Introduction
The new discovery of a regularity in the sequence and interdependence of the market phenomena went beyond the limits of the traditional system of learning. Before, philosophers were trying to find the law of mankind's destiny and evolution, due to a faulty method they couldn't answer it, because they dealt with humanity as whole or holistic concepts and set up ends to which the behavior of such wholes is bound to lead. They did not search for the laws of social cooperation because they thought that man could organize society as he pleased.
Human action and social cooperations seen as the object of a science of given relations, no longer as a normative discipline of things that ought to be. The effects on the methods of reasoning were restricted because many people believed that they referred only to a narrow segment of the total field of human action, to market phenomena.
Modern Subjectivist converted the theory of market prices into a general theory of human choice.
Choosing determines all human decisions, in making his choice man chooses not only for services or material things, he values options, and all ends and means, material and ideal, subjected to a decision, he picks one things and sets aside another, nothing that a man wants aims or avoids is inseparable from a unique scale of gradation and preference.
Praxeology emerges from the political economy of the classical school.
Catallactics: Science of the exchanges
Besides the problem of classifying which was the most fruitful procedure, the real issue was the epistemological foundations of the science of human actions and its logical legitimacy.
Universal nihilism of time immemorial men in thinking, speaking and acting had taken the uniformity and immutability of the logical structure of the human mind as something unquestionable. Marx stated that man's thinking was determined by his class affiliation, and every social class has a logic of its own.
Racial polylogism, assigns to each race a logic of its own.
Irrationalism, reason as such is not fit to elucidate the irrational forces that determine human behavior
The main motive for the development of the doctrines was to provide a justification for disregarding the teachings of economics in the determination of economic policies.
The first task of every scientific inquiry is the exhaustive description and definition of all conditions and assumptions under which its various statements claim validity.
Human action and social cooperations seen as the object of a science of given relations, no longer as a normative discipline of things that ought to be. The effects on the methods of reasoning were restricted because many people believed that they referred only to a narrow segment of the total field of human action, to market phenomena.
Modern Subjectivist converted the theory of market prices into a general theory of human choice.
Choosing determines all human decisions, in making his choice man chooses not only for services or material things, he values options, and all ends and means, material and ideal, subjected to a decision, he picks one things and sets aside another, nothing that a man wants aims or avoids is inseparable from a unique scale of gradation and preference.
Praxeology emerges from the political economy of the classical school.
Catallactics: Science of the exchanges
Besides the problem of classifying which was the most fruitful procedure, the real issue was the epistemological foundations of the science of human actions and its logical legitimacy.
Universal nihilism of time immemorial men in thinking, speaking and acting had taken the uniformity and immutability of the logical structure of the human mind as something unquestionable. Marx stated that man's thinking was determined by his class affiliation, and every social class has a logic of its own.
Racial polylogism, assigns to each race a logic of its own.
Irrationalism, reason as such is not fit to elucidate the irrational forces that determine human behavior
The main motive for the development of the doctrines was to provide a justification for disregarding the teachings of economics in the determination of economic policies.
The first task of every scientific inquiry is the exhaustive description and definition of all conditions and assumptions under which its various statements claim validity.
Chapter 1
PURPOSEFUL ACTION AND ANIMAL REACTION
Human action is purposeful behavior. The distinguishing feature of action is that the observer imputes a goal to the actor. Action is different from purely reflexive behavior.
Praxeology is the science of action as such. That is, praxeol- ogy as a field contains all results that can be deduced from the fact that people have ends (i.e., goals), and adopt means of trying to achieve them. The specific content of the ends, and whether the means chosen are suitable, lie outside the scope of praxeology.
Every action is a choice, where the actor selects one alternative that he prefers to another.
THE PREREQUISITES OF HUMAN ACTION
In order for action to occur, the actor must be in a state of uneasiness or dissatisfaction. (If he were perfectly content, he would not act.) Along with the uneasiness, the actor must be able to imagine a more satisfactory state. Finally, the actor must believe that purposeful behavior has the power to remove or reduce the uneasiness.
