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Professor Caldwell on
Ludwig von Mises’
Methodology

J. Patrick Gunning

He who addresses fellow men, who wants to inform and convince them,
who asks questions, can proceed in this way only because he can ap-
peal to something common to all men—namely, the logical structure
of human reason.

—Ludwig von Mises, Human Action, p. 35

ruce Caldwell’s recent writings on the Austrian school of economics
(1982, chapter 6; 1984) are undoubtedly a positive contribution to
economic thought. Caldwell argues correctly that

The usual criticisms of Austrian economics . . . have thus far proven unsuc-
cessful, primarily because they proceed by assuming the validity of a rival
epistemological system (e.g., positivism or falsification), then “proving” that
the Austrian system does not meet the qualifications of their presumptively
true system. (1982, p. 6)

Or, more specifically, he says:

(1) Many of the usual complaints against praxeology, so often considered to
be conclusive, are anticipated and answered by Mises, and thus must be con-
sidered at this point inadequate, and (2) those that remain fail to take into
account that the epistemological and methodological foundations of Austrian
and neoclassical economics differ. (1982, p. 119)

”

These arguments carry considerable force since Caldwell is an “outsider
and is well read. He is familiar with both the most significant so-called economic
methodologies and the major works in the philosophy of science and social
science. Thus, he is like an informed tourist who has ventured into Austrian
territory and returned to tell of his journey. But his journey has not been super-
ficial. By focusing on the fundamental and difficult works of Mises, he is able
to observe the best of a consistently Austrian position.


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164 « The Review of Austrian Economics, Volume 3

Although Caldwell is sympathetic with what he takes to be Mises’ posi-
tion, he does not go so far as to claim that Mises has been right all along and
that other methodologies are wrong. His moderate conclusion is that the door
is open for further debate and that such a debate may eventually succeed in
resolving some of the contradictions or differences among alternative method-
ologies (1984, p. 373).

In effect, Caldwell claims that the rivalry between Austrian and alternative
methodologies is far from over and he expresses the hope that the outcome
of a future debate and cross-fertilization (which will undoubtedly be stimulated
by his work) will be greater understanding. Although he keeps an open mind
on the subject, his book advocates what he calls methodological pluralism
(1982, chapter 13). He does not expect that Austrian methodology will be
the “victor.”

In both his book and his articles, Caldwell competently shows that Mises
anticipated and answered the “external” criticisms of his a priorism. But then,
as if to announce that he was able to go beyond Mises, Caldwell offers what
he calls internal criticisms—i.e., criticisms that even Austrians (including
presumably Mises himself, if he were alive) might accept.

I believe that Caldwell fails to uncover the essence of the Misesian system.
As a result, his representation of it, although deeper than that of most of its
critics, nevertheless fails to communicate its most fundamental strengths. That
Caldwell does not communicate the strengths of Misesian economics is evi-
denced by the internal criticisms he suggests.

The first section of this article describes Misesian methodology. In the next,
three of Caldwell’s criticisms are discussed and refuted on the basis of text
references. The final section briefly discusses the general problem of compar-
ing Misesian methodology with alternatives.

Misesian Methodology

One cannot successfully evaluate criticisms of “Mises” methodology” without
a more complete understanding of Human Action than Caldwell provides. It
is easy to understand why Caldwell would have chosen not to present the argu-
ment in detail. Most economists are not interested in meticulous philosophical
argumentation. Unfortunately, without giving the reader an idea of that argu-
mentation, one can neither adequately present Misesian economics nor respond
to Caldwell’s so-called internal criticisms.! Thus, at the expense of taxing the
reader’s patience, I shall try in this part to summarize the relevant aspects of
Misesian methodology.

