Austrian Economics Part One – Action
Matthew John Hayden
Economics rather sucks. Not because of some deficiency of the impulse to understand human action, but rather because the vast majority of economists have little time for any real human actions at all amidst their vast anonymous modelling of group behaviours without reference to the actual people in those herds. This might be why the economics establishment stared at their feet when the Queen asked them why they didn’t see the late crisis and recession coming. As to the great work at hand, and the struggle it represents, it behoves one to remember the basis for our worldview, to remember that it is something that has been arrived at through philosophical rationalism, that is mental deduction. This makes us a tribe of rationalists rather than empiricists. The positivism of the economic mainstream and of Post-Keynesianism can seem very scientific – it is the method of natural science after all – but for social science it is utterly inadequate for one simple reason. It hasn’t proved or disproved anything. Verification and falsification are not enough when there is no laboratory in which to repeat experiments. We will have to turn elsewhere.
Epistemology, or theory of knowledge, is the philosophical discipline concerned with knowledge of the world around us and, crucially to the economist, of ourselves. Remember, it’s laws of human social behaviour against the backdrop of scarce resources we are studying, and we want to be as authoritative in our pronouncements as possible. What would it make sense to do? Epistemology can be either rational or empirical, but we are going down the rational road. This means using pure reason in the mode of Immanuel Kant to describe the fundamental truths of human-beingness. Next is establishing a universally true description of human motivation. Here there is a snag. You can’t begin this kind of enquiry with price theories or market dynamics. No. For a rational approach, the individual real human being is the focus of our enquiry. So what are we going to establish?
Human individuals are all operationally similar, with brains arranged the same way and with the same basic faculties of reason, emotion and impulse. This means we all share the same, human, nature. It is possible to rationally declare certain things human behaviour, since that behaviour must necessarily arise from human nature. First of all there is the category of involuntary behaviour, as muscles act in certain ways in response to certain stimuli, or heart rate goes up in response to fear and induces a fight-or-flight instinct. Then there is voluntary behaviour, such as eating an apple when there is an apple, an orange and a peach available to eat, or hugging a loved one, or taking a long walk outside, or choosing and carrying out an actual fight-or-flight by running away or battling. This voluntary category is hereafter referred to as action.
Praxeology is the name of our formal method, whereby we will try to describe human action authoritatively. This talk of formal method means deduction by pure reason making the axioms we come up with a priori, or prior to experience. But that wasn’t all. Since all axioms are extensions of the action axiom then they are synthetic, relying on deductions from assumptions implicit in the action axiom first of all. Now, is this to say that praxeology is anti-empirical or mutually exclusive of empirical method? It depends on the frame of reference. If economic laws are to be demonstrated conclusively then synthetic a priori reasoning is the only method by which that can be achieved. If however, one is taking in a more holistic view, marrying economic law to history or anthropology or sociology, then dalliances with empiricism are inevitable and desirable, since no one can simply deduce when the Battle of Hydaspes was fought and by what belligerents.
Some consider the action axiom and praxeology to be bunk because of confusion about its nature; are we learning new knowledge through our use of successive axioms or are we just discovering the truth as it is implied at the beginning by that first axiom? Is the method really entirely a priori, and if not, how so, and why? Lots of brutal questions, but the answer is very simple. Praxeology gives us true statements because they were, indeed, already implicit in the action axiom. That makes the axioms, strictly speaking, tautological in much the same way that the synthesis after a thesis and antithesis must always be. Yet, surely there is a slight empirical element as well, as one has had to experience human-beingness itself to begin the process of praxeologically describing one’s own action in response to dissatisfaction.
True. But so what? External stimuli enter your brain through your senses. You feel unsatisfied. You identify by thought a way you’d be more satisfied. You act upon the external world, giving rise to a new external state. This new state’s external stimuli enter your brain through your senses. Rinse and repeat ad infinitum until death. This has to be experienced first before one can concoct and conceive of the action axiom, yes, but the truths of the axiom and its following statements are not tied to the empirical rigours by which the axiom was first formulated because it, and all the axioms which follow, do not deal intrinsically with the external world, but with internal cognitive processes in response to dissatisfaction with the present moment and the infinitely arising wants for new and better states. With justification out of the way, on to the action axiom itself!
The present moment is almost always unsatisfactory, and requires that a person take some form of action to transition out of the present, less satisfying state toward a future, more satisfying one. The grass is always greener on the other side. That action was taken with the deliberate intention of making the move from less good state to better state, making human-action goal-oriented or future-oriented. This all extends the facts established earlier, that voluntary behaviour – behaviour that arises from choice – is action. This is useful as a starting point because using pure reason requires building a structure of axioms to describe human behaviour in response to scarcity, or economics.
There is a particular word that gets used in quite a unique way in the Austrian method, and that word is ‘rational’. To be rational according to praxeology is to act in accordance with the action axiom in pursuit of goals. To a masochist enduring pain will lead to a more satisfying state than that beforehand, and to a desperate man trying to escape a cramped submarine by opening the hatch merely getting it open will, if briefly, satisfy him more than not doing so. This is self-evident, because otherwise these people would not act as they do. Why would I deliberately act in the name of something I don’t want? Honour? Honour would be the thing I am acting to attain in others’ eyes. So even something as self-harming as seppuku is still rational human action.
Humans are endowed with a cognisance of the future and past. This allows a human being to put some thought into how to categorise their wants and choose which ones to prioritise. This is strategy, and at more advanced levels becomes a scholarly discipline in its own right, but for now suffice it to say that there are later axioms that deal with this, including utility and disutility, time preference and time horizon, and catallactics in diplomacy. For now it will suffice to say that we formulate goals out of possibilities as we perceive them from our unique, individual frames of reference. So, with praxeology’s first axiom open to inspection, it’s time to look under the hood and see what might be at fault.
Can the action axiom be refuted without inviting absurdity? Well, let’s try. Humans don’t have goals! Right, now what absurdity does this invite? Well, since goals are simply desires formed, in a person’s mind, into a future state that a person seeks to attain, saying that humans don’t have goals is denying an intrinsic truth of being conscious. Admittedly the truth in question was arrived at empirically before beginning the praxeological enterprise, but the justification for praxeology against its empirical background is already stated above; humans act on their dissatisfaction, which is discovered through empirical data from their senses. So no problem there.
Are there other means by which to try to refute the axiom? Humans don’t act? This one is a bit complex. The real meat of this denial is that there is no choice on account of there being no free will. This is actually quite a compelling criticism but for one big problem. If a human has several viable options in front of them and they go down one route – for that is all we can do when limited by time, space, location, physical resources, disutility of alternative uses of our labour, etc – then by definition they have chosen, biological free will or not. So once again the call for a solid refutation goes unanswered.
Irrefutability is vital to successful synthetic a priori reasoning, and equipped with praxeology one can irrefutably assert that humans act and that from this action axio can be inferred several other axioms pertaining to exchange, the origin of money, interest rates, employment, and business cycle theory. It is an inescapable fact of being human – in fact economics as Austrians understand it applies to all species with cognitive powers – that we act, have always acted, and will always act.