Responding to Noel Campbell, Part Deux

I cannot help joining Emily (and Art at DOL) in responding to Noel Campbell (Noel responds to Art here).

One should not be surprised that Noel doesn't "get it." He starts his first post by noting that he's "never read Human Action once, much less twice." Personally, I don't think the Misesian position is that extreme. My initial reading of HA was consistent with most of my undergraduate economics education (from a non-Austrian perspective). In fact, I would claim that Mises is simply a classical economist in many respects.

Here's a short reading list for folks like Noel who'd like to understand what it is that (at least some of) those crazy Austrians are doing (and, whether what they are doing classifies as science). Below the fold, I briefly outline a couple points that I take from these works and show how they relate to Human Action and Austrian Economics more broadly.

Mises, L. Human Action.
Polanyi, M. The Study of Man.
Polanyi, M. The Republic of Science.
Lavoie, D. The Interpretive Dimension in Economics: Science, Hermeneutics, and Praxeology.
Rizzo, M. Mises and Lakatos: A Reformulation of Austrian Methodology.

Continued below the fold.
+/-

1. Contrary to what Joe Friday might tell you, there's no such thing as "Just the facts, Ma'am."

All so-called objective facts require an act of interpretation; and interpretation is necessarily subjective. The mere acts of asking a particular question or observing particular facts is subjective. The scientist is concerned with particular questions/facts (and not others) because of the historical context in which he finds himself. So we can cease and desist (to continue with the Dragnet metaphor) with equating science to 100% objectivity. It just ain't so, folks.

2. Less than pure objectivity does not spiral into absolute relativism where one cannot know anything.

Simply put, we can mimic objectivity from a particular position with particular assumptions. And from this position we attempt to learn more things.
Rizzo lays out a Lakatosian framework. First, we have a set of hardcore propositions that we cling to and are very hesitant to reject. For Austrians, these are things like "Human action is purposeful behavior," and "Man acts to reduce felt uneasiness." These things are what define a particular approach, in this case Austrian Economics, and cannot be changed without dismissing the approach and adopting a new approach. Next, we have a protective belt. This includes things that can change to explain a given phenomenon. Let me give an example:
The price of bread falls from $2 to $1 and yet individuals buy less bread. We could conclude that individuals are irrational (that they do not act purposefully to reduce felt uneasiness). But this would violate our hardcore propositions. So instead, we first investigate alternative explanations by adjusting those things in our protective belt. Is quantity held constant? What about quality? Because if the size of bread shrank and quality got worse, the real price of bread may have increased. Now, if after checking all those things in our protective belt we find that the only answer that suffices requires rejecting a hardcore proposition, we do just that. But this constitutes a paradigm shift. We are no longer doing Austrian Economics but something else.

Mises makes a similar point on page 19:

It is usual to call an action irrational if it aims, at the expense of “material” and tangible advantages, at the attainment of “ideal” or “higher” satisfactions. In this sense people say, for instance—sometimes with approval, sometimes with disapproval—that a man who sacrifices life, health, or wealth to the attainment of “higher” goods—like fidelity to his religious, philosophical, and political convictions or the freedom and flowering of his nation—is motivated by irrational considerations. However, the striving after these higher ends is neither more nor less rational or irrational than that after other human ends. It is a mistake to assume that the desire to procure the bare necessities of life and health is more rational, natural, or justified than the striving after other goods or amenities. It is true that the appetite for food and warmth is common to men and other mammals and that as a rule a man who lacks food and shelter concentrates his efforts upon the satisfaction of these urgent needs and does not care much for other things. The impulse to live, to preserve one’s own life, and to take advantage of every opportunity of strengthening one’s vital forces is a primal feature of life, present in every living being. However, to yield to this impulse is not—for man—an inevitable necessity.

Rather than rejecting the hardcore, Mises considers the protective belt. He notes that we get the same prediction if we adjust the utility function to include non-material considerations. Therefore, rejecting the hardcore proposition is unnecessary.

3. Human Action is not an irrefutable tract.

And Mises knew this. On page 7 he states the following:

Now it is quite obvious that our economic theory is not perfect. There is no such thing as perfection in human knowledge, nor for that matter in any other human achievement. Omniscience is denied to man. The most elaborate theory that seems to satisfy completely our thirst for knowledge may one day be amended or supplanted by a new theory. Science does not give us absolute and final certainty. It only gives us assurance within the limits of our mental abilities and the prevailing state of scientific thought. A scientific system is but one station in an endlessly progressing search for knowledge. It is necessarily affected by the insufficiency inherent in every human effort. But to acknowledge these facts does not mean that present-day economics is backward. It merely means that economics is a living thing—and to live implies both imperfection and change.

Give Human Action a read. And check out Polanyi and the others I listed above. Let's continue the conversation in the comments.