The Relations in the Logical Structure of the Mind

The foundation of Misesian economic theory is contained in Mises’ discussion
of the a priori and can be found in Human Action. He discusses the a priori


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Professor Caldwell on Mises’ Methodology + 16S

in a section entitled “The Formal and Aprioristic Character of Praxeology,”
where he introduces what he calls “the problem of the a priori.” This problem,
he says, “refers to the essential and necessary character of the logical structure
of the human mind” (1966, p. 34). Every attempt to prove the presence of the
relations in this logical structure “must presuppose their validity. It is impossi-
ble to explain them to a being who would not possess them on his own ac-
count” (1966, p. 34). Mises says that all (normal, adult) human beings possess
these relations: “Everybody in his daily behavior again and again bears witness
to the immutability and universality of the categories of thought and action”
(1966, p. 35). Mises invents the term methodological apriorism to refer to this
set of statements: “The fact that man does not have the creative power to im-
agine categories at variance with the fundamental logical relations and with
the principles of causality and teleology enjoins upon us what may be called
methodological apriorism (p. 35).

What then are the relations that comprise the “essential and necessary
character of the logical structure of the human mind” (p. 34)? Mises derives
them from his definition of human action. In his section entitled “The Prereq-
uisites of Human Action,” he cites three such prerequisites: (1) man’s “eagerness
to substitute a more satisfactory state of affairs for a less satisfactory [state],
(2) his imagination of “conditions which suit him better,” and (3) “the expec-
tation that purposeful behavior has the power to remove or at least alleviate
the felt uneasiness” (pp. 13-14).

It is tempting to refer to these statements as Mises’ beliefs. But the word
belief carries a relativistic connotation that reflects neither Mises’ thoughts nor
the philosophical tradition from which they stem.? The tradition is fundamen-
tally Cartesian. For Mises, the statement “I am human, therefore I act” carries
a degree of forcefulness that is comparable to the statement “I think, therefore
I am.” One cannot imagine himself being human without implicitly assuming
that he acts just as one cannot imagine himself thinking without implicitly
assuming that he exists.

Upon reading Mises’ description of these prerequisites, an outsider is in-
clined to think that it is a description of the subjects of his studies—in
economics, a description of the economic actors, perhaps with the same status
as homo economicus. This is not wrong. But it is incomplete. More fundamen-
tally, the description is intended to apply to all normal human beings, including
the economist and the comparer of methodologies.® Because of this, it can be
regarded as an appeal to the intuition of the reader. Mises asks the reader
* whether he would deny that he possesses the three prerequisites. If the reader
honestly denies that he possesses them, Mises would presumably have nothing
to say to him. As previously quoted, “It is impossible to explain [the logical
relations| to a being who [does] not possess them on his own account.” The
reader could not be called a human actor.

Mises deduces (defines) the relations in the logical structure of the human
mind from the previously named three prerequisites of human action. First,


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he deduces (defines) the idea of causality. The human actor must “know” what
it means for his action to cause a state of affairs to be different from what it
otherwise would be:

Acting requires and presupposes the category of causality. Only a man who
sees the world in the light of causality is fitted to act. In this sense we may
say that causality is a category of action. (1966, p. 22)

The concept of causality is not a simple one. In particular, there is the
issue of infinite regress. If A is caused by B, what then causes B? One is some-
times inclined to approach this problem by invoking teleology—the idea that
there is a first cause. These two ideas, causality and teleology, coexist in the
mind, says Mises. He says that both causality and teleology are deducible from
the prerequisites of action (pp. 22-25).

Also deducible from the prerequisites of action are the concepts of time
and uncertainty. First, consider time.

The notion of change implies the notion of a temporal sequence. . . . The
concepts of change and of time are inseparably linked together. . . . Human
reason is . . . incapable of conceiving the ideas of timeless existence and of
timeless action. (p. 99)

Now consider uncertainty.

