Reflections on Presenting at the Southern Economic Association/Society for the Development of Austrian Economics Conference of 2023

 I believe this year's conference was the last one I will attend. It's not so much that it was a waste of time and money, but that I very much doubt that I have another paper in me. In fact, there was only a mass of paragraphs underlying my presentation, not a paper.

The title of my presentation was "Biophilosophy and Praxeology" in which I made many assertions that I expected would be challenged or at least would produce a request for elaboration in the Q&A period. As there was only 15 minutes for the presentation, you can imagine that many things were glossed over, including the apriorism that is surfacing in biophilosophy and the idea that Ludwig von Mises should have looked to biology rather than philosophy for the source of his apriorism. In fact, when I would wake up in the middle of the night, I spent a lot of time thinking about how I would address the vast array of possible questions that would require deeper explanations of my thinly supported assertions.

At the very end of the paper there is a short example of how an a priori concept in biology, metabolism and the requirement of binding and releasing energy (Mayr), could lead to the creation of goods and the process of evolution that Menger described in development of money. For some reason, this example became the exclusive focus of questioning by the session organizer and then, in open discussion, by other participants. I was corrected from the floor that the definition of money is the generally accepted means of exchange rather than the most liquid commodity.

In addition, there was very little follow-up after the end of the session in which people like to engage in private discussion. Apparently, nobody liked it, and nobody hated it—a non-event. At the SDAE dinner one student said he liked the presentation and found it interesting.

Note that no one told me that I was rehashing old material that was more clearly or rigorously presented in the past or had misinterpreted the material I was citing. Perhaps it was the emphasis that this year seemed much more empirical than in previous years. Maybe there simply is no interest in rescuing the apriorism of the Misesian program of praxeology from the evolutionary empirical emphasis that dominates the Hayekian mind set.

It only remains for me to seek an alternative path, possibly through the biophilosophers. Do I have confidence of a different result in that direction? Who knows—pigs may fly!

Mass Psychosis

 An amazing video showed up on my Facebook feed today! It is called MASS PSYCHOSIS - How an Entire Population Becomes MENTALLY ILL. If you have 22 minutes (11 minutes at 2X), you might want to watch it now.

Assuming you have watched it, you probably noticed that the graphics implied the target psychosis was what might be called COVID mania. In my view, COVID mania is a mass psychosis, but so are the other "issues" that are driving the political narrative, including the immigration debate. But this is all politics offers us—one mass psychosis after another. We can call the two current most virulent strains The Great Reset Psychosis—which includes COVID mania and catastrophic climate change—and the MAGA Psychosis—which includes anti-immigration, China demonization, protectionism, and the belief that only Donald Trump can provide the antidote to the Great Reset Crisis.

That being said, those who suffer from these psychoses will most likely see the insanity of their opposition and deny that of their own. It takes a big person to realize their own behavior as insane. The real problem is that, having recognized that insanity, it is unlikely that the revelation will cause them to adopt a libertarian, classical liberal, or "live and let live" position, as politics virtually demands the adoption of a psychosis.

As long as people believe that the existence of the state is a benefit, and that it must be governed through politics, there will be no end of psychoses followed by death and destruction. 

Karl Popper's Three Worlds and "The Market"

Introduction

Talking about "the market" in a more generalized way – that is, one which includes all of the living world and nonconsensual interactions that occur between humans and between species – requires increased semantic clarity. In order to achieve this increased clarity Karl Popper's three worlds can be used as a model. After introducing a terminology that parallels that of Popper its potential utility is discussed.

Three Worlds, Three Markets

English: Karl Popper in 1990. (Photo credit: Wikipedia)

In discussing "the market" it is difficult to transmit a number of different meanings that depend on the context, e.g., one that is consensual vs. nonconsensual or one that is human versus one that is inter-species. These different meanings are reminiscent of Popper's three worlds, and his concepts are used to introduce a parallel analog relating to markets.

