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