Was Mises right?

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Date: June 2006
From: Review of Social Economy(Vol. 64, Issue 2)
Publisher: Routledge
Document Type: Article
Length: 8,367 words
Lexile Measure: 1500L

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Abstract This paper argues that Mises's methodological position has been misunderstood by both friends and foes alike. On the one hand, Mises's critics wrongly characterize his position as rejecting empirical work. On the other hand, his defenders wrongly interpret his stance as rejecting empirical analyses on the grounds that they contradict apriorism and push economics towards historicism. We show that Mises's methodological position occupies a unique place that is at once both wholly aprioristic and radically empirical.

Keywords: Ludwig von Mises, economic methodology, apriorism

INTRODUCTION

The Austrian school's unique methodological stance separates it from the rest of the economics profession. Methodological subjectivism, recognition of radical uncertainty, and the notion of markets as processes are often cited as defining characteristics of the Austrian approach (see, for example, O'Driscoll and Rizzo 1985; Vaughn 1994; Boettke 1994; Boettke and Leeson 2003). Due to its controversial status, less frequently noted in the modern literature is methodological apriorism. Indeed, throughout the history of the Austrian school, many of its adherents have attempted to distance themselves from Menger's exact laws and Mises's apriorism, while at the same time building on the theoretical insights of these thinkers. Several of Mises's students from the Vienna years, for example Fritz Machlup, attempted to accomplish this two-step maneuver. (1) But to the Austrian economists who trained with Mises during his New York University period (1944-1969), like Murray Rothbard, adherence to methodological apriorism is the distinguishing characteristic of the Austrian school, and alternative methodological positions are interpreted as undermining Mises's strong claim about the nature of economic reasoning. (2)

The Austrian position has long been associated with a bifurcation of knowledge--deductive versus historical method, apriorism versus positivism, etc. We want to suggest that these blunt divisions fail to capture the subtle position that was developed by Menger, Boehm-Bawerk and Mises in the attempt to carve out a unique niche for the human sciences. For most economists, economics was a science located between the natural sciences and the cultural discipline of history. For these Austrians, however, economics was a human science that could derive laws that had the same ontological status as the laws derived in the natural sciences, yet accounted for the complexity of the human experience. Mises did not originate the Austrian position but inherited it from Menger and Boehm-Bawerk and sought to provide an updated philosophical defense of that position (see, for example, Mises 1933).

While Menger and Mises resorted to epistemological argument, Bohm-Bawerk put his argument in more common-sense terms (see Boehm-Bawerk 1891). Here the deductive method is justified on the grounds that in the act of arranging the array of historical facts to construct a meaningful story, the historian must arrange according to some criteria of priority. The criteria, Boehm-Bawerk argued, are provided by theory. The purpose of theory is to aid in the act of historical investigation--not to fight against it. In making this argument, which was (is) the Austrian argument, Boehm-Bawerk carved out a niche where the advancement of human knowledge in the discipline of...

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Gale Document Number: GALE|A148575220