The uncertainty of the future is already implied in the very notion of action. . . .
[Action and uncertainty are] two different modes of establishing one
thing. . . . If man knew the future, he would not have to choose and would
not act. (p. 105)

Praxeology

Economics, to Mises, means economic theory. Economic theory, in turn, is
said to be a branch of what Mises calls praxeology. Thus, it is sensible to define
praxeology before defining economics. Praxeology is a theory—a set of deduc-
tions based upon assumptions. Praxeology provides a framework that is used
to help one explain historical events. (Since all known human events are past
events, the term historical can be dropped without any loss in meaning.)*

Any historical event may be partly the consequence of nonhuman factors,
such as the particular physical environment. It may also be partly the conse-
quence of genetic evolution, the constraints of law, and nonpurposeful behavior.
From the perspective of praxeology, however, it is most important that historical
events are partly the consequence of human action. Because of this, there is
a crucial distinction in Mises’ conception between observing a historical event
and understanding the event.


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Professor Caldwell on Mises’ Methodology « 167

To observe a historical event, one merely records “facts” in a way that can
presumably be recalled and perhaps communicated to others. To understand
a historical event, by Mises’ definition, one must identify the human beings
whose actions in some way helped to cause the facts that are observed. Then
he must insert his hypotheses about their actions (i.e., their ends and means)
into a theory of interaction. The important point is that he must have a theory
of the interactions of human beings, who possess the a priori categories.

It follows that any comprehensive description of particular historical events
must be made partly in terms of a language (or theory) for communicating
hypotheses that involve human action (the three prerequisites and the concepts
Mises calls causality, teleology, time, and uncertainty). The theory that Mises
develops to help describe (i.e., understand) the specifically human character
of historical events is praxeology.’

Economic Theory

Economic theory, as defined by Mises, is one part, or branch, of praxeology.
It is designed specifically to enable one to understand human action conducted
on the basis of monetary calculation. Everyday economic action is entangled
with action not conducted on the basis of monetary calculation. Moreover,
human action itself is entangled with nonpurposeful behavior. The physical
environment and law may often lead to nonpurposeful behavior. Accordingly,
economic theory, by its nature, does not entail the construction of images of
an entire historical event. It commands one’s attention to the economic aspects
of historical events, i.e., those aspects that are caused by choices made on the
basis of monetary calculation.

As theory, economics is a deductive system.® Because it is about the
distinctly human (i.e., logical or rational) part of human actors, its deduc-
tions are made on the basis of the a priori assumptions stated previously. To
construct an economic theory, one combines the a priori assumptions with
other, subsidiary assumptions. Subsidiary assumptions include the assump-
tions that groups of individuals use money, that they get disutility from labor,
that they use capital, and especially that particular types of entrepreneurship
are present. Some subsidiary assumptions are made in order to simplify by
abstraction, since economic interaction is so complex. An example is the divi-
sion of individuals into roles, such as the household, the business firm, and
the banker.

In economic theory, subsidiary and simplifying assumptions are separate
from the a priori “assumptions” that correspond to the a priori categories. To
Mises, the a priori assumptions are necessary because they set apart the distinct
phenomena of praxeology and because they are undeniable. Economists, as
Mises defines them, must use these assumptions. Since economic subjects are
human actors, their actions must manifest the assumptions.


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How can one tell whether an assumption is a priori or subsidiary? The
answer, according to Mises, is that it is impossible to imagine an alternative
to an a priori assumption. For example, with respect to a priori assumptions,
Mises says: “|As human beings ourselves, we] cannot think of a world without
causality and teleology” (1966, p. 35). Subsidiary assumptions are different:
“The disutility of labor is not of a categorial and aprioristic character. We can
without contradiction think of a world in which labor does not cause uneasiness,
and we can depict the state of affairs prevailing in such a world” (p. 65).

As previously mentioned, the a priori assumptions may give the appearance
of being an alternative to homo economicus. Thus, it may seem reasonable
to compare the “a priori being” with homo economicus. To Mises, however,
the a priori being is the universal being of which homo economicus is one
manifestation. The a priori being may, in certain circumstances, act identically
to homo economicus. But the a priori being also has the option not to act like
homo economicus. Indeed, all thinkable options must be regarded as being
available to the a priori being. Homo economicus, however, could never become
an a priori being. Homo economicus must always maximize his financial wealth
in situations specified by the economist. The a priori being can create his own
situations. He can even become an economist.

