“Human Action” and “Praxeology”.
Some considerations about the foundational econcepts of the Austrian School
Different from the approaches that dominate large parts of modern economics, Austrian economics is based on the concept of “human action”. As Ludwig von Mises declared in his Notes and Recollections, “what distinguishes the Austrian School and will lend it everlasting fame is its doctrine of economic action, in contrast to one of economic equilibrium or nonaction.”
Mises called his approach “praxeology”. Praxeology puts economics on a new footing with its basis in the principles of human action. As such Austrian economics confronts human action in its full complexity. This research program aims at nothing less than to create a general theory of society based on the principles of human action.
The challenge is to substitute or at least to reduce the prevalent deterministic and reductionist methodologies of the social sciences by a paradigm that studies human action in the context of the complexity of its social and physical environment. Praxeology stands in contrast to behaviorism and positivism which is not mere methodologies but provides the intellectual basis of the modern interventionist welfare-state and its anti-liberty consequences.
Human action is different from behavior. Behavior is deterministic or probabilistic. It leaves no or very little room for proper human decision-making. In the context of the concept of the homo economicus, the rationality of the logic of choice is contained in the premises of the setting. Modern microeconomics reduces rationality to mathematical implications, and when de facto human behavior deviates from this postulate, the model makers must claim irrationality of the agents, which, in turn automatically calls for the intervention of the authorities to “correct” this “false” behavior.
It is different with human action. The concept of human action implies freedom of choice. It is the choice of purposes and means that distinguishes human beings from nature and the animal kingdom. The pursuit of purposes through the systematic application of means is the fundamental characteristic of human existence, and this is captured by the concept of “human action”.
Our main categories of thinking are also contained in the concept of human action. Inherent in the concept of human action are the categories of purpose and means, profit and loss, pleasure and pain, time and sequence, past and present.
Human action is:
- conscious action
- tautologically rational
- valuation based on subjective meaning
- intentional specific valuation
- active choice
- centered in the personal “I”
- sequential in time and space
- Human action is imperfect and incomplete
- Human thinking is interior action
- is imperfect and incomplete (like human thinking).
Instead of striving towards more drastic reductionism and simplifications, as it is characteristic of the modern social sciences, Austrian economics takes up the challenge to deal with the complexity of the economic reality and the contingency of human action. In this respect, Austrian economics is more modern than the other economic schools despite the fact that Austrian economics is also one of the oldest, maybe the oldest school of economics.
The so-called “classical economics”, particularly the economics of David Ricardo and his successors presumed that in order for economics to become “scientific”, it must be as formalistic and consequently deterministic as the physics of Isaac Newton. In the meantime, however, modern natural science has gone far beyond the Newtonian paradigm. Nevertheless, the reductionist and deterministic foci still characterize the endeavors of the economics profession. One of the consequences of this kind of research is that its results are often useless and, worst of all, the recipes derived from deterministic economics are not adequate for our current problems and often harmful.
By being based on the principles of human action, Austrian economics is not only modern in the methodological sense, it also modern in the choice of the objects of its research. Different from the schools of economics that study markets in a deterministic fashion with the aim to discover the features of a dead point called “equilibrium”, Austrian economics studies markets as a process and does discard “optimizing behavior” in favor of purposeful human action. Capturing economic action in its dynamic complexity is the guiding principle of investigation in the tradition of the Austrian School.
In the view of Austrian economics, the essence of the economy is not given by the interplay of aggregates, but economic phenomena are inherently facts of human action. This way and long before it became seen as a necessity by other schools of economics, it has always been clear for Austrian economics that macroeconomics needs a micro-foundation.
Different from behaviorism, human activity is a conscious activity in the perspective of praxeology. This consciousness of the actor is located in the individual’s existence as a person who is conscious of himself. Behavioral approaches tend to eliminate consciousness and individuality. Behavioral social science attempts to reduce human activity to mechanistic processes and thereby, together with consciousness and individuality, this approach also eliminates liberty of choice and consequently responsibility.
In the perspective of praxeology, human action is purposeful. Individuals have aims that they try to obtain and for that purpose, they apply (more or less adequate) means. Human action is always means-ends oriented. It is an active choice of both purpose and means with both of these based on subjective valuation. In this sense, “capital” a praxeological category.
Utility is intentionally specific. In this sense, human action is tautological rational. Human action is based on conscious evaluation. This does not exclude that ends as well as means could be badly chosen and that means could be wrong in the technical sense or that the purpose is false by specific external standards.
Human thinking is interior human action. Both are imperfect and incomplete. Rather than the exception, shortcomings of thoughts and deeds are essential to the human condition. In fact, these shortcomings of thought and deed are essential to human existence and represent the motor of social progress that moves humankind from one pace of trial and error to the next step of trial and error in order to eliminate one state of dissatisfaction after the other in a lifelong process that only ends with the death of the individual.
In contrast to the behavioral approach in the social sciences, which promotes interventionism at the personal and collective level, the theory of human action is a doctrine of freedom of choice, of individual endeavor and of personal responsibility. Praxeology is a doctrine that does not claim paranormal powers for human beings such as the certainty of omniscience.
As a paradigm for the social sciences, praxeology represents an approach based on realism, the recognition of complexity and that life is full of contingencies and uncertainties. Praxeology holds that logic holds in the same way for every human being but that individual values differ.