WEBVTT NOTE Introduction to 'Human Action' 1 00:00:00.000 --> 00:00:05.000 Introduction 1. Economics and Praxeology 2 00:00:06.000 --> 00:00:17.000 Economics is the youngest of all sciences. In the last 200 years, it is true, many new sciences have emerged from the disciplines familiar to the ancient Greeks. 3 00:00:17.000 --> 00:00:28.000 However, what happened here was merely that parts of knowledge which had already found their place in the complex of the old system of learning, now became autonomous. 4 00:00:28.000 --> 00:00:35.160 The field of study was more nicely subdivided and treated with new methods, hitherto unnoticed 5 00:00:35.160 --> 00:00:40.280 provinces were discovered in it and people began to see things from aspects different 6 00:00:40.280 --> 00:00:42.800 from those of their precursors. 7 00:00:42.800 --> 00:00:46.280 The field itself was not expanded. 8 00:00:46.280 --> 00:00:52.000 But economics opened to human science a domain previously inaccessible and never thought 9 00:00:52.000 --> 00:00:53.200 of. 10 00:00:53.200 --> 00:00:58.760 The discovery of irregularity in the sequence and interdependence of market phenomena went 11 00:00:58.760 --> 00:01:02.400 beyond the limits of the traditional system of learning. 12 00:01:02.400 --> 00:01:07.920 It conveyed knowledge which could be regarded neither as logic, mathematics, psychology, 13 00:01:07.920 --> 00:01:11.680 physics, nor biology. 14 00:01:11.680 --> 00:01:16.320 Philosophers had long since been eager to ascertain the ends which God or nature was 15 00:01:16.320 --> 00:01:19.840 trying to realize in the course of human history. 16 00:01:19.840 --> 00:01:24.360 They searched for the law of mankind's destiny and evolution. 17 00:01:24.360 --> 00:01:29.720 But even those thinkers whose inquiry was free from any theological tendency failed 18 00:01:29.720 --> 00:01:34.660 utterly in these endeavors, because they were committed to a faulty method. 19 00:01:34.660 --> 00:01:41.200 They dealt with humanity as a whole, or with other holistic concepts like nation, race, 20 00:01:41.200 --> 00:01:42.640 or church. 21 00:01:42.640 --> 00:01:47.840 They set up, quite arbitrarily, the ends to which the behavior of such wholes is bound 22 00:01:47.840 --> 00:01:49.440 to lead. 23 00:01:49.440 --> 00:01:54.880 But they could not satisfactorily answer the question regarding what factors compelled the 24 00:01:54.880 --> 00:02:00.960 various acting individuals to behave in such a way that the goal aimed at by the whole's 25 00:02:00.960 --> 00:02:04.520 inexorable evolution was attained. 26 00:02:04.520 --> 00:02:10.800 They had recourse to desperate shifts, miraculous interference of the deity either by revelations 27 00:02:10.800 --> 00:02:17.280 or by the delegation of God-sent prophets and consecrated leaders, pre-established harmony, 28 00:02:17.280 --> 00:02:24.580 Redestination or the operation of a mystic and fabulous world soul or national soul. 29 00:02:24.580 --> 00:02:30.560 Others spoke of a cunning of nature which implanted in man impulses driving him unwittingly 30 00:02:30.560 --> 00:02:35.780 along precisely the path nature wanted him to take. 31 00:02:35.780 --> 00:02:38.340 Other philosophers were more realistic. 32 00:02:38.340 --> 00:02:42.640 They did not try to guess the designs of nature or God. 33 00:02:42.640 --> 00:02:46.360 They looked at human things from the viewpoint of government. 34 00:02:46.360 --> 00:02:52.000 They were intent upon establishing rules of political action, a technique, as it were, 35 00:02:52.000 --> 00:02:55.360 of government and statesmanship. 36 00:02:55.360 --> 00:03:01.620 Speculative minds drew ambitious plans for a thorough reform and reconstruction of society. 37 00:03:01.620 --> 00:03:07.000 The more modest were satisfied with a collection and systematization of the data of historical 38 00:03:07.000 --> 00:03:08.660 experience. 39 00:03:08.660 --> 00:03:14.560 But all were fully convinced that there was, in the course of social events, no such regularity 40 00:03:14.560 --> 00:03:19.560 Society and Invariance of Phenomena as had already been found in the operation of human 41 00:03:19.560 --> 00:03:23.400 reasoning and in the sequence of natural phenomena. 42 00:03:23.400 --> 00:03:28.120 They did not search for the laws of social cooperation because they thought that man 43 00:03:28.120 --> 00:03:31.700 could organize society as he pleased. 