To put this still differently, homo economicus is a puppet or robot who
is programmed by the economist. The a priori being is his own controller. It
is the a priori being who encompasses the humanness in the human being.
Economic models must be peopled by individuals who are programmed by the
modelbuilder.” They cannot be peopled by a priori beings.

The usefulness of models lies in the fact that they enable the modelbuilder
to contrast (1) what he can, through reflection, come to know about the nature
of the a priori being with (2) the puppet or robot that he employs in his model.
In this way, he can isolate the inventive, creative, programming, controlling,
alert aspects of human nature. In the context of economics, this means that
by constructing models of an economy, he can set apart the characteristics of
his a priori beings. He can also learn to attach more realistic characteristics
to his roles. He does this by making reference to entrepreneurship and other
catallactic functions.®

Discussion

It has been shown that Mises defines the human being in terms of a priori
categories derived from the three prerequisites of action. He even goes so far
as to suggest that persons who do not possess such categories are not normal
human beings. It must now be asked whether there is any justification for defin-
ing the normal human being as Mises does.

It seems to the author that the possible viewpoints on this matter can be
divided into three categories that would be progressively more agreeable with


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Professor Caldwell on Mises’ Methodology 169

Mises. The first viewpoint is that Mises is making a personal judgment about
what constitutes humanness. This viewpoint holds that Mises is entitled to
his judgment. But there is no reason why another judgment might not be more
acceptable. If some other “economist” chooses to define a human being as com-
passionate, empathetic, status-seeking, driven by a need for companionship,
or whatever, his choice is just as legitimate as that of Mises. Similarly, an
economics based on the other economist’s definition of humanness ought to
be every bit as acceptable as one based on the concept of human action,
although it may be unfamiliar and novel.

A second viewpoint is a modified version of the first. It is that Mises’ con-
cept of human action captures part of what it means to be human, but it does
not capture all of it. It should be supplemented by an economic theory that
recognizes compassion, empathy, and so on. In this view, Mises’ assertion about
humanness is at best limited. One should be particularly careful to limit discus-
sions of policy by emphasizing that they only apply to the imaginary world
in which the only objective of human beings is to remove uneasiness in ways
that can be accomplished by means of markets.

A third viewpoint represents the conviction that Mises was able to isolate
a particular set of phenomena that are both important and capable of being
analyzed by the methods he suggested. His definition of economics is imma-
nently sensible because it separates this realm from other realms. Deductions
in an economic theory so defined cannot yield information about what is best
for human beings. But, to the extent that human action (as defined by Mises)
is present, the deductions can give one valuable insights about some aspects
of everyday interaction. To completely describe interaction, such deductions
should be supplemented by what Mises would presumably call nonpraxeological
theories. To describe everyday events, one would also have to use knowledge
of the natural sciences and knowledge of how coercion is used.

Caldwell’s Misinterpretations

Given that the interpretation of Mises presented in this article is correct, it is
not difficult to show that the three “internal criticisms” offered by Caldwell
were answered by Mises. Each is discussed in turn.

Nonpurposeful Action

The first of Caldwell’s suggestions is based on the idea that there can be non-
purposeful action. Caldwell cites the possibility, also suggested by Nozick
(1977), that a type of nonpurposeful action is operantly conditioned behavior.
Caldwell comments: “An uninformed observer would interpret such behavior
as purposeful, but because it is conditioned behavior it is in fact non-volitional


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and hence non-purposeful.” Then he says that this may raise a problem for
Misesian methodology because Mises “claims” that all human action is pur-
poseful (1984, p. 375).

The answer to this is that Mises does not claim that all human behavior
is purposeful. What Mises says is that human action is by definition purposeful.
Caldwell confuses behavior with action and a claim with an a priori assump-
tion. Mises says that a theory of human action (praxeology) is a necessary part
of any explanation of human behavior. But it is not the only part. A theory
of nonpurposeful behavior also is a necessary part of a complete explanation
of human behavior. Mises did not conceive of economic theory as a complete
theory relating to human behavior. Thus, this particular Nozick criticism is
beside the point.’

