The Conception of Praxeology

The conception of praxeology within the Austrian School begins with Carl Menger. In his book Investigations into the Method of the Social Sciences, Menger sketches the outlines of a discipline concerned with exact laws as distinct from empirical laws.

The types and typical relationships (the laws) of the world of phenomena are not equally strict in all cases. A glance at the theoretical sciences teaches us rather that the regularities in the coexistence and in the succession of phenomena are in part without exception; indeed they are such that the possibility of an exception seems quite out of the question. However, some are such that they do indeed exhibit exceptions, or that in their case exceptions seem possible. The first are called laws of nature, the latter empirical laws. (I-50)

The aim of this orientation, which in the future we will call the exact one, an aim which research pursues in the same way in all realms of the world of phenomena, is the determination of strict laws of phenomena, of regularities in the succession of phenomena which do not present themselves to us as absolute, but which in respect to the approaches to cognition by which we attain to them simply bear within themselves the guarantee of absoluteness. It is the determination of laws of phenomena which commonly are called “laws of nature,” but more correctly should be designated by the expression “exact laws.” (I-59)

What is the purpose of the theoretical sciences, including “exact” theoretical science?

The purpose of the theoretical sciences is understanding of the real world, knowledge of it extending beyond immediate experience, and control of it. We understand phenomena by means of theories as we become aware of them in each concrete case merely as exemplifications of a general regularity. We attain a knowledge of phenomena extending beyond immediate experience by drawing conclusions, in the concrete case, from certain observed facts about other facts not immediately perceived. We do this on the basis of the laws of coexistence and of the succession of phenomena. We control the real world in that, on the basis of our theoretical knowledge, we set the conditions of a phenomenon which are within our control, and are able in such a way to produce the phenomenon itself. (I-55/56)

It is important to note that Menger’s conception of scientific laws includes not only laws of the succession of phenomena, but also laws of the copresence of phenomena. Menger is not only conscious of regularities in which there is a temporal separation between phenomenon A and phenomenon B, but also of regularities in which A and B appear “copresently.”

Praxeology is thus a relatively simple notion. It is a discipline that studies exact laws; those regularities in which phenomenon A follows phenomenon B without exception, or in which phenomenon A is copresent with phenomenon B without exception. When Menger refers to “exact research,” he means the study of exact laws in all the realms of the universe in which we live (the physical realm, the social realm, etc.). When Ludwig von Mises refers to “praxeology,” he means the study of exact laws exclusively in the realm of social phenomena.

The Problem of the Relationship between Two Nonidentical Phenomena

Though the conception of praxeology is relatively simple, the practice of praxeology is correspondingly difficult. It is easy to define the general goal of praxeology (the study of exact laws of social phenomena), but it is difficult to conceive or formulate valid exact laws in a given social realm such as the realm of market phenomena (economics). We begin with the assumption of two nonidentical phenomena A and B. Let’s take this short passage from Mises as an example:

The first and basic achievement of thinking is the awareness of constant relations among the external phenomena that affect our senses. A bundle of events that are regularly related in a definite way to other events is called a specific thing and as such distinguished from other specific things. The starting point of experimental knowledge is the cognition that an A is uniformly followed by a B. The utilization of this knowledge either for the production of B or for the avoidance of the emergence of B is called action. The primary objective of action is either to bring about B or to prevent its happening. (U-20)

Thus, we are talking about two nonidentical phenomena, A and B, and how to bring about B (or prevent its happening) by means of phenomenon A. Praxeology is only concerned with exact laws (in which B must necessarily happen if A happens) and not with empirical laws (in which B may or may not happen if A happens). The goal will be to demonstrate an exact relationship between nonidentical phenomena A and B such that the production or emergence of A must necessarily produce phenomenon B without exception. As Mises writes:

Praxeological knowledge makes it possible to predict with apodictic certainty the outcome (B) of various modes of action (A). (HA, p. 117)(A and B have been added for purposes of clarity)

To understand the difficulty involved in formulating or conceiving a praxeological law, let us take an example of a deduced law of economics as provided by Mises in Epistemological Problems of Economics. We will highlight the important parts of the passage and add A‘s and B‘s for clarity.