44 00:03:31.700 --> 00:03:37.240 If social conditions did not fulfill the wishes of the reformers, if their utopias proved 45 00:03:37.240 --> 00:03:42.780 unrealizable, the fault was seen in the moral failure of man. 46 00:03:42.780 --> 00:03:46.300 Ethical problems were considered ethical problems. 47 00:03:46.300 --> 00:03:51.500 What was needed in order to construct the ideal society, they thought, was good princes 48 00:03:51.500 --> 00:03:53.560 and virtuous citizens. 49 00:03:53.560 --> 00:03:58.100 With righteous men, any utopia might be realized. 50 00:03:58.100 --> 00:04:04.340 The discovery of the inescapable interdependence of market phenomena overthrew this opinion. 51 00:04:04.340 --> 00:04:08.780 Bewildered, people had to face a new view of society. 52 00:04:08.780 --> 00:04:13.500 They learned with stupefaction that there is another aspect from which human action 53 00:04:13.500 --> 00:04:21.620 might be viewed than that of good and bad, of fair and unfair, of just and unjust. 54 00:04:21.620 --> 00:04:27.140 In the course of social events there prevails a regularity of phenomena to which man must 55 00:04:27.140 --> 00:04:30.860 adjust his action if he wishes to succeed. 56 00:04:30.860 --> 00:04:36.540 It is futile to approach social facts with the attitude of a censor who approves or disapproves 57 00:04:36.540 --> 00:04:42.820 from the point of view of quite arbitrary standards and subjective judgments of value. 58 00:04:42.820 --> 00:04:48.680 One must study the laws of human action and social cooperation as the physicist studies 59 00:04:48.680 --> 00:04:50.960 the laws of nature. 60 00:04:50.960 --> 00:04:56.820 Human action and social cooperation seen as the object of a science of given relations, 61 00:04:56.820 --> 00:05:01.580 no longer as a normative discipline of things that ought to be. 62 00:05:01.580 --> 00:05:07.460 This was a revolution of tremendous consequences for knowledge and philosophy, as well as for 63 00:05:07.460 --> 00:05:09.740 social action. 64 00:05:09.740 --> 00:05:14.740 For more than a hundred years, however, the effects of this radical change in the methods 65 00:05:14.740 --> 00:05:19.780 of reasoning were greatly restricted, because people believed that they referred only to 66 00:05:19.780 --> 00:05:26.240 a narrow segment of the total field of human action, namely, to market phenomena. 67 00:05:26.240 --> 00:05:31.440 The classical economists met in the pursuit of their investigations an obstacle which 68 00:05:31.440 --> 00:05:36.460 which they failed to remove, the apparent antinomy of value. 69 00:05:36.460 --> 00:05:42.960 Their theory of value was defective and forced them to restrict the scope of their science. 70 00:05:42.960 --> 00:05:48.740 Until the late 19th century, political economy remained a science of the economic aspects 71 00:05:48.740 --> 00:05:53.220 of human action, a theory of wealth and selfishness. 72 00:05:53.220 --> 00:06:00.560 It dealt with human action only to the extent that it is actuated by what was, very unsatisfactorily, 73 00:06:00.560 --> 00:06:09.560 was described as the profit motive, and it asserted that there is, in addition, other human action whose treatment is the task of other disciplines. 74 00:06:09.560 --> 00:06:19.560 The transformation of thought which the classical economists had initiated was brought to its consummation only by modern subjectivist economics, 75 00:06:19.560 --> 00:06:25.560 which converted the theory of market prices into a general theory of human choice. 76 00:06:25.560 --> 00:06:41.560 For a long time, men failed to realize that the transition from the classical theory of value to the subjective theory of value was much more than the substitution of a more satisfactory theory of market exchange for a less satisfactory one. 77 00:06:41.560 --> 00:06:57.560 The general theory of choice and preference goes far beyond the horizon which encompassed the scope of economic problems as circumscribed by the economists from Cantillon, Hume and Adam Smith down to John Stuart Mill. 78 00:06:57.560 --> 00:07:08.560 It is much more than merely a theory of the economic side of human endeavors and of man striving for commodities and an improvement in his material well-being. 79 00:07:08.560 --> 00:07:12.560 It is the science of every kind of human action. 80 00:07:12.560 --> 00:07:16.560 Choosing determines all human decisions. 81 00:07:16.560 --> 00:07:23.560 In making his choice, man chooses not only between various material things and services. 82 00:07:23.560 --> 00:07:27.560 All human values are offered for option. 