It can be said that Mises claims that purposeful behavior exists and that
it is the distinct characteristic of the human being. But the word claim seems
to greatly understate Mises’ view. Mises says that he, the reader, and all nor-
mal human beings can recognize the purposefulness of others in the same species
by recognizing the purposefulness in themselves. It is difficult to see how such

“claim” could be contradicted.

It is odd that Caldwell considers operantly conditioned behavior a source
of possible internal criticism, since he clearly recognizes “that in Mises’s system
all action is rational because all action is by definition purposeful” (1982, p.
119). The only sensible explanation is that Caldwell failed to realize the dif-
ference between a theory of action, as Mises defined it, and a theory of all
behavior. It is legitimate to criticize Mises for not being interested in nonra-
tional (nonpurposeful) behavior. One might even argue on ethical grounds that
economists should be more concerned with nonrational behavior than with
rational behavior. But such a criticism would not be a criticism of Mises’
methodology of economics. It would be a criticism of the scope that is encom-
passed by Mises’ definition of economics.

Alternative a Priori Assumptions

Caldwell’s second suggestion is that there may be alternative a priori assump-
tions. This possibility is most extensively pursued in his 1982 book, (pp
130-33), where he contrasts Mises’ methodological apriorism with what he
calls the apriorism of Hollis and Nell (1975 ) Hollis and Nell assert that the
“reproduction of the system . . . is primary.” If I understand Hollis and Nell
correctly, they argue that production and reproduction is necessary because
otherwise there would be no “system” to discuss.

It is easy to see that Misesian human action implies production in the sense
that action itself means production (choice) of a state that is less unsatisfac-
tory to the actor than an alternative state. The Hollis and Nell assumption
does not imply human action, however. It applies equally to nonhuman life


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Professor Caldwell on Mises’ Methodology « 171

and to human life. Animals and plants produce and reproduce “systems,” but
we cannot use our self-understanding and intuition to determine with comparable
confidence that they can construct images of the behavior or actions of other
animals and plants. In any event, we can be fairly certain that animals and plants
do not have methodological thoughts or engage in methodological discussions.

It is possible that Hollis and Nell would separate specifically human
“systems” of production and reproduction from nonhuman systems. If so, they
may identify a specific category of behavior that would correspond to Mises’
concept of action. But there is nothing in their alleged a priori assumption
to suggest that they would do this. Thus, one might expect that a theory built
on the Hollis and Nell assumption would enable the theorybuilders to capture
some aspects of all life. However, there would be no reason to expect such a
theory to have anything perceptive to say about economic interaction in the
Misesian sense.

If there are indeed a priori assumptions that can be considered as alter-
natives to those made by Mises, they must apply to the philosopher, the
economist, and the subjects studied by the economist. And, if the assumptions
are to deal with the same subject matter that Mises was concerned with, they
must relate to human thinking, choosing, and planning.

Theory versus Hypothesis

A third suggestion relates to hypothesis testing. Caldwell says that “Mises’ view
that the predictions which emerge from praxeology cannot and should not be
used to test the theory directly conflicts with the standard approach” (1984,
p. 371). This statement does not adequately represent the “conflict.” Praxeology
does not generate predictions. Praxeological and economic models, which are
based on a priori assumptions and subsidiary assumptions, yield deductions.
If subsidiary and simplifying economic assumptions are realistic, the deduc-
tions will represent a “real” economic phenomenon, in Mises’ sense. But whether
an observer of everyday life can separate that “real” economic phenomenon
in Mises’ sense from the noneconomic phenomena with which the economic
phenomenon is invariably entangled depends upon his knowledge of the non-
economic phenomena.

