Reisman and Praxeology

George Reisman’s book Capitalism is the best economics book available. Other books I have read on economics are less clearly written and include worse ideas. One particular example of this greater clarity is how Reisman explains what economics is about.

In Chapter 1 , Section 1 Reisman writes:

I define economics as the science that studies the production of wealth under a system of division of labor, that is, under a system in which the individual lives by producing, or helping to produce, just one thing or at most a very few things, and is supplied by the labor of others for the far greater part of his needs.

In Chapter 2, Section 2 he discusses some objections to this position on what economics is about:

The second challenge to economics’ focus on wealth is the mistaken claim that economics is a science of choices rather than a science of wealth—a science which studies the “allocation of scarce means among competing ends.” 

This contention rests on a logical fallacy. It does not see that what gives rise to economics’ study of choices and its concern with the allocation of scarce means among competing ends is the fact that people have a virtually limitless need for wealth but only a limited capability of satisfying that need at any given time. Thus, people must choose which aspects of their need for wealth are to be satisfied and which are not. Economics studies the determinants of human choice only insofar as they concern choices of how to spend incomes that are of necessity limited, and only insofar as they affect the attraction of capital and labor to the production of some goods rather than other goods. In other words, it studies the issue of choices for no other reason than that it is necessary to do so as part of its study of the production of wealth under a system of division of labor. To claim that economics is on this account a science of human choices rather than of wealth is to confuse an aspect of the science with its totality. To adopt this view is to be led to ignore all the really crucial matters that economics deals with and to seek esoteric extensions of the subject that have nothing whatever to do with its actual nature. Fortunately, those who adopt this view are highly inconsistent in its application and generally continue to devote most of their attention to the serious business of economics and leave the alleged necessity of extending the subject beyond the domain of wealth as a task to be carried out in the indefinite future.12

Reisman continues in note 12:

Regrettably, this criticism applies to the great von Mises and his efforts to portray economics as merely the “hitherto best developed part” of an allegedly wider science of human action known as praxeology. See Ludwig von Mises, Human Action, 3d ed. rev. (Chicago: Henry Regnery Co., 1966), pp. 1–10 passim. I wish to note, indeed to stress, however, that even when I have ultimately come to disagree with some position of von Mises, as in this case, I do not recall ever having read so much as a single paragraph of his writings that did not serve as the most powerful stimulus to my own thinking. Therefore, I urge everyone to give the most serious consideration to every portion of his writings.

So Reisman is criticising praxeology. In Section 1 of the Introduction to Human Action, Mises writes:

For a long time men failed to realize that the transition from the classical theory of value to the subjective theory of value was much more than the substitution of a more satisfactory theory of market exchange for a less satisfactory one. The general theory of choice and preference goes far beyond the horizon which encompassed the scope of economic problems as circumscribed by the economists from Cantillon, Hume, and Adam Smith down to John Stuart Mill. It is much more than merely a theory of the “economic side” of human endeavors and of man’s striving for commodities and an improvement in his material well-being. It is the science of every kind of human action. Choosing determines all human decisions. In making his choice man chooses not only between various material things and services. All human values are offered for option. All ends and all means, both material and ideal issues, the sublime and the base, the noble and the ignoble, are ranged in a single row and subjected to a decision which picks out one thing and sets aside another. Nothing that men aim at or want to avoid remains outside of this arrangement into a unique scale of gradation and preference. The modern theory of value widens the scientific horizon and enlarges the field of economic studies. Out of the political economy of the classical school emerges the general theory of human action, praxeology. The economic or catallactic problems are embedded in a more general science, and can no longer be severed from this connection. No treatment of economic problems proper can avoid starting from acts of choice; economics becomes a part, although the hitherto best elaborated part, of a more universal science, praxeology.

In Section 2 of Chapter I Mises writes:

Praxeology is indifferent to the ultimate goals of action. Its findings are valid for all kinds of action irrespective of the ends aimed at. It is a science of means, not of ends. It applies the term happiness in a purely formal sense. In the praxeological terminology the proposition: man’s unique aim is to attain happiness, is tautological. It does not imply any statement about the state of affairs from which man expects happiness.

In Section 4 he writes:

The teachings of praxeology and economics are valid for every human action without regard to its underlying motives, causes, and goals. The ultimate judgments of value and the ultimate ends of human action are given for any kind of scientific inquiry; they are not open to any further analysis. Praxeology deals with the ways and means chosen for the attainment of such ultimate ends. Its object is means, not ends.

I think Reisman’s criticism of praxeology is correct. 

Mises’ ideas about praxeology are esoteric extensions of economics and they’re also wrong. A person can have many different incompatible ends. Some socialists like the idea of hurting rich people, but this isn’t compatible with their stated desire to help the poor. Rich people get rich by providing goods that people want, and his customers often include many poor people. And if a business makes more profit it may be able to hire more people, including some poor people so more poor people would have the means to buy stuff they want. And there are other economic advantages to the government leaving rich people alone. So it is possible to criticise a person’s ends in terms of economics. A person can have many different goals and there is no guarantee of their compatibility so there are no ultimate goals.

Economics doesn’t require having a completely general theory of human action. Explaining the operation of a division of labour society is necessary for progress and a lot of progress has been made on that project. As Reisman points out later in Chapter 2, Section 3:

The fact that both the need and the desire for additional wealth are limitless for all practical purposes does not mean, however, that people automatically act to satisfy that need and desire. It is certainly possible for the need and desire for additional wealth to fail to result in the production of additional wealth, let alone in continuous economic progress. Indeed, history and most of the world around us are characterized by stagnation and poverty. The mere possession of a need or desire is never sufficient to ensure that the need or desire will be satisfied. In the absence of the influence of a rational philosophy establishing limited government and economic freedom and inculcating such convictions as that the material world has both reality and primacy, that it is intelligible, and that hard work pays, man is not able to devote himself sufficiently to the production of wealth.

It would be better to concentrate on more thoroughly explaining the good ideas of economics rather than working on bad philosophy in the name of praxeology.

About conjecturesandrefutations
My name is Alan Forrester. I am interested in science and philosophy: especially David Deutsch, Ayn Rand, Karl Popper and William Godwin.

One Response to Reisman and Praxeology

  1. > I think Reisman’s criticism of praxeology is correct.

    You can tweet or email Reisman to tell him.

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