83 00:07:27.560 --> 00:07:32.560 All ends and all means, both material and ideal issues, 84 00:07:32.560 --> 00:07:44.560 The sublime and the base, the noble and the ignoble, are ranged in a single row and subjected to a decision which picks out one thing and sets aside another. 85 00:07:44.560 --> 00:07:54.560 Nothing that men aim at or want to avoid remains outside of this arrangement into a unique scale of gradation and preference. 86 00:07:54.560 --> 00:08:01.560 The modern theory of value widens the scientific horizon and enlarges the field of economic studies. 87 00:08:01.560 --> 00:08:10.560 Out of the political economy of the classical school emerges the general theory of human action, praxeology. 88 00:08:10.560 --> 00:08:19.560 The economic or catallactic problems are embedded in a more general science and can no longer be severed from this connection. 89 00:08:19.560 --> 00:08:25.560 No treatment of economic problems proper can avoid starting from acts of choice. 90 00:08:25.560 --> 00:08:36.560 Economics becomes a part, although the hitherto best elaborated part, of a more universal science, praxeology. 91 00:08:36.560 --> 00:08:43.560 2. The Epistemological Problem of a General Theory of Human Action 92 00:08:43.560 --> 00:08:50.560 In the new science, everything seemed to be problematic. It was a stranger in the traditional system of knowledge. 93 00:08:50.560 --> 00:08:56.560 People were perplexed and did not know how to classify it and to assign it its proper place. 94 00:08:56.560 --> 00:09:02.560 But on the other hand, they were convinced that the inclusion of economics in the catalog of knowledge 95 00:09:02.560 --> 00:09:06.560 did not require a rearrangement or expansion of the total scheme. 96 00:09:06.560 --> 00:09:09.560 They considered their catalog system complete. 97 00:09:09.560 --> 00:09:15.560 If economics did not fit into it, the fault could only rest with the unsatisfactory treatment 98 00:09:15.560 --> 00:09:18.560 that the economists applied to their problems. 99 00:09:18.560 --> 00:09:20.280 Systems. 100 00:09:20.280 --> 00:09:26.440 It is a complete misunderstanding of the meaning of the debates concerning the essence, scope, 101 00:09:26.440 --> 00:09:32.520 and logical character of economics to dismiss them as the scholastic quibbling of pedantic 102 00:09:32.520 --> 00:09:33.760 professors. 103 00:09:33.760 --> 00:09:38.800 It is a widespread misconception that while pedants squandered useless talk about the 104 00:09:38.800 --> 00:09:45.600 most appropriate method of procedure, economics itself, indifferent to these idle disputes, 105 00:09:45.600 --> 00:09:48.280 went quietly on its way. 106 00:09:48.280 --> 00:09:55.600 In the metodenstreit between the Austrian economists and the Prussian historical school, the self-styled 107 00:09:55.600 --> 00:10:01.400 intellectual bodyguard of the House of Hohenzollern, and in the discussions between the school 108 00:10:01.400 --> 00:10:07.920 of John Bates Clark and American institutionalism, much more was at stake than the question of 109 00:10:07.920 --> 00:10:12.320 what kind of procedure was the most fruitful one. 110 00:10:12.320 --> 00:10:18.260 The real issue was the epistemological foundations of the science of human action and its logical 111 00:10:18.260 --> 00:10:20.540 and Political Legitimacy. 112 00:10:20.540 --> 00:10:25.820 Starting from an epistemological system to which praxeological thinking was strange, 113 00:10:25.820 --> 00:10:32.820 and from a logic which acknowledged as scientific, besides logic and mathematics, only the empirical 114 00:10:32.820 --> 00:10:39.100 natural sciences and history, many authors tried to deny the value and usefulness of 115 00:10:39.100 --> 00:10:41.900 economic theory. 116 00:10:41.900 --> 00:10:45.940 Historicism aimed at replacing it by economic history. 117 00:10:45.940 --> 00:10:51.260 Some recommended the substitution of an illusory social science which should adopt the logical 118 00:10:51.260 --> 00:10:55.340 structure and pattern of Newtonian mechanics. 119 00:10:55.340 --> 00:11:01.860 Both these schools agreed in a radical rejection of all the achievements of economic thought. 120 00:11:01.860 --> 00:11:07.660 It was impossible for the economists to keep silent in the face of all these attacks. 121 00:11:07.660 --> 00:11:13.300 The radicalism of this wholesale condemnation of economics was very soon surpassed by a 122 00:11:13.300 --> 00:11:16.580 by a still more universal nihilism. 