The conflict is not over whether predictions can or should be tested. One
conflict is over whether an economic deduction in Mises’ sense is the same
as the hypotheses that are tested by “the standard approach.” A second con-
flict is over whether testing an economic deduction can be adequately ac-
complished when the tester lacks knowledge about noneconomic phenomena
and when he cannot directly observe the fundamental economic phenomena.

Thus Caldwell’s conclusion that “Surely, one way to discover whether a
mistake in reasoning has been made is to see if the chain of logic leads to predic-
tions that are disconfirmed by evidence” (1984, p. 371) seems misplaced and


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confusing. Misesian economic theory, by itself, does not necessarily yield predic-
tions about the phenomena of everyday life. The only way to use Misesian
* economic theory to generate such predictions is to employ subsidiary assump-
tions that reflect the “true” preferences, the environmental conditions (i.e.,
natural science, law, culture, the capital structure, and other resources), and
individuals’ knowledge of these conditions.

This is not to deny the significance of fact gathering. Rather, it is to put
the task of fact gathering in a separate category from the task of constructing
theory. Both are necessary if one wishes to describe historical events or to make
predictions in everyday life. But the idea of testing the deductions in a model
designed specifically to help one identify the characteristics of human beings
that have not or cannot be modeled (e.g., entrepreneurship) is quite a bit dif-
ferent from what most economists have in mind when they speak of testing
a hypothesis.!!\12

On the Problem of Comparing Methodologies

In an important sense, Caldwell’s work was exploratory. His “internal criticisms”
were apparently not meant to denigrate Misesian economics. On the contrary, in
his book at least, he issued a “challenge to the Austrians to come up with some
means by which their system could be compared with its rivals” (1982, pp.
134-35). Within the context of this challenge, it seems appropriate to devote the
final section to the issue of how the various methodologies could be compared.

Caldwell set a difficult task for himself when he sought to compare the
“methodology” of Mises with positivism and falsificationism. A crucial part
of his comparison should have been to determine whether these methodologies
were focused on the same phenomena. Had he done this, I have no doubt that
he would have discovered that Mises restricted the definition of economic
phenomena to the realm of the purely purposeful and subjective. Mises did
not by any means deny the significance of nonpurposeful and objective
phenomena. He simply did not regard them as directly relevant to the problem
of constructing a pure logic of human action.

Mises presented what, from the perspective of positivism or falsificationism,
may be considered a rival definition of the subject matter of economics. In his
economic theory, he was not interested in most of the phenomena that modern
positivists or falsificationists (i.e., most modern economists) would label
economic. His concern was with the choices that cause wants to get satisfied
in a capitalist economy. In other words, he was concerned with “entrepreneurial”
choices and their consequences and with other factors that individuals regard
as instrumental or relevant in the satisfaction of wants.

Positivists or falsificationists are interested at least partly in entrepreneur-
ship and these other factors. But they are also interested in such items as the


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Professor Caldwell on Mises’ Methodology « 173

rate of statistical unemployment, the purchasing power of money, the size of
the GNP, the magnitude of investment spending, the market interest rate, and
other statistical figures.

It is true that these numbers are partly caused by entrepreneurship and
that they are related to the other factors. But the numbers also reflect the con-
ditions of the natural environment, prevailing law, and the particular preferences,
knowledge, and habits that have been transmitted through cultural processes.
Because Mises did not regard these latter conditions as economic, the statistics
were not so relevant to him. Since Misesian economics focuses on entre-
preneurial choices, the presence of which could not often be discovered by means
of statistical analysis, Mises regarded positivism and falsificationism as largely
irrelevant to economics.!?

A proper comparison of Misesian methodology with that of positivism
or falsificationism requires the comparer to designate the phenomena with
respect to which the methdologies are being compared. Misesian economics
is mainly concerned with entrepreneurship and its consequences. Modern
positivist or falsificationist economics is defined more broadly; yet it includes
entrepreneurship and its consequences. It follows that a proper comparison
of the two should be based only on the common phenomena—entrepreneurship
and its consequences.