On Happiness
It is acceptable to view action as man’s striving for “happiness.” However, such a claim is liable to misinterpretation. In praxeology, happiness (or utility, or satisfaction) is a purely formal term, defined entirely by the subjective goals of the individual actor.
Human action is purposeful behavior. The distinguishing feature of action is that the observer imputes a goal to the actor. Action is different from purely reflexive behavior.
Praxeology is the science of action as such. That is, praxeol- ogy as a field contains all results that can be deduced from the fact that people have ends (i.e., goals), and adopt means of trying to achieve them. The specific content of the ends, and whether the means chosen are suitable, lie outside the scope of praxeology.
Every action is a choice, where the actor selects one alternative that he prefers to another.
THE PREREQUISITES OF HUMAN ACTION
In order for action to occur, the actor must be in a state of uneasiness or dissatisfaction. (If he were perfectly content, he would not act.) Along with the uneasiness, the actor must be able to imagine a more satisfactory state. Finally, the actor must believe that purposeful behavior has the power to remove or reduce the uneasiness.
On Happiness
It is acceptable to view action as man’s striving for “happiness.” However, such a claim is liable to misinterpretation. In praxeology, happiness (or utility, or satisfaction) is a purely formal term, defined entirely by the subjective goals of the individual actor.
Chapter 2
PRAXEOLOGY AND HISTORY
Praxeology and history are the two main branches of the sciences of human action.
History is the collection and systematic arrangement of all data of experience concerning human action.
The natural sciences too deal with past events, but their successful use of induction relies on the experience of past experiments.
In contrast, in the sciences of human action there can be no controlled experiment, and hence a different method is needed. Praxeology starts from the fact of human action and uses logical deduction to arrive at a priori truths that are valid for all action, both in the past and future.
Praxeology and history are the two main branches of the sciences of human action.
History is the collection and systematic arrangement of all data of experience concerning human action.
The natural sciences too deal with past events, but their successful use of induction relies on the experience of past experiments.
In contrast, in the sciences of human action there can be no controlled experiment, and hence a different method is needed. Praxeology starts from the fact of human action and uses logical deduction to arrive at a priori truths that are valid for all action, both in the past and future.
Chapter 3
THE REVOLT AGAINST REASON
Reason is the primary tool for acting man. The modern revolt against reason was not due to exaggerated claims by the rationalist philosophers. What really happened was that the socialist opponents of the classical economists could not defeat their arguments, and so instead challenged reason itself. Once the floodgates had been opened in this sphere, nihilism and skepticism spilled over into other branches of thought.
THE CASE FOR REASON
Reason is an ultimate given, a nonrational fact; one cannot establish the validity of reason itself through logical argument. Yet it is man’s foremost tool in action, and distinguishes man from other animals. There can be no such thing as an irrational mode of thinking. To renounce reason and return to guidance by “instinct” would destroy the foundations of civilization.
Reason is the primary tool for acting man. The modern revolt against reason was not due to exaggerated claims by the rationalist philosophers. What really happened was that the socialist opponents of the classical economists could not defeat their arguments, and so instead challenged reason itself. Once the floodgates had been opened in this sphere, nihilism and skepticism spilled over into other branches of thought.
THE CASE FOR REASON
Reason is an ultimate given, a nonrational fact; one cannot establish the validity of reason itself through logical argument. Yet it is man’s foremost tool in action, and distinguishes man from other animals. There can be no such thing as an irrational mode of thinking. To renounce reason and return to guidance by “instinct” would destroy the foundations of civilization.
Chapter 4
ENDS AND MEANS
The end (or goal or aim) is the result sought by an actor. The means is whatever is used to attain the end. Ends and means do not exist in the physical universe but rather are the product of a valuing mind as it surveys its physical environment.
Praxeology does not concern itself with an idealized actor who has noble ends and knows the best means to achieve any end. On the contrary, praxeology takes an actor’s goals and his beliefs on how to satisfy them as the starting point of analysis. If people erroneously believe that a certain root possesses medicinal properties, it will command a price on the market. The economist must take people as they are to explain market phenomena.
