Hoppe on epistemology

There is a branch of the Austrian school of economics that claims to closely follow the ideas of Ludwig von Mises. They say that they have better ideas about epistemology and methodology than other economists. I’m going to look at a book written by a prominent representative of that school of thought, Economic Science and the Austrian Method by Hans-Hermann Hoppe and see if his ideas are any good.

Most economists think of economics as being similar to the natural sciences like physics. You measure some quantity like the number of employees hired and then look at whether it goes up or down in response to an increase in the minimum wage.

Mises thought that the laws of economics were not subject to such a check. If the price of labour increases people will demand less than they would if the price remained the same. An increase in the minimum wage increases the price of some labour and so decreases the amount of labour demanded. Mises wrote that you couldn’t understand the set of facts non-Austrian economists want to interpret as data without economic laws and so they can’t be tested:

Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification or falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts. They are a necessary requirement of any intellectual grasp of historical events. Without them we should not be able to see in the course of events anything else than kaleidoscopic change and chaotic muddle.

Hoppe wrote his book in defence of Mises’ position (and some other economists Hoppe quotes) and against the positions of his critics. He calls the anti-Mises position “empiricism”. The Misesian position is so unfamiliar to most people that I think it requires extended discussion and quotes from Hoppe to give it a fair assessment.

Hoppe makes a contrast between the natural sciences and economics:

Let us first look briefly at the natural sciences. How do we know what the consequences will be if we subject some nature-given material to specified tests, let’s say, if we mix it with another kind of material? Obviously we do not know before we actually try it and observe what happens. We can make a prediction, of course, but our prediction is only a hypothetical one, and observations are required to find out if we are right or wrong.

Moreover, even if we have observed some definite outcome, let’s say that mixing the two materials leads to an explosion, can we then be sure that such an outcome will invariably occur whenever we mix such materials? Again, the answer is no. Our predictions will still, and permanently, be hypothetical. It is possible that an explosion will only result if certain other conditions—A, B, and C—are fulfilled. We can only find out whether or not this is the case and what these other conditions are by engaging in a never-ending trial and error process. This enables us to improve our knowledge progressively about the range of application for our original hypothetical prediction.

Now let us turn to some typical economic propositions. Consider the validation process of a proposition such as the following: Whenever two people A and B engage in a voluntary exchange, they must both expect to profit from it. And they must have reverse preference orders for the goods and services exchanged so that A values what he receives from B more highly than what he gives to him, and B must evaluate the same things the other way around.

…

Considering such propositions, is the validation process involved in establishing them as true or false of the same type as that involved in establishing a proposition in the natural sciences? Are these propositions hypothetical in the same sense as a proposition regarding the effects of mixing two types of natural materials? Do we have to test these economic propositions continuously against observations? And does it require a never-ending trial and error process in order to find out the range of application for these propositions and to gradually improve our knowledge, such as we have seen to be the case in the natural sciences?

It seems quite evident—except to most economists for the last forty years—that the answer to these questions is a clear and unambiguous No. That A and B must expect to profit and have reverse preference orders follows from our understanding of what an exchange is. And the same is the case concerning the consequences of a coerced exchange. It is inconceivable that things could ever be different: It was so a million years ago and it will be so a million years hence. And the range of application for these propositions too is clear once and for all: They are true whenever something is a voluntary exchange or a coerced exchange, and that is all there is to it.

It is true that judging whether voluntary exchanges benefit both parties is not an empirical matter. You can’t experimentally criticise the idea that voluntary exchanges benefit people. Many criticisms involve saying a person could regret the exchange later, which is irrelevant to whether he finds it beneficial now. They are also confused about what sort of actions count as voluntary. Many current transactions happen in part because the government prevents alternatives, so they are not fully voluntary. People don’t look deeply into such issues and so there are cases of coerced transactions that people don’t see as coerced.

Saying that economics is not hypothetical in the same sense as the natural sciences is a mistake. An idea is either hypothetical or not hypothetical, and in either case it is unclear what work the word “sense” is doing here. All ideas are hypothetical for reasons I described in previous posts [1,2] and won’t reproduce here. All knowledge is created by guessing solutions to problems and criticising the guesses. The assessment of ideas should be discussed in terms of how they can be criticised, not in terms of whether or not they are hypothetical since all ideas are hypothetical. The idea that knowledge can be shown to be true or probably true or good or whatever – justificationism – is false.

A theory in the natural sciences can be criticised by finding experimental results that contradict it. An economic theory can’t be criticised in that way. Rather, the economic theory has to be criticised by other kinds of arguments. For example, some people think that an action shouldn’t count as voluntary if you would regret it later, e.g. – a person who spends all his money on booze might regret that decision when he hasn’t got money to pay the rent. This idea blurs the line between voluntary and non-voluntary actions.