This 1s the comparison that Mises typically made. Unfortunately in the
author’s view, Mises’ terminology was not suitable to the ideas he wished to
convey. As a result, too few readers of Human Action recognized that his pro-
vocative criticisms of the use of positivism, scientism, statistics, and mathematics
were based on his view that economics should be defined differently than it
was coming to be defined in the mainstream literature and in the universities.
It is hoped that this article will succeed in redirecting the interested reader’s
attention to the definition of economics that Mises had in mind.

Notes

1. That a more complete presentation is necessary is apparently substantiated
by the more recent criticisms of Caldwell that were published in History of Political
Economy. In the first, Abraham Hirsch mainly criticizes Caldwell for not providing
a more detailed justification for his sympathy with Mises. According to Hirsch, Caldwell
should have dealt with what most readers, Austrian or not, would regard as contradic-
tions in Human Action. Most importantly, says Hirsch, he should have explained how
Mises was able to reach such sweeping normative conclusions about capitalism on the
basis of his theory of human action, which ignores “nonrational” behavior.

It would not have been necessary for Caldwell to discuss all of Human Ac-
tion to avoid this criticism. He would only have had to recognize that the issue of
methodology is sufficiently divorced from that of application that it is possible to
elucidate and evaluate the foundation of praxeology, as well as Mises’ justifications


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for his methodological apriorism, without referring at all to what Mises thinks or claims
such a method implies for the “good of individuals” under capitalism. One can justifiably
criticize Mises’ own economic reasoning as well as his apparently normative concly-
sions without ever mentioning or understanding his methodology.
In the second criticism, Eugene Rotwein criticizes Caldwell for not providing
sufficient support for methodological apriorism to justify Caldwell’s conclusion that
Mises adequately defended it against the standard criticisms. Whether Caldwell did
or did not provide sufficient support, it is evident that Rotwein himself did not come
to understand Mises’ arguments either directly by reading Mises’ text or indirectly by
reading Caldwell. Of particular significance is Rotwein’s contention that “the general
empirical spirit of science operates to check the growth of dogma, and patently so as
compared with apriorism, which is the equivalent of a claim to the possession of a
pipeline to the Deity” (p. 671). Only someone who had not come to understand the
history of subjectivism and its role in the emergence of Mises’ apriorism could reach
such a conclusion. It is precisely the fact that “the general empirical spirit of science”
(which itself is a manifestation of subjectivism) does not function to check the growth
of dogma in the science of human action that compels the scientist to employ a dif-
ferent check—that of subjectivism. However, the employment of subjectivism itself
entails the use of a priori assumptions about the nature of subjects and the scientists.
The greatest contribution of Mises to social-science methodology was his recognition
and elucidation of this.
2. An interesting paper regarding philosophical foundations of Austrian eco-
nomics has been written by Barry Smith (1986). This should be compared with Mises’
Notes and Recollections (1978).
3. For the definition of normal, see Mises (1966, p. 14).
4. The word explain encompasses (1) personal interpretation and (2) communi-
cation of one’s personal interpretation to others.
5. The word understand, as used here, is derived from the German concept of
versteben. Mises contrasts it with concept formation. See Mises (1981, chapter 3; 1966,
pp. 47-59). Also see Lachmann (1971, chapter 1).
6. Economics and economic theory are synonymous. The synonym for applied
economics is the economic understanding of history.
7. Mises calls a model an imaginary construction in order to emphasize the point
that a model in economics is not intended to be a small representation of a larger real-
ity, like a scale model of an industrial park.
8. Praxeology employs a priori reasoning (Mises, 1966, p. 32). In discussing
a prior reasoning, Mises says:
The significant task of aprioristic reasoning is on the one hand to bring into relief all
that is implied in the categories, concepts, and premises and, on the other hand, to.
show what they do not imply. It is its vocation to render manifest and obvious what
was hidden and unknown before. (1966, p. 38)

Also see Mises (1966, pp. 251-55).