The common distinction between free goods and economic goods is unhelpful, for a “free good” isn’t scarce and is better classified as a general condition of human well-being. Goods that directly satisfy human wants are consumers’ goods or goods of the first order. Goods that only satisfy wants indirectly, with the assistance of other goods, are classified as producers’ goods, or factors of production.
Value resides not in objects but in the minds of actors who rank those objects as either directly desirable or as means to some other, more ultimate end.
The end (or goal or aim) is the result sought by an actor. The means is whatever is used to attain the end. Ends and means do not exist in the physical universe but rather are the product of a valuing mind as it surveys its physical environment.
Praxeology does not concern itself with an idealized actor who has noble ends and knows the best means to achieve any end. On the contrary, praxeology takes an actor’s goals and his beliefs on how to satisfy them as the starting point of analysis. If people erroneously believe that a certain root possesses medicinal properties, it will command a price on the market. The economist must take people as they are to explain market phenomena.
The common distinction between free goods and economic goods is unhelpful, for a “free good” isn’t scarce and is better classified as a general condition of human well-being. Goods that directly satisfy human wants are consumers’ goods or goods of the first order. Goods that only satisfy wants indirectly, with the assistance of other goods, are classified as producers’ goods, or factors of production.
Value resides not in objects but in the minds of actors who rank those objects as either directly desirable or as means to some other, more ultimate end.
Chapter 5
THE TEMPORAL CHARACTER OF PRAXEOLOGY
In a logical system (such as mathematics) all of the implications are coexistent and interdependent. It is not true that the axioms of geometry “cause” its theorems to be true, even though a limited human mind must work step by step through a geometrical proof.
In the sense that praxeology is a logical system, it too is “out of time.” However, the system itself contains parts such as change, causality, and the notions of sooner and later.
Thus the subject matter, the content, of praxeology is intimately related to time.
PAST, PRESENT, AND FUTURE
It is action that makes man aware of the flux of time. Time itself is a praxeological category; one can’t make sense of time without understanding action, and one can’t understand action without the concept of time.
In a logical system (such as mathematics) all of the implications are coexistent and interdependent. It is not true that the axioms of geometry “cause” its theorems to be true, even though a limited human mind must work step by step through a geometrical proof.
In the sense that praxeology is a logical system, it too is “out of time.” However, the system itself contains parts such as change, causality, and the notions of sooner and later.
Thus the subject matter, the content, of praxeology is intimately related to time.
PAST, PRESENT, AND FUTURE
It is action that makes man aware of the flux of time. Time itself is a praxeological category; one can’t make sense of time without understanding action, and one can’t understand action without the concept of time.
Chapter 6
UNCERTAINTY AND ACTING
Action implies uncertainty of the future. If the future were known, there would be no impetus to action. The praxeologist can recognize this truth without taking a stand on the philosophical question of whether men are really “free.” Even if all events really are determined by natural laws, nonetheless we are nowhere near the ability to accurately predict all future events, and hence there is still scope for human action.
THE MEANING OF PROBABILITY
There are two totally distinct fields of probability, namely, class and case probability. The former is applicable to the natural sciences and is governed by causality (i.e., mechanical laws of cause and effect), while the latter is applicable to the social sciences and is governed by teleology (i.e., subjective means/ends frameworks).
Action implies uncertainty of the future. If the future were known, there would be no impetus to action. The praxeologist can recognize this truth without taking a stand on the philosophical question of whether men are really “free.” Even if all events really are determined by natural laws, nonetheless we are nowhere near the ability to accurately predict all future events, and hence there is still scope for human action.
THE MEANING OF PROBABILITY
There are two totally distinct fields of probability, namely, class and case probability. The former is applicable to the natural sciences and is governed by causality (i.e., mechanical laws of cause and effect), while the latter is applicable to the social sciences and is governed by teleology (i.e., subjective means/ends frameworks).
Chapter 7
THE LAW OF MARGINAL UTILITY
Acting man must place all ends onto a single scale of values. If he is to choose between (say) acquiring a steak or attending the opera, he must decide which outcome yields the most utility, and thus these entirely different satisfactions must be compared according to a common denominator. Even so, action doesn’t measure utility; rather, it is action that demonstrates the end most highly valued by the actor.