123 00:11:16.580 --> 00:11:23.360 From time immemorial, men in thinking, speaking and acting had taken the uniformity and immutability 124 00:11:23.360 --> 00:11:28.900 of the logical structure of the human mind as an unquestionable fact. 125 00:11:28.900 --> 00:11:32.700 All scientific inquiry was based on this assumption. 126 00:11:32.700 --> 00:11:37.820 In the discussions about the epistemological character of economics, writers, for the first 127 00:11:37.820 --> 00:11:42.880 time in human history, denied this proposition too. 128 00:11:42.880 --> 00:11:48.260 Boehm asserts that a man's thinking is determined by his class affiliation. 129 00:11:48.260 --> 00:11:51.880 Every social class has a logic of its own. 130 00:11:51.880 --> 00:11:57.360 The product of thought cannot be anything else than an ideological disguise of the selfish 131 00:11:57.360 --> 00:12:00.200 class interests of the thinker. 132 00:12:00.200 --> 00:12:06.340 It is the task of a sociology of knowledge to unmask philosophies and scientific theories 133 00:12:06.340 --> 00:12:10.680 and to expose their ideological emptiness. 134 00:12:10.680 --> 00:12:16.980 Politics is a bourgeois makeshift. The economists are sycophants of capital. Only the classless 135 00:12:16.980 --> 00:12:24.320 society of the socialist utopia will substitute truth for ideological lies. 136 00:12:24.320 --> 00:12:30.240 This polylogism was later taught in various other forms also. Historicism asserts that 137 00:12:30.240 --> 00:12:35.180 the logical structure of human thought and action is liable to change in the course of 138 00:12:35.180 --> 00:12:42.900 of Historical Evolution, Racial Polylogism Assigns to Each Race a Logic of Its Own, Finally 139 00:12:42.900 --> 00:12:49.460 there is Irrationalism, contending that reason as such is not fit to elucidate the irrational 140 00:12:49.460 --> 00:12:53.500 forces that determine human behavior. 141 00:12:53.500 --> 00:12:57.180 Such doctrines go far beyond the limits of economics. 142 00:12:57.180 --> 00:13:03.720 They question not only economics and praxeology, but all other human knowledge and human reasoning 143 00:13:03.720 --> 00:13:05.280 Banking in general. 144 00:13:05.280 --> 00:13:09.980 They refer to mathematics and physics as well as to economics. 145 00:13:09.980 --> 00:13:14.880 It seems therefore that the task of refuting them does not fall to any single branch of 146 00:13:14.880 --> 00:13:19.440 knowledge but to epistemology and philosophy. 147 00:13:19.440 --> 00:13:24.660 This furnishes apparent justification for the attitude of those economists who quietly 148 00:13:24.660 --> 00:13:30.240 continue their studies without bothering about epistemological problems and the objections 149 00:13:30.240 --> 00:13:37.080 is raised by polylogism and irrationalism. The physicist does not mind if somebody stigmatizes 150 00:13:37.080 --> 00:13:43.760 his theories as bourgeois, western or Jewish. In the same way, the economist should ignore 151 00:13:43.760 --> 00:13:50.200 detraction and slander. He should let the dogs bark and pay no heed to their yelping. 152 00:13:50.200 --> 00:13:57.800 It is seemly for him to remember Spinoza's dictum. Just as light defines itself and darkness, 153 00:13:57.800 --> 00:14:02.360 So truth sets the standard for itself and falsity. 154 00:14:02.360 --> 00:14:08.800 However, the situation is not quite the same with regard to economics as it is with mathematics 155 00:14:08.800 --> 00:14:11.400 and the natural sciences. 156 00:14:11.400 --> 00:14:16.840 Polylogism and irrationalism attack praxeology and economics. 157 00:14:16.840 --> 00:14:21.440 Although they formulate their statements in a general way to refer to all branches of 158 00:14:21.440 --> 00:14:27.360 knowledge, it is the sciences of human action that they really have in view. 159 00:14:27.360 --> 00:14:33.200 They say that it is an illusion to believe that scientific research can achieve results 160 00:14:33.200 --> 00:14:39.840 valid for people of all eras, races and social classes, and they take pleasure in disparaging 161 00:14:39.840 --> 00:14:45.880 certain physical and biological theories as bourgeois or western. 162 00:14:45.880 --> 00:14:51.280 But if the solution of practical problems requires the application of these stigmatized 163 00:14:51.280 --> 00:14:54.440 doctrines, they forget their criticism. 164 00:14:54.440 --> 00:15:00.920 The technology of Soviet Russia utilizes without scruple all the results of bourgeois physics, 165 00:15:00.920 --> 00:15:05.960 chemistry and biology, just as if they were valid for all classes. 