Hoppe discusses synthetic a priori ideas – ideas we can know without making observations that aren’t just definitions. Hoppe writes:

Kant, in the course of his critique of classical empiricism, in particular that of David Hume, developed the idea that all our propositions can be classified in a two-fold way: On the one hand they are either analytic or synthetic, and on the other they are either a priori or a posteriori. The meaning of these distinctions is, in short, the following. Propositions are analytic whenever the means of formal logic are sufficient in order to find out whether they are true or not; otherwise propositions are synthetic ones. And propositions are a posteriori whenever observations are necessary in order to establish their truth or at least confirm them. If observations are not necessary, then propositions are a priori.

…

First, how is the truth of such propositions derived, if formal logic is not sufficient and observations are unnecessary? Kant’s answer is that the truth follows from self-evident material axioms.
What makes these axioms self-evident? Kant answers, it is not because they are evident in a psychological sense, in which case we would be immediately aware of them. On the contrary, Kant insists, it is usually much more painstaking to discover such axioms than it is to discover some empirical truth such as that the leaves of trees are green. They are self-evident because one cannot deny their truth without self-contradiction; that is, in attempting to deny them one would actually, implicitly, admit their truth.

So the way in which we get true synthetic a priori ideas, according to this view, is that we look for ideas where you assert their truth by trying to deny them. If you argue that an idea A is false that is a criticism – criticism B. If by arguing B, you use the idea A, then somebody can make a criticism of your criticism – criticism C. So you guess A, criticise A with B and then criticise B with C. This sounds plausible but actually doesn’t work because an argument either refers to other arguments or doesn’t have the context needed to refute objections. Also, even taken at face value it doesn’t justify anything. All it does is give bad criticisms of a rival view.

Hoppe writes about how we find synthetic a priori ideas:

How do we find such axioms? Kant answers, by reflecting upon ourselves, by understanding ourselves as knowing subjects. And this fact—that the truth of a priori synthetic propositions derives ultimately from inner, reflectively produced experience—also explains why such propositions can possibly have the status of being understood as necessarily true. Observational experience can only reveal things as they happen to be; there is nothing in it that indicates why things must be the way they are. Contrary to this, however, writes Kant, our reason can understand such things as being necessarily the way they are, “which it has itself produced according to its own design.”

…
It has been a common quarrel with Kantianism that this philosophy seemed to imply some sort of idealism. For if, as Kant sees it, true synthetic a priori propositions are propositions about how our mind works and must of necessity work, how can it be explained that such mental categories fit reality? How can it be explained, for instance, that reality conforms to the principle of causality if this principle has to be understood as one to which the operation of our mind must conform? Don’t we have to make the absurd idealistic assumption that this is possible only because reality was actually created by the mind?
…
Mises provides the solution to this challenge. It is true, as Kant says, that true synthetic a priori propositions are grounded in self-evident axioms and that these axioms have to be understood by reflection upon ourselves rather than being in any meaningful sense “observable.” Yet we have to go one step further. We must recognize that such necessary truths are not simply categories of our mind, but that our mind is one of acting persons. Our mental categories have to be understood as ultimately grounded in categories of action. And as soon as this is recognized, all idealistic suggestions immediately disappear. Instead, an epistemology claiming the existence of true synthetic a priori propositions becomes a realistic epistemology. Since it is understood as ultimately grounded in categories of action, the gulf between the mental and the real, outside, physical world is bridged. As categories of action, they must be mental things as much as they are characteristics of reality. For it is through actions that the mind and reality make contact.

Hoppe discusses a Misesian idea called the ‘action axiom’:

Mises not only recognizes that epistemology indirectly rests on our reflective knowledge of action and can thereby claim to state something a priori true about reality but that economics does so too and does so in a much more direct way. Economic propositions flow directly from our reflectively gained knowledge of action; and the status of these propositions as a priori true statements about something real is derived from our understanding of what Mises terms “the axiom of action.”
This axiom, the proposition that humans act, fulfills the requirements precisely for a true synthetic a priori proposition. It cannot be denied that this proposition is true, since the denial would have to be categorized as an action—and so the truth of the statement literally cannot be undone. And the axiom is also not derived from observation—there are only bodily movements to be observed but no such things as actions—but stems instead from reflective understanding.

This sounds plausible, but it doesn’t work. People often deny ideas like the idea that humans act. A person may have a story about his actions being determined or influenced by biology, e.g. – a person might say he has ADHD. According to his own ideas, this person doesn’t act or make choices. His brain does stuff without his control. This issue arises because the argument is divorced from the context needed to explain how action works. Why is the ADHD argument wrong in Hoppe’s view? To understand that issue properly, you have to understand the theory of evolution and epistemology: there is no room for that sort of argument in Hoppe’s ideas.