The Creative Genius
Mises believes that the “output” of the creative genius cannot usefully be treated in the same framework that praxeology uses for the work of other laborers. Mises believes that a creative genius “labors” neither for immediate nor mediate gratification.
PRODUCTION
Production is not creative; it rather transforms the given material objects of the universe into forms that are more pleasing to actors. The true creation occurs in the mind of the actor, who surveys the available means and conceives of a way to improve his condition.
Acting man must place all ends onto a single scale of values. If he is to choose between (say) acquiring a steak or attending the opera, he must decide which outcome yields the most utility, and thus these entirely different satisfactions must be compared according to a common denominator. Even so, action doesn’t measure utility; rather, it is action that demonstrates the end most highly valued by the actor.
The Creative Genius
Mises believes that the “output” of the creative genius cannot usefully be treated in the same framework that praxeology uses for the work of other laborers. Mises believes that a creative genius “labors” neither for immediate nor mediate gratification.
PRODUCTION
Production is not creative; it rather transforms the given material objects of the universe into forms that are more pleasing to actors. The true creation occurs in the mind of the actor, who surveys the available means and conceives of a way to improve his condition.
Chapter 8
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Chapter 9
HUMAN REASON
Reason distinguishes man from other animals. All action is preceded by thinking. The reasoning employed may be faulty, but, by definition, action is the purposeful attempt to remove uneasiness. It is always an individual, not “society,” who thinks. Tradition—primarily through language—allows present actors to incorporate into their own thinking the reasoning of their ancestors. This renders present thinking more productive, just as labor is now more productive because of our inheritance of capital goods created by our forefathers.
A worldview serves as both an interpretation of all things, but also as a guide to action. In this sense a worldview is both an explanation and a technology. Ideology is a narrower term, in that it restricts attention to human interaction over earthly concerns. Religious dogma and even the pure natural sciences thus fall outside the scope of ideology.
Reason distinguishes man from other animals. All action is preceded by thinking. The reasoning employed may be faulty, but, by definition, action is the purposeful attempt to remove uneasiness. It is always an individual, not “society,” who thinks. Tradition—primarily through language—allows present actors to incorporate into their own thinking the reasoning of their ancestors. This renders present thinking more productive, just as labor is now more productive because of our inheritance of capital goods created by our forefathers.
A worldview serves as both an interpretation of all things, but also as a guide to action. In this sense a worldview is both an explanation and a technology. Ideology is a narrower term, in that it restricts attention to human interaction over earthly concerns. Religious dogma and even the pure natural sciences thus fall outside the scope of ideology.
Chapter 10
AUTISTIC EXCHANGE AND INTERPERSONAL EXCHANGE
All action is an exchange, of giving up what is less satisfactory for (the actor hopes) what is more satisfactory. Autistic exchange concerns only one actor, while interpersonal exchange involves cooperation between two or more individuals. Although the emergence of social cooperation occurred gradually in the course of history, the conceptual line between autistic versus interpersonal exchange is sharp.
CONTRACTUAL BONDS AND HEGEMONIC BONDS
People can cooperate either in a contractual or in a hegemonic relationship. In the former, the participants are on an equal footing. In the latter, one person or group is in charge over the subordinates. Even in a hegemonic structure, the sub- ordinate still acts. He simply chooses subjection over the alternative.
CALCULATIVE ACTION
All action uses ordinal numbers, in the sense that possible outcomes must be ranked on the scale of values to determine which action will result in the highest possible satisfaction. The use of cardinal numbers in action requires special conditions. It was in the context of a contractual society that the use of arithmetic as an aid to action developed.
All action is an exchange, of giving up what is less satisfactory for (the actor hopes) what is more satisfactory. Autistic exchange concerns only one actor, while interpersonal exchange involves cooperation between two or more individuals. Although the emergence of social cooperation occurred gradually in the course of history, the conceptual line between autistic versus interpersonal exchange is sharp.
CONTRACTUAL BONDS AND HEGEMONIC BONDS
People can cooperate either in a contractual or in a hegemonic relationship. In the former, the participants are on an equal footing. In the latter, one person or group is in charge over the subordinates. Even in a hegemonic structure, the sub- ordinate still acts. He simply chooses subjection over the alternative.