166 00:15:05.960 --> 00:15:11.320 The Nazi engineers and physicians did not disdain to utilize the theories, discoveries 167 00:15:11.320 --> 00:15:16.100 and inventions of people of inferior races and nations. 168 00:15:16.100 --> 00:15:23.160 The behavior of people of all races, nations, religions, linguistic groups and social classes 169 00:15:23.160 --> 00:15:29.040 clearly proves that they do not endorse the doctrines of polylogism and irrationalism 170 00:15:29.040 --> 00:15:34.760 as far as logic, mathematics and the natural sciences are concerned. 171 00:15:34.760 --> 00:15:38.920 But it is quite different with praxeology and economics. 172 00:15:38.920 --> 00:15:44.960 The main motive for the development of the doctrines of polylogism, historicism and irrationalism 173 00:15:44.960 --> 00:15:50.700 was to provide a justification for disregarding the teachings of economics in the determination 174 00:15:50.700 --> 00:15:52.880 of economic policies. 175 00:15:52.880 --> 00:15:58.760 The socialists, racists, nationalists and statists failed in their endeavors to refute 176 00:15:58.760 --> 00:16:05.260 the theories of the economists and to demonstrate the correctness of their own spurious doctrines. 177 00:16:05.260 --> 00:16:10.960 It was precisely this frustration that prompted them to negate the logical and epistemological 178 00:16:10.960 --> 00:16:16.960 principles upon which all human reasoning, both in mundane activities and in scientific 179 00:16:16.960 --> 00:16:19.600 research, is founded. 180 00:16:19.600 --> 00:16:24.840 It is not permissible to dispose of these objections merely on the ground of the political 181 00:16:24.840 --> 00:16:27.420 motives which inspired them. 182 00:16:27.420 --> 00:16:33.160 No scientist is entitled to assume beforehand that a disapprobation of his theories must 183 00:16:33.160 --> 00:16:39.080 be unfounded because his critics are imbued by passion and party bias. 184 00:16:39.080 --> 00:16:45.160 He is bound to reply to every censure without any regard to its underlying motives or its 185 00:16:45.160 --> 00:16:46.640 background. 186 00:16:46.640 --> 00:16:51.640 It is no less impermissible to keep silent in the face of the often asserted opinion 187 00:16:51.640 --> 00:16:57.360 that the theorems of economics are valid only under hypothetical assumptions never realized 188 00:16:57.360 --> 00:17:03.340 in life, and that they are therefore useless for the mental grasp of reality. 189 00:17:03.340 --> 00:17:09.480 It is strange that some schools seem to approve of this opinion, and nonetheless quietly proceed 190 00:17:09.480 --> 00:17:13.400 to draw their curves and to formulate their equations. 191 00:17:13.400 --> 00:17:17.960 They do not bother about the meaning of their reasoning and about its reference to the world 192 00:17:17.960 --> 00:17:20.880 of real life and action. 193 00:17:20.880 --> 00:17:23.880 This is, of course, an untenable attitude. 194 00:17:23.880 --> 00:17:29.200 The first task of every scientific inquiry is the exhaustive description and definition 195 00:17:29.200 --> 00:17:35.520 of all conditions and assumptions under which its various statements claim validity. 196 00:17:35.520 --> 00:17:40.820 It is a mistake to set up physics as a model and pattern for economic research. 197 00:17:40.820 --> 00:17:46.500 But those committed to this fallacy should have learned one thing at least, that no physicist 198 00:17:46.500 --> 00:17:51.480 ever believed that the clarification of some of the assumptions and conditions of physical 199 00:17:51.480 --> 00:17:56.260 theorems is outside the scope of physical research. 200 00:17:56.260 --> 00:18:01.580 The main question that economics is bound to answer is what the relation of its statements 201 00:18:01.580 --> 00:18:09.380 is to the reality of human action, whose mental grasp is the objective of economic studies. 202 00:18:09.380 --> 00:18:14.460 It therefore devolves upon economics to deal thoroughly with the assertion that its teachings 203 00:18:14.460 --> 00:18:20.340 are valid only for the capitalist system of the short-lived and already vanished liberal 204 00:18:20.340 --> 00:18:23.260 period of Western civilization. 205 00:18:23.260 --> 00:18:29.380 It is incumbent upon no branch of learning other than economics to examine all the objections 206 00:18:29.380 --> 00:18:34.580 raised from various points of view against the usefulness of the statements of economic 207 00:18:34.580 --> 00:18:39.200 theory for the elucidation of the problems of human action. 