Hoppe doesn’t discuss any substantive objections to his ideas. Some people will dismiss Hoppe’s ideas out of hand. Others will dismiss it without knowing exactly why because it involves a subtle epistemological issue.

Hoppe’s comments on Popper

Hoppe has commented on Popper in this paper.

On p. 191, Hoppe writes:

Popper would have us throw out any theory that is contradicted by any
fact, which, if at all possible, would leave us virtually empty-handed, going nowhere. In recognizing the insoluble connection between theoretical knowledge (language) and actions, rationalism would instead deem such falsificationism, even if possible, as completely irrational. There is no situation conceivable in which it would be reasonable to throw away any theory—conceived of as a cognitive instrument of action—that had been successfully applied in a past situation but proves unsuccessful in a new application—unless one already had a more successful theory at hand.

This is a false statement about Popper’s positioning at least two respects. First, Popper requires that a supposed refutation of a theory should be reproducible otherwise it could just be due to some mistake in the observation that allegedly refuted the theory, see Section 8 of “Logic of Scientific Discovery”.

Second, criticising an explanation as an account of reality is not the same as criticising it as a way of explaining what action you should take. For example, as a description of reality Newton’s theories of motion are false. But those same laws might still be used in some circumstances to predict the weight a bridge will bear or something like that because Newton’s equations are sufficiently accurate for that purpose. Since Popper’s epistemology sez we should be able to use any idea not refuted by criticism the same goes for predicting the load a bridge can take with Newton’s laws.

On p.188, Hoppe notes that scientists could choose to immunise their theories from criticism by reinterpreting them. On p. 209 he tries to reply to Popper’s solution to that problem:

Empiricists such as Blaug (note 19), p. 17ff., argue that Popper actually realized the possibility of “immunizing stratagems” yet “solved” this problem and thus escaped relativism and skepticism. Nothing could be further from the truth. It is correct that Popper has always been aware of the possibility of immunizing one’s hypotheses from falsification. (See his Logik der Forschung, Tubingen: Mohr, 1969, chapter 4, sections 19,20.) His answer to such a threat to his falsificationism, however, can hardly be accepted as a solution. For he actually admits that he cannot show such “conventionalism” to be wrong. He simply proposes to overcome it by adopting the methodological convention of not behaving as conventionalists do. Yet how can such methodolical conventionalism (i.e., a methodology without epistemological foundation) claim to establish science as a rational enterprise and to stimulate scientific progress?

The idea that a foundation is necessary for progress is false as Popper explained. You can make progress by noticing flaws in ideas and replacing them with ideas that don’t have such flaws. Hoppe doesn’t address Popper’s arguments on that point.

On p. 210, Hoppe criticises Popper’s claim that he solved the problem of induction:

Alas, this is simply an illusion. For how can it be possible to relate two or more observational experiences, even if they concern the relations between things that are perceived to be the same or similar, as falsifying (or confirming) each other, rather than merely neutrally record them as one experience here and one experience there, one repetitive of another or not, and leaving it at that (i.e., regarding them as logically incommensurable) unless one presupposed the existence of time-invariantly operating causes? Only if the existence of such time-invariantly operating causes could be assumed would there by any logically compelling reason to regard them as commensurable and as falsifying or confirming each other.

This is a terrible muddle. Saying that there are time-invariant causes is totally irrelevant to the problem of induction. Induction is supposed to explain how people get scientific theories and then justify them. You get them by doing observations and justify them with more observations. Suppose that there are such causes. And suppose that you do an experiment that is consistent with some particular theory about those causes. The result is also compatible with many other causal theories, so it doesn’t justify them. Saying there are time-invariant causes and using some particular theory of those causes to explain the workings of an experiment doesn’t pose any problem for Popper, but it also does nothing to solve the problem of induction.

However, Popper, like all empiricists, denies that any such assumption can be given an a priori defense (there are for him no such things as a priori true propositions about reality such as the causality principle would have to be) and is itself merely hypothetical. Yet clearly, if the possibility of constantly operating causes as such is only a hypothetical one, then it can hardly be claimed, as Popper does, that any particular predictive hypothesis could ever be falsified or confirmed. For then the falsification (or confirmation) would have to be considered a hypothetical one: any predictive hypothesis would only undergo tests whose status as tests were themselves hypothetical. And hence one would be right back in the muddy midst of skepticism. Only if the causality principle as such could be unconditionally established as true, could any particular causal hypothesis ever be testable, and the outcome of a test provide rational grounds for deciding whether or not to uphold a given hypothesis.

Popper holds all knowledge is conjectural and can make progress by guessing and criticism. Skepticism sez we can’t have knowledge and that we can’t make progress in understanding the world. So Popper’s position isn’t skepticism.