CALCULATIVE ACTION
All action uses ordinal numbers, in the sense that possible outcomes must be ranked on the scale of values to determine which action will result in the highest possible satisfaction. The use of cardinal numbers in action requires special conditions. It was in the context of a contractual society that the use of arithmetic as an aid to action developed.
Chapter 11
THE GRADATION OF THE MEANS
Acting man values means according to the valuation he places on the ends they can achieve. (An apple seed is valued through consideration of the future apples it can produce for consumption.) The totality of means needed for a given end would possess the same value as the end, except for the discount due to the waiting time involved.
THE PROBLEM OF ECONOMIC CALCULATION
Technology is quantitative; it tells actors how many units of various inputs are necessary in order to yield a definite quantity of output.
Technology can tell us how many inputs of various kinds will yield a certain output. It cannot tell us which of several possible combinations of inputs is the most “economical” to use when producing a good.
ECONOMIC CALCULATION AND THE MARKET
The money prices established in a market are not measurements of value. They are historical facts, recording the ratio at which two items (the money good and some other good or service) exchanged in the past.
Acting man values means according to the valuation he places on the ends they can achieve. (An apple seed is valued through consideration of the future apples it can produce for consumption.) The totality of means needed for a given end would possess the same value as the end, except for the discount due to the waiting time involved.
THE PROBLEM OF ECONOMIC CALCULATION
Technology is quantitative; it tells actors how many units of various inputs are necessary in order to yield a definite quantity of output.
Technology can tell us how many inputs of various kinds will yield a certain output. It cannot tell us which of several possible combinations of inputs is the most “economical” to use when producing a good.
ECONOMIC CALCULATION AND THE MARKET
The money prices established in a market are not measurements of value. They are historical facts, recording the ratio at which two items (the money good and some other good or service) exchanged in the past.
Chapter 12
THE CHARACTER OF MONETARY ENTRIES
Economic calculation encompasses everything that trades against money. Despite their apparent precision, most of the entries on balance sheets reflect the speculative anticipation of owners regarding future market conditions. Therefore, there is nothing “objective” about them. Even so, economic calculation is as effective as it could be. It cannot give a perfect guide to the future, because the future is inherently uncertain.
THE LIMITS OF ECONOMIC CALCULATION
Economic calculation can’t account for things that do not exchange for money.
THE CHANGEABILITY OF PRICES
Prices are in constant flux because their underlying determinants—ultimately the subjective valuations of individuals— are always changing.
Economic calculation encompasses everything that trades against money. Despite their apparent precision, most of the entries on balance sheets reflect the speculative anticipation of owners regarding future market conditions. Therefore, there is nothing “objective” about them. Even so, economic calculation is as effective as it could be. It cannot give a perfect guide to the future, because the future is inherently uncertain.
THE LIMITS OF ECONOMIC CALCULATION
Economic calculation can’t account for things that do not exchange for money.
THE CHANGEABILITY OF PRICES
Prices are in constant flux because their underlying determinants—ultimately the subjective valuations of individuals— are always changing.
Chapter 13
MONETARY CALCULATION AS A METHOD OF THINKING
Monetary calculation is the guiding principle of action in any society with a division of labor. It transforms the very thought process of anyone considering action that involves the property of others. Potential actions are evaluated on the basis of expected costs and revenues, while past actions are evaluated with the accounting of profit and loss. Besides purposeful behavior, monetary calculation requires the institution of private property in the means of production, as well as a universally accepted medium of exchange
Capitalism was originally a smear term for the system of free enterprise, meant to imply that this system only serves the narrow interests of the capitalists.
Monetary calculation is the guiding principle of action in any society with a division of labor. It transforms the very thought process of anyone considering action that involves the property of others. Potential actions are evaluated on the basis of expected costs and revenues, while past actions are evaluated with the accounting of profit and loss. Besides purposeful behavior, monetary calculation requires the institution of private property in the means of production, as well as a universally accepted medium of exchange
Capitalism was originally a smear term for the system of free enterprise, meant to imply that this system only serves the narrow interests of the capitalists.