208 00:18:39.200 --> 00:18:44.520 The system of economic thought must be built up in such a way that it is proof against 209 00:18:44.520 --> 00:18:51.480 any criticism on the part of irrationalism, historicism, panphysicalism, behaviorism, 210 00:18:51.480 --> 00:18:54.760 and all varieties of polylogism. 211 00:18:54.760 --> 00:19:00.280 It is an intolerable state of affairs that while new arguments are daily advanced to 212 00:19:00.280 --> 00:19:06.000 demonstrate the absurdity and futility of the endeavors of economics, the economists 213 00:19:06.000 --> 00:19:09.260 pretend to ignore all this. 214 00:19:09.260 --> 00:19:15.160 It is no longer enough to deal with the economic problems within the traditional framework. 215 00:19:15.160 --> 00:19:21.000 It is necessary to build the theory of catallactics upon the solid foundation of a general theory 216 00:19:21.000 --> 00:19:24.600 of human action, praxeology. 217 00:19:24.600 --> 00:19:30.360 This procedure will not only secure it against many fallacious criticisms, but clarify many 218 00:19:30.360 --> 00:19:49.640 3. Economic Theory and the Practice of Human Action 219 00:19:49.640 --> 00:19:55.940 It is customary for many people to blame economics for being backward. Now it is quite obvious 220 00:19:55.940 --> 00:19:59.200 Notice that our economic theory is not perfect. 221 00:19:59.200 --> 00:20:04.160 There is no such thing as perfection in human knowledge, nor, for that matter, in any other 222 00:20:04.160 --> 00:20:05.940 human achievement. 223 00:20:05.940 --> 00:20:08.980 Omniscience is denied to man. 224 00:20:08.980 --> 00:20:14.440 The most elaborate theory that seems to satisfy completely our thirst for knowledge may one 225 00:20:14.440 --> 00:20:18.660 day be amended or supplanted by a new theory. 226 00:20:18.660 --> 00:20:22.300 Science does not give us absolute and final certainty. 227 00:20:22.300 --> 00:20:26.980 It only gives us assurance within the limits of our mental abilities and the prevailing 228 00:20:26.980 --> 00:20:29.620 state of scientific thought. 229 00:20:29.620 --> 00:20:36.100 A scientific system is but one station in an endlessly progressing search for knowledge. 230 00:20:36.100 --> 00:20:41.780 It is necessarily affected by the insufficiency inherent in every human effort. 231 00:20:41.780 --> 00:20:47.300 But to acknowledge these facts does not mean that present-day economics is backward. 232 00:20:47.300 --> 00:20:53.740 It merely means that economics is a living thing, and to live implies both imperfection 233 00:20:53.740 --> 00:20:56.260 and change. 234 00:20:56.260 --> 00:21:01.300 The reproach of an alleged backwardness is raised against economics from two different 235 00:21:01.300 --> 00:21:03.440 points of view. 236 00:21:03.440 --> 00:21:08.640 There are on the one hand some naturalists and physicists who censure economics for not 237 00:21:08.640 --> 00:21:14.300 being a natural science and not applying the methods and procedures of the laboratory. 238 00:21:14.300 --> 00:21:20.900 It is one of the tasks of this treatise to explode the fallacy of such ideas. 239 00:21:20.900 --> 00:21:26.060 In these introductory remarks it may be enough to say a few words about their psychological 240 00:21:26.060 --> 00:21:27.540 background. 241 00:21:27.540 --> 00:21:32.520 It is common with narrow-minded people to reflect upon every respect in which other 242 00:21:32.520 --> 00:21:35.500 people differ from themselves. 243 00:21:35.500 --> 00:21:40.820 The camel in the fable takes exception to all other animals for not having a hump, and 244 00:21:40.820 --> 00:21:46.380 The Ruritanian criticizes the Laputanian for not being a Ruritanian. 245 00:21:46.380 --> 00:21:52.140 The research worker in the laboratory considers it as the sole worthy home of inquiry and 246 00:21:52.140 --> 00:21:58.700 differential equations as the only sound method of expressing the results of scientific thought. 247 00:21:58.700 --> 00:22:04.540 He is simply incapable of seeing the epistemological problems of human action. 248 00:22:04.540 --> 00:22:09.900 For him, economics cannot be anything but a form of mechanics. 249 00:22:09.900 --> 00:22:14.740 And there are people who assert that something must be wrong with the social sciences because 250 00:22:14.740 --> 00:22:18.140 social conditions are unsatisfactory. 