Firstly, there is the market that is composed of the physical world. As Popper says, in describing world 1:

There is, first, the world that consists of physical bodies: of stones and of stars; of plants and of animals; but also of radiation, and of other forms of physical energy. I will call this physical world ‘world 1’. (1978, 143)

This market consists of all of the interactions, physical and/or chemical, that occur in the physical world. These interactions, as far as we know, are not guided by conjectural knowledge. This physical market is called "market 1".

Market 1 can be subdivided into the living and non-living, as Popper suggests:

If we so wish, we can subdivide the physical world 1 into the world of non-living physical objects and into the world of living things, of biological objects; though the distinction is not sharp. (1978, 143)

Secondly, there is the market of conjectural knowledge. This description might be thought to augment Popper's world 2, which he described as follows:

There is, secondly, the mental or psychological world, the world of our feelings of pain and of pleasure, of our thoughts, of our decisions, of our perceptions and our observations; in other words, the world of mental or psychological states or processes, or of subjective experiences. I will call it ‘world 2’. (1978, 143)

Popper's view is expanded to include the conjectural knowledge encoded in DNA or any similar, yet-to-be-discovered encoding system. This market is called "market 2".

Again, market 2 can be subdivided following Popper's prescription:

World 2 could be subdivided in various ways. We can distinguish, if we wish, fully conscious experiences from dreams, or from subconscious experiences. Or we can distinguish human consciousness from animal consciousness. (1978, 143)

Thirdly, there is the market of expressed knowledge. This market consists of the actions taken based on the conjectural knowledge of market 2. Popper describes world 3 as follows:

By world 3 I mean the world of the products of the human mind, such as languages; tales and stories and religious myths; scientific conjectures or theories, and mathematical constructions; songs and symphonies; paintings and sculptures. But also aeroplanes and airports and other feats of engineering. (1978, 144)

In striking contrast to his descriptions of worlds 1 and 2, Popper includes only "the products of the human mind" (emphasis added). Omitting the non-human expressed knowledge of plants and animals, including everything from the behavior of the E. coli bacterium (Cziko, 1995, 120) to the engineering feats of the Great Sequoias and honey bees, clearly damages the consistency of the discussion if nothing else. As Popper might agree, these expressions of world 2 cannot be criticized without becoming objects in world 3, where criticism is based on evolutionary fit. Notably, this form of criticism also affects world 2 as Popper framed it, culling those living systems whose conjectural knowledge is not up to the task.

With the addition of these non-human components this market is called "market 3". Clearly, the human component of market 3 is where business plans are exposed to the criticisms of consumers, with the result that the objects that appear in market 1 will be created and the conjectural knowledge of market 2 will be modified.

Popper suggests some subdivisions to world 3:

It would be easy to distinguish a number of different worlds within what I call world 3. We could distinguish the world of science from the world of fiction; and the world of music and the world of art from the world of engineering. (1978, 144)

Market 3 contains some additional markets – the markets of successful and unsuccessful expressed knowledge, and the markets of voluntarily and involuntarily expressed knowledge. These distinctions are blurred and the two sets definitely overlap.

Conclusion

Where does the forgoing discussion get us? Most importantly, it enables us to talk about society in a non-religious way that unifies it with the rest of the living world. With it we become aware of a wider range of questions that are rarely even asked. Why is killing animals or plants acceptable while killing humans is not? Why is the killing of some humans supported or even demanded? Why is the enslaving of animals widely practiced while enslaving humans is considered barbarous? Would a super-human species treat us more like we treat animals or more like we treat each other?

Without an ability to explore these questions in a value-free manner we cannot identify man's position in the universe and investigate what environment is most conducive to his flourishing. Hopefully, we will also be able to discern the difference between conjectural knowledge that is universally applicable and that which is dependent on time and place.

Bibliography

Cziko, G. (1995). Without Miracles: Universal Selection Theory and the Second Darwinian Revolution. Cambridge, MA: The MIT Press.
Popper, K. R. (1978), "Three Worlds", In The Tanner Lecture on Human Values (Delivered at The University of Michigan on April 7, 1978). (pp. 143-167). Retrieved November 26, 2013 from http://www.tannerlectures.utah.edu/lectures/documents/popper80.pdf.

