Thursday, December 27, 2012

Day 4: Economics as theology

"The Peculiar and Unique Position of Economics", by Ludwig von Mises.
Excerpted from Human Action, (1949), chapter 37, "The Nondescript Character of Economics."

Day 4 of Robert Wenzel's 30 Day Reading List on Libertarianism

Day 0: The Libertarian catechism

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In "The Peculiar and Unique Position of Economics," Ludwig von Mises argues that economics is outside the realm of empirical inquiry. Although von Mises believes that economics is real — a good economic theory will produce the intended outcome; a bad theory will not — he asserts that economics, like history, is simply too complex for observable events to prove or disprove any particular theory. Hence economics is in the realm of "praxeological knowledge": we must evaluate economic theories according to dictates of reason without reference to experience. von Mises argues that unlike a good technological theory, which can be proven by events, the praxeological character of economics requires that a good economic theory requires that proponents marshal public opinion in its support before its value can be realized. Hence, unlike technology and scientific progress, the project of social progress requires two forces, the creation of sound praxeological knowledge, and the ability to persuade the public to accept those theories.

I have to correct myself. In my previous response, I called Wilhelm Röpke's article, "Free Economy and Social Order," sophisticated theology. It is not: it is naive theology that simply takes its premises for granted. Sophisticated theology entails that the theology be explicitly placed beyond the bounds of empirical inquiry.

In this article, von Mises places economics firmly in the realm of sophisticated theology, and like religion, links his economic theology to the necessity of evangelism. The notion of praxeological knowledge is, of course, just as vacuous in economics as it is in religion. There is simply no way to compare theories on the basis of pure knowledge. Praxeology is just a dodge, long perfected by Christian theologians, to place their ideology outside the bounds of rational criticism, to "socialize" its failures to the complexity of society in general but "privatize" and take individual credit for its successes. Had Popper known about von Mises economics, he might well have placed it in the same category as Freudian psychoanalysis and Marxian historical theory.

Curiously von Mises explicitly contradicts himself. On the one hand, the real consists of that which preference cannot change: "'Real' is, in the eyes of man, all that he cannot alter and to whose existence he must adjust his actions if he wants to attain his ends," that which "wishful thinking cannot alter." On the other hand, praxeological economic requires that people in some sense wish for it for it to be effective: "the practical utilization of the teachings of economics presupposes their endorsement by public opinion." Either economics is not real, or reality is something that wishful thinking at a large enough scale can alter.

Four days, and the parallels of Wenzel's presentation of Libertarianism is looking more and more like borrowed Christianity.

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