251 00:22:18.140 --> 00:22:23.500 The natural sciences have achieved amazing results in the last two or three hundred years, 252 00:22:23.500 --> 00:22:28.460 and the practical utilization of these results has succeeded in improving the general standard 253 00:22:28.460 --> 00:22:31.500 of living to an unprecedented extent. 254 00:22:31.500 --> 00:22:37.340 But, say these critics, the social sciences have utterly failed in the task of rendering 255 00:22:37.340 --> 00:23:00.540 These grumblers do not realize that the tremendous progress of technological methods of production 256 00:23:00.540 --> 00:23:06.380 and the resulting increase in wealth and welfare were feasible only through the pursuit of 257 00:23:06.380 --> 00:23:13.020 of those liberal policies which were the practical application of the teachings of economics. 258 00:23:13.020 --> 00:23:18.940 It was the ideas of the classical economists that removed the checks imposed by age-old 259 00:23:18.940 --> 00:23:26.020 laws, customs and prejudices upon technological improvement, and freed the genius of reformers 260 00:23:26.020 --> 00:23:31.520 and innovators from the straitjackets of the guilds, government tutelage and social pressure 261 00:23:31.520 --> 00:23:33.780 of various kinds. 262 00:23:33.780 --> 00:23:39.660 It was they that reduced the prestige of conquerors and expropriators and demonstrated the social 263 00:23:39.660 --> 00:23:43.140 benefits derived from business activity. 264 00:23:43.140 --> 00:23:48.100 None of the great modern inventions would have been put to use if the mentality of the 265 00:23:48.100 --> 00:23:54.160 pre-capitalistic era had not been thoroughly demolished by the economists. 266 00:23:54.160 --> 00:24:00.140 What is commonly called the industrial revolution was an offspring of the ideological revolution 267 00:24:00.140 --> 00:24:03.920 brought about by the doctrines of the economists. 268 00:24:03.920 --> 00:24:10.600 The economists exploded the old tenets, that it is unfair and unjust to outdo a competitor 269 00:24:10.600 --> 00:24:16.600 by producing better and cheaper goods, that it is iniquitous to deviate from the traditional 270 00:24:16.600 --> 00:24:22.920 methods of production, that machines are an evil because they bring about unemployment, 271 00:24:22.920 --> 00:24:27.520 that it is one of the tasks of civil government to prevent efficient businessmen from getting 272 00:24:27.520 --> 00:24:33.540 to become rich and to protect the less efficient against the competition of the more efficient. 273 00:24:33.540 --> 00:24:38.720 That to restrict the freedom of entrepreneurs by government compulsion or by coercion on 274 00:24:38.720 --> 00:24:45.600 the part of other social powers is an appropriate means to promote a nation's well-being. 275 00:24:45.600 --> 00:24:52.480 British political economy and French physiocracy were the pacemakers of modern capitalism. 276 00:24:52.480 --> 00:24:58.140 It is they that made possible the progress of the natural sciences that has heaped benefits 277 00:24:58.140 --> 00:25:00.120 upon the masses. 278 00:25:00.120 --> 00:25:05.400 What is wrong with our age is precisely the widespread ignorance of the role which these 279 00:25:05.400 --> 00:25:12.340 policies of economic freedom played in the technical evolution of the last 200 years. 280 00:25:12.340 --> 00:25:17.940 People fell prey to the fallacy that the improvement of the methods of production was contemporaneous 281 00:25:17.940 --> 00:25:22.340 with the policy of laissez-faire only by accident. 282 00:25:22.340 --> 00:25:27.980 Deluded by Marxian myths, they consider modern industrialism an outcome of the operation 283 00:25:27.980 --> 00:25:35.540 of mysterious, productive forces that do not depend in any way on ideological factors. 284 00:25:35.540 --> 00:25:40.820 Classical economics, they believe, was not a factor in the rise of capitalism, but rather 285 00:25:40.820 --> 00:25:44.580 its product, its ideological superstructure. 286 00:25:44.580 --> 00:25:51.220 That is, a doctrine designed to defend the unfair claims of the capitalist exploiters. 287 00:25:51.220 --> 00:25:56.260 Hence the abolition of capitalism and the substitution of socialist totalitarianism 288 00:25:56.260 --> 00:26:03.020 for a market economy and free enterprise would not impair the further progress of technology. 289 00:26:03.020 --> 00:26:08.780 It would, on the contrary, promote technological improvement by removing the obstacles which 290 00:26:08.780 --> 00:26:13.740 the selfish interests of the capitalists place in its way. 291 00:26:13.740 --> 00:26:19.100 The characteristic feature of this age of destructive wars and social disintegration 292 00:26:19.100 --> 00:26:22.140 is the revolt against economics. 