Pat Gunning wrote:  
>I maintain that the subject matter of economics   
>so conceived is economic interaction -- how   
>people act under the conditions of a market   
>economy -- private property rights, free   
>enterprise, and the use of money. (It is also   
>about how people act when these conditions are   
>only partly present and when some sort of   
>government policy alters the conditions that   
>would otherwise be present. But the study of   
>economic interaction under these conditions   
>comes later. The starting point is the study of   
>economic interaction, as defined.) So the first   
>point we must establish is whether you agree   
>that the study of this subject is worthwhile.  
>  
>If we can agree on this, we can go on to deal   
>with the issue of the meaning of action and of   
>how to build an epistemological basis of studying it.  
  
  
It is, indeed, at the level of epistemology that   
Mises errs, and if this is wrong everything is   
wrong. He tried to make economics a speculative   
science rather than a practical one. Speculative   
science deals with universal and non-contingent   
reality (such as mathematics), while practical   
science deals with  contingent reality, or as we   
say now, with the empirical world. This critique,   
by the way, is available from within Austrian   
economics itself by no less than Hayek. Consider   
the following, sent to me by a reader of this list:  
  
http://www.cato.org/pubs/policy_report/cpr-5n2-hayek.html  
"PR: Professor Hayek, when did you realize the   
important incentive and information functions played by market prices?  
  
Hayek: Well, it's a very curious story, in a way,   
that I was led to put the emphasis on prices as a   
signal of what to do. It was an essay I wrote in   
1936 called "Economics and Knowledge." That was   
originally written to persuade my great friend   
and master, Ludwig von Mises, why I couldn't   
accept all of his teaching. The main topic of the   
essay was to show that while it was perfectly   
true that what I called the logic of   
choice--analysis of individual action--was, like   
all logic, an a priori subject, Mises' contention   
that all the analysis of the market was an a   
priori thing was wrong, because it de-pended on   
empirical knowledge. It depends on the problem of   
knowledge being conveyed from one person to another.  
  
Now, curiously, Mises, who was so very resentful   
generally of critiques by his pupils, even   
praised my article, but he never seemed to   
recognize to what extent it meant a diversion   
from his own fundamental conception. And I never   
got him to admit what I really imagined to be the   
case, that I refuted his contention that the   
analysis of the market economy was an a priori   
function, that it was a fully empirical matter.   
What was a priori was a logic behind it--a logic   
of individual action--that when you pass from the   
action of one individual, there occurs a causal   
process of one person acting upon another and   
learning. And this could never be a priori. This   
must be empirical. And pursuing this thought is   
how it started. This led me to investigate how   
important the prices forming on the market were   
as guides to individual action. And it is since   
that date, since what originally was a criticism   
of my master, Mises, that I have developed this   
idea of the guide function of prices which 1   
regard as more and more important, which I have   
applied in its effect on price fixing, on rent   
restriction, on capital investment."  
  
Of course, I would disagree with Hayek that   
action is an "a priori" from the world of   
universals; it clearly belongs to praxis, and   
hence to practical reason. But even accepting the   
a priori of action, one still has to accept the   
praxis of interaction, which is Hayek's point.   
And as much as you might object, I have to insist   
that these are matters within the competence of   
philosophy, and a "Treatise on Economics" is   
insufficient to settle the case; one needs to   
subject one's inquiry to the discipline of   
philosophy. It seems clear to me that Mises did   
not understand the distinction between   
speculative and practical reason and that his a   
prioris are not in any sense the self-evident   
propositions (e.g., "The Principle of   
Non-Contradiction") required by speculative   
science. Speculative science has its own   
requirements, and praxeology simply does not meet   
them. Hence, the system is neither speculative   
nor practical. Hence, it is not science at all.  
  
Further, I must disagree with your definition of   
economics. It seems to me that you have merely   
defined capitalist economics. I prefer   
Heilbronner's definition, by which economics is   
the study of how societies handle their material   
provisioning. This allows us to study economics   
in general across a variety of cultures and   
historical moments, and also gives a purpose, a   
telos, to economics and hence a way to make   
meaningful judgements about  the effectiveness of economics systems.  
  
  
John C. Medaille