirical knowledge?e.g., the propositions of the agio theory of interest?lies outside the scope of empiricism.

Whether the exchange of economic goods (in the broadest sense, which also includes services) occurs directly, as in barter, or indirectly, through a medium of exchange, can be established only empirically. However, where and in so far as media of exchange are employed, all the propositions that are essentially valid with regard to indirect exchange must hold true. Everything asserted by the quantity theory of money, the theory of the relation between the quantity of money and interest, the theory of fiduciary media, and the circulation-credit theory of the business cycle, then becomes inseparably connected with action. All these theorems would still be meaningful even if there had never been any indirect exchange; only their practical significance for our action and for the science that explains it would then have to be appraised differently. However, the heuristic importance of experience for the analysis of action is not to be disregarded. Perhaps if there had never been indirect exchange, we would not have been able to conceive of it as a possible form of action and to study it in all its ramifications. But this in no way alters the aprioristic character of our science.

These considerations enable us to assess critically the thesis that all or most of the doctrines of economics hold only for a limited period of history and that, consequently, theorems whose validity is thus limited historically or geographically should replace, or at least supplement, those of the universally valid theory. All the propositions established by the universally valid theory hold to the extent that the conditions that they presuppose and precisely delimit are given. Where these conditions are present, the propositions hold without exception. This means that these propositions concern action as such; that is, that they presuppose only the existence of a state of dissatisfaction, on the one hand, and the recognized possibility, on the other, of relieving this dissatisfaction by conscious behavior, and that, therefore, the elementary laws of value are valid without exception for all human action. When an isolated person acts, his action occurs in accordance with the laws of value. Where, in addition, goods of higher order are introduced into action, all the laws of the theory of imputation are valid. Where indirect exchange takes place, all the laws of monetary theory are valid. Where fiduciary media are created, all the laws of the theory of fiduciary media (the theory of credit) are valid. There would be no point in expressing this fact by saying that the doctrines of the theory of money are true only in those periods of history in which indirect exchange takes place.

However, the case is entirely different with the thesis of those who would subordinate theory to history. What they maintain is that propositions derived from the universally valid theory are not applicable to historical periods in which the conditions presupposed by the theory are present. They assert, for example, that the laws of price determination of one epoch are different from those of another. They declare that the propositions of the theory of prices, as developed by subjective economics, are true only in a free economy, but that they no longer have any validity in the age of the hampered market, cartels, and government intervention.

In fact, the theory of prices expounds the principles governing the formation of monopoly prices as well as of competitive prices. It demonstrates that every price must be either a monopoly price or a competitive price and that there can be no third kind of price. In so far as prices on the hampered market are monopoly prices they are determined in accordance with the laws of monopoly price. Limited and hampered competition that does not lead to the formation of monopoly prices presents no special problem for the theory. The formation of competitive prices is fundamentally independent of the extent of competition. Whether the competition in a given case is greater or smaller is a datum that the theory does not have to take into account since it deals with categorial, and not concrete, conditions. The extent of the competition in a particular case influences the height of the price, but not the manner in which the price is determined.

The Historical School has not succeeded in providing any proof of its assertion that the laws derived from the universally valid theory do not hold for all human action independently of place, time, race, or nationality. In order to prove this it would have had to show that the logical structure of human thinking and the categorial nature of human action change in the course of history and are different for particular peoples, races, classes, etc. This it could never demonstrate; indeed, philosophy has established the very opposite as the truth.[1]

Nor were the adherents of the Historical School ever able to point to any instance of a proposition for which the claim could be made that observation had established it as an economic law with merely temporal, local, national, or similarly limited validity. They were unable to discover such a proposition either a priori or a posteriori. If thinking and action were really conditioned by place, time, race, nationality, climate, class, etc., then it would be impossible for a German of the twentieth century to understand anything of the logic and action of a Greek of the age of Pericles. We have already shown why the a posteriori discovery of empirical laws of action is not possible.[2] All that the "historical theory" could present was history?very poor history, to be sure, but, considered from a logical point of view, history nevertheless, and in no sense a theory.

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[1] See below pp. 102 f. for a further discussion of this point.

[2] Supra, pp. 9 ff.

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