293 00:26:22.140 --> 00:26:28.480 Thomas Carlyle branded economics a dismal science, and Karl Marx stigmatized the economists 294 00:26:28.480 --> 00:26:31.260 as the sycophants of the bourgeoisie. 295 00:26:31.260 --> 00:26:37.160 Quacks, praising their patent medicines and shortcuts to the earthly paradise, take pleasure 296 00:26:37.160 --> 00:26:41.980 in scorning economics as orthodox and reactionary. 297 00:26:41.980 --> 00:26:47.380 Demagogues pride themselves on what they call their victories over economics. 298 00:26:47.380 --> 00:26:52.640 The practical man boasts of his contempt for economics and his ignorance of the teachings 299 00:26:52.640 --> 00:26:55.300 of armchair economists. 300 00:26:55.300 --> 00:27:00.060 The economic policies of the last decades have been the outcome of a mentality that 301 00:27:00.060 --> 00:27:06.820 scoffs at any variety of sound economic theory and glorifies the spurious doctrines of its 302 00:27:06.820 --> 00:27:08.580 detractors. 303 00:27:08.580 --> 00:27:14.220 What is called orthodox economics is in most countries barred from the universities and 304 00:27:14.220 --> 00:27:19.660 is virtually unknown to the leading statesmen, politicians and writers. 305 00:27:19.660 --> 00:27:25.020 The blame for the unsatisfactory state of economic affairs can certainly not be placed 306 00:27:25.020 --> 00:27:31.460 upon a science which both rulers and masses despise and ignore. 307 00:27:31.460 --> 00:27:36.860 It must be emphasized that the destiny of modern civilization as developed by the white 308 00:27:36.860 --> 00:27:44.020 Peoples in the last 200 years is inseparably linked with the fate of economic science. 309 00:27:44.020 --> 00:27:49.060 This civilization was able to spring into existence because the peoples were dominated 310 00:27:49.060 --> 00:27:54.680 by ideas which were the application of the teachings of economics to the problems of 311 00:27:54.680 --> 00:27:56.860 economic policy. 312 00:27:56.860 --> 00:28:03.020 It will and must perish if the nations continue to pursue the course which they entered upon 313 00:28:03.020 --> 00:28:08.180 under the spell of doctrines rejecting economic thinking. 314 00:28:08.180 --> 00:28:14.100 It is true that economics is a theoretical science, and as such abstains from any judgment 315 00:28:14.100 --> 00:28:15.580 of value. 316 00:28:15.580 --> 00:28:20.060 It is not its task to tell people what ends they should aim at. 317 00:28:20.060 --> 00:28:25.940 It is a science of the means to be applied for the attainment of ends chosen, not, to 318 00:28:25.940 --> 00:28:30.340 be sure, a science of the choosing of ends. 319 00:28:30.340 --> 00:28:37.340 Decisions, the valuations and the choosing of ends are beyond the scope of any science. 320 00:28:37.340 --> 00:28:40.660 Science never tells a man how he should act. 321 00:28:40.660 --> 00:28:46.980 It merely shows how a man must act if he wants to attain definite ends. 322 00:28:46.980 --> 00:28:51.840 It seems to many people that this is very little indeed, and that a science limited 323 00:28:51.840 --> 00:28:57.860 to the investigation of the is and unable to express a judgment of value about the highest 324 00:28:57.860 --> 00:29:02.820 and Ultimate Ends is of no importance for life and action. 325 00:29:02.820 --> 00:29:05.020 This too is a mistake. 326 00:29:05.020 --> 00:29:10.660 However, the exposure of this mistake is not a task of these introductory remarks. 327 00:29:10.660 --> 00:29:14.460 It is one of the ends of the treatise itself. 328 00:29:14.460 --> 00:29:16.060 4. 329 00:29:16.060 --> 00:29:20.220 Resume It was necessary to make these preliminary 330 00:29:20.220 --> 00:29:25.780 remarks in order to explain why this treatise places economic problems within the broad 331 00:29:25.780 --> 00:29:29.620 A broad frame of a general theory of human action. 332 00:29:29.620 --> 00:29:34.740 At the present stage, both of economic thinking and of political discussions concerning the 333 00:29:34.740 --> 00:29:40.440 fundamental issues of social organization, it is no longer feasible to isolate the treatment 334 00:29:40.440 --> 00:29:43.560 of catalactic problems proper. 335 00:29:43.560 --> 00:29:49.060 These problems are only a segment of a general science of human action, and must be dealt 336 00:29:49.060 --> 00:29:50.340 with as such.