Wednesday, September 12, 2012

The Tangled Issue of Praxeology and Thymology

Steven Horwitz wrote an essay in which he claims that ASE is not only empirical, but perhaps even more empirical than the neoclassical mainstream. I disagree with this assessment and in this post I would like to briefly explain why.

For me, the core paragraph of Horwitz's text is this: "When the economist goes to analyze the world, the core toolkit that comes only from reflection on action is a rather small set of basic propositions. Most of the interesting work in economics is institutionally contingent. For example, even if we recognize the importance of being able to engage in economic calculation, our ability to do so effectively depends upon the set of institutions in the economy under analysis."

Did Mises and the contemporary Misesians claim that "when the economist goes to analyze the world, the core toolkit that comes only from reflection on action is a rather small set of basic propositions"? No. For instance, the theorem of the impossibility of calculation under socialism and the Austrian Business Cycle Theory consist of very complex sets of propositions - and yet they are purely deductive and a priori. Whether these complex sets of propositions are applicable to any given present or historical set of instances of human action is an entirely different matter - a thymological, not a praxeological matter. But Horwitz suggests that one can advance beyond "a rather small set of basic (praxeological) propositions" only by studying the institutional contingencies of contemporary or historical economic systems. In other words, he implies that praxeology advances by means of thymological analysis, not that in order to conduct sound thymological analyses one needs to have a complete, complex praxeological structure worked out in advance. And it is the latter that is the Misesian position, while the former is, terminological differences aside, hardly distinguishable from the position of a standard neoclassical Popperian.

Yes, Horwitz is right in saying that "our ability to (engage in economic calculation) depends upon the set of institutions in the economy under analysis". But that is precisely what the purely aprioristic, praxeological theorem of the impossibility of economic calculation under socialism says! It says: only given the existence of certain institutions (money, private property in the means of production, and free exchange of property titles) can there be rational economic calculation. This is a purely aprioristic conditional statement, and it is hardly "basic" or "economically uninteresting". In fact, the astonishing predictive power of this theorem comes precisely from the fact that Mises formulated it before any serious thymological work on the Soviet economy could have been done. To sum up, praxeology depends on thymology (i.e., on the existence of the so-called "auxiliary assumptions", which are not institutionally contingent - e.g., it is not institutionally contingent that there exist as-of-yet unsatisfied wants, that goods are scarce, or that people differ from one another) but its level of complexity and completeness (not applicability or relevance) in no way depends on the amount of thymological data at our disposal, and it is the belief in such a dependence that Horwitz (mis)attributes to Mises in his text.

To clarify matters further, I created the following diagram, which depicts the relationship between praxeology and thymology in what I hope is a transparent and unambiguous manner:

Hopefully it will be of some use to scholars of Austrian Economics.


  1. Tried to post a comment but it wasn't accepted.

    Can't find a personal e-mail address.

  2. That's strange. It seems to work normally for me. If it still doesn't work for you, you can find my e-mail address in my profile.