9. For a thorough, point-by-point critique of Nozick’s Interpretation of Mises,

see W. Block, “On Robert Nozick’s ‘On Austrian Methodology’ ” (pp. 397-444).
10. Caldwell also refers in passing to Nozick’s view that methodological in-

dividualism as practiced by “Austrians” constitutes reductionism. Nozick says: “The

methodological individualist claims that all true theories of social science are reducible


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Professor Caldwell on Mises’ Methodology « 175

to theories of individual human action, plus boundary conditions specifying the con-
ditions under which persons act” (1977, p. 353). He dtes Hayek as holding this view.
The problem with this statement is the potential ambiguity of the word theory. From
the context, Nozick really means hypotheses. Nozick is not concerned with the prob-
lem of building a many-person model from the separate models of individuals (i.e.,
theories). Instead, he is concerned with the process of interpreting many-person in-
teraction in terms of hypotheses about individuals. The point of methodological in-
dividualism in theory has nothing to do with whether actual interaction can be described
solely in terms of individuals. Instead, as used by Mises, it deals with the question
of whether a model of many-person interaction that is constructed by the economist,
who is concerned only with human action, is logical. If it is logical, it must be reduc-
ible. If it is not reducible, it is not logical and must be jettisoned. Nozick apparently
did not realize the limited scope of praxeology and economics, as Mises defined them.

11. Some of Caldwell’s confusion might have been avoided by a more discrimi-
nating use of the word theory. The practice of equating theory with hypothesis has
little to recommend it.

12. For a more complete discussion of Mises’ distinction between theory and its
application, see Mises’ Theory and History (1969).

13. Mises did not regard the statistics as irrelevant in general. Indeed, to explain
any particular historical event, one should use knowledge of all types, including
knowedge of statistics. “In dealing with a historical problem the historian makes use
of all the knowledge provided by logic, mathematics, the natural sciences, and especially
by praxeology” (1966, p. 49).

14. It is not surprising that Caldwell himself did not recognize the difference in
subject matter. Human Action is tough going for individuals who are trained in the
positivism and falsificationism that has come to be the hallmark of reputable U.S. univer-
sities. It is significant to me, however, that the various “Austrians” listed as having
commented in some way on Caldwell’s paper apparently did not identify the difference
in subject matter (1984, p. 377).

References

Block, Walter. “On Robert Nozick’s ‘On Austrian Methodology’,” Inquiry, vol. 23
(fall 1980).

Caldwell, Bruce. Beyond Positivism: Economic Methodology in the Twentieth Cen-
tury. Boston: George Allen & Unwin, 1982.

. “Praxeology and Its Critics,” History of Political Economy, vol. 16, no. 3

(fall 1984).

. “Towards a Broader Conception of Criticism,” History of Political Economy,
vol. 18, no. 4 (winter 1986).

Hirsch, Abraham. “Caldwell on Praxeology and Its Critics: A Reappraisal,” History
of Political Economy, vol. 18, no. 4 (winter 1986).

Hollis, Martin, and Edward J. Nell. Rational Economic Man. London: Cambridge
University Press, 1975.

Lachmann, Ludwig M. The Legacy of Max Weber. Berkeley, Calif.: Glendessary Press,
1971.



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176 « The Review of Austrian Economics, Volume 3

Mises, Ludwig von. Human Action. Chicago: Henry Regnery, 1966.

. Theory and History. New Rochelle, N.Y.: Arlington House, 1969.

. Epistemological Problems of Economics. New York: New York University

Press, 1981.

. Notes and Recollections. South Holland, Ill.: Libertarian Press, 1978.

Nozick, Robert. “On Austrian Methodology,” Synthese, November 1977.

Rotwein, Eugene. “Flirting with Apriorism: Caldwell on Mises,” History of Political
Economy, vol. 18, no. 4 (winter 1986).

Smith, Barry. “Austrian Economics and Austrian Philosophy,” in Wolfgang Grassl and
Barry Smith (eds.), Austrian Economics. New York: New York University Press,
1986.