For example, we deduce from our theory that when the price of a commodity rises (A), its production will be increased (B). However, if the expansion of production necessitates new investment of capital, which requires considerable time, a certain period of time will elapse before the price rise (A) brings about an increase in supply (B). And if the new investment required to expand production (B) would commit capital in such a way that conversion of invested capital goods in another branch of production is altogether impossible or, if possible, is so only at the cost of heavy losses, and if one is of the opinion that the price of the commodity will soon drop again, then the expansion of production (B) does not take place at all. In the whole process there is nothing that the theory could not immediately explain to us. (p. 163)

The first thing to note is that Mises is here discussing a deduced relationship, which means a relationship established by logical reasoning. The deduced relationship between A and B in this passage is, for Mises, of the same logical character as the other deduced relationships of economics and praxeology. Mises does not envision or conceive various classes of deductions, with each type of deduction differing with respect to its degree of certainty. In Mises’s system there are only deduced (a priori) relationships on the one hand, and relationships shown to us by experience (empirical or historical relationships) on the other hand. The relationship between the increase in the price of a commodity and the increase in the commodity’s production is, according to Mises, a deduced, praxeological relationship.

As we can see, Mises explains that granted assumption A (an increase in the price of a commodity), we deduce phenomenon B (an increase in the production of the commodity). However, he also explains that granted assumption A, phenomenon B may not take place at all. Mises’s explanation is that though we may deduce B from A in a theoretical context, we do not thereby learn whether phenomenon B must happen if phenomenon A happens. We cannot say that based on our theoretical deduction, phenomenon B must follow phenomenon A with apodictic certainty. This is clear and apparent in Mises’s explanation.

Mises accounts for this discrepancy—the deduced relationship between A and B versus the “actual” relationship between A and B—by stating that if B does not take place, our theory will be able to explain why it did not take place. But this explanation skirts the issue. The primary purpose of praxeological knowledge is not to provide a satisfactory historical account, ex post, of why phenomenon B did or did not take place. The primary aim of praxeology is knowledge instructing us on how to bring about B or to prevent B‘s happening in the future, and with certainty, by means of phenomenon A.

Praxeological knowledge makes it possible to predict with apodictic certainty the outcome (B) of various modes of action (A). (HA, p. 117)(A and B have been added for purposes of clarity)

In Mises’s explanation we can see that the relationship between an increase in the price of a commodity and an increase in the production of the same commodity is an empirical relationship, because when the price increases (phenomenon A), we know a priori that phenomenon B (an increase in the production of the commodity) may happen or may not happen. Since we know a priori that B may or may not happen, but do not know a priori which possibility will be actualized, we can only know which possibility is actualized a posteriori (by experience).

Thus, either (1) this particular deduction of economics is not a valid praxeological deduction, or (2) the relationships of praxeological theory are empirical not a priori. We conclude therefore that this particular deduction of economics is not a valid praxeological deduction.

The Problem of the Relationship between Two Nonidentical Phenomena

It is important to remember that praxeology on the one hand, and the unqualified application of logic to various assumed situations on the other hand, are two different things. The object of praxeological theorizing is not phenomena in general but action. Natural phenomena are only treated by praxeology to the extent they are aspects of action. Strictly speaking, in praxeology, there is no such thing as “an increase in the price of a commodity.” Phenomena that are conceived as occurring in nature independent of volition are objects of natural science. An actor may increase the price of a commodity or an actor may observe an increase in the price of a commodity. These are both actions and as such objects of praxeological study. The focus of praxeology is not events, but actions.

Having clarified the object of study, we may now ask: If I increase the price of a commodity (an action), must I or someone else consequently increase the production of this commodity (an action) with absolute certainty? Or, if I or someone else observes an increase in the price of a commodity (an action), must I or someone else consequently increase the production of this commodity (an action) with absolute certainty? The answer, as Mises explains, is no. The relationship between an increase in the price of a commodity and an increase in the production of a commodity is therefore an empirical relationship.

Let us consider the following conception. If I increase the price of a commodity (an action), must I necessarily decrease the amount of that commodity that may be purchased (also an action)? Suppose my intention in increasing the price of a commodity is to obtain a greater revenue from the sale of the commodity. I do not necessarily intend to decrease the amount of the commodity that others may purchase. Yet this may be a necessary and unintended consequence of my raising the price of a commodity in order to gain a greater revenue. The difference between the previously discussed conception and the present conception is that in the present conception there is no conceived temporal separation between A (increasing the price of a commodity) and B (decreasing the amount of a commodity that may be purchased). A and B here are “copresent” with no temporal separation. In this conception, A and B are identical in one sense—A and B symbolize the same action—and nonidentical in another sense—an actor may consciously intend to do A without consciously intending to do B. We refer to this type of relationship as an “identity relationship,” and we maintain that these types of identity relationships (or “tautological transformations”) constitute the essence of praxeological, exact laws. (see Knott, Introduction to the Theory of Interpersonal Action, 2014, section 1B.)