In Support of Methodological Monism

The appeal of methodological monism – as Popper put it, "the view that all theoretical or generalizing sciences make use of the same method, whether they are natural or social sciences" (1957, 130) – seems undeniable (think Occam's Razor), and it has a number of supporters.¹ On the other hand, some in the social sciences – notably members of the Austrian school of economics – suggest methodological dualism or, in the case of Bruce Caldwell (Caldwell, 1982), even methodological pluralism. It appears that these different camps are difficult to reconcile, and to this point no resolution has been found.

English: Karl Popper in 1990. (Photo credit: Wikipedia)

When difficulties of this sort arise – where there exist multiple views, all seemingly reasonable, yet
irreconcilable – it is possible that a solution may be found in appealing to a higher level of abstraction. In this case we look to Karl R. Popper's formalization of the scientific method in the following schema (Popper, 1972, 119):

P₁ → TT → EE → P₂

Where P₁ is the initial problem state, TT is a tentative solution or theory, EE is the error-elimination process applied to the theory, and P₂ represents the new problem state that has been generated by the process. This concise representation is simply that of a Darwinian or evolutionary approach to knowledge.

In this discussion our focus is on the error-elimination step. If one thinks of Popper's formulation as "the method", the error-elimination step may be modified as circumstances warrant without altering that method. Popper also referred to this step as "attempted elimination through critical discussion" (1999, 13-4). To acquire new knowledge, we always use this method, substituting the appropriate critical component.² With this understanding we may actually suggest that Bruce Caldwell is a methodological monist, as he specifically states that his reason for supporting methodological pluralism is that theories require different forms of criticism (Caldwell, 1982, 1-2).

English: Ludwig von Mises in his library (Photo credit: Wikipedia)

Ludwig von Mises, a strong advocate of methodological dualism (1969, 1-2),³ presents a slightly more difficult case. His dualism differentiated the method in the social sciences from that of the physical sciences by asserting that its axioms were a priori true,⁴ and that criticisms of the logic used to deduce its theorems were the best method of refuting them. A clarification of Mises's approach (Smith, 1996),
 explicity identifying and defending its axioms as synthetic rather than analytic, has tied it more closely to the real world. This clarification has increased the credibility of the approach even though tentative theories, in Popper's view, need no justification. To illustrate Mises's emphasis on criticism we offer the following quote:

Man is not infallible. He searches for truth – that is, for the most adequate comprehension of reality as far as the structure of his mind and reason makes it accessible to him. Man can never become omniscient. He can never be absolutely certain that his inquiries were not misled and that what he considers as certain truth is not error. All that man can do is submit all his theories again and again to the most critical reexamination. This means for the economist to trace back all theorems to their unquestionable and certain ultimate basis, the category of human action, and to test by the most careful scrutiny all assumptions and inferences leading from this bases to the theorem under examination. It cannot be contended that this procedure is a guarantee against error. But it is undoubtedly the most effective method of avoiding error. (Mises, 1966, 68)

The critical component in the method is composed of the examination of premises and validation of logic.

When viewed in this more abstract light, Mises's method fits Popper's formulation and does not contradict methodological monism. This fact is comforting as we suspect that the idea that there is only one fundamental method of obtaining knowledge is itself an a priori truth.

In a previous post we suggested that Mises was incorrect in claiming that economics was a subject unconnected with any other science, linking the action axiom with Popper's suggestion that "all life is problem solving" and to the science of biology. Here we have claimed that Mises's method fully complies with the scientific method as formulated by Popper, and that it is only the use of an appropriately different approach to error elimination or criticism that differentiates it from the physical sciences. If we have succeeded in our project it seems clear that economic methodology, as described and practiced by Ludwig von Mises, is scientific, and that the resulting discipline of economics is science.

Footnotes

¹ See (Blaug, 1992, 42-47), (Wilson, 1998), and (Cziko, 1995).
² I am grateful to Rafe Champion for bringing this point home.
³ For Mises's discussion of his method see (2003), (1966, 1-142), (1969) and (2006). For discussions by others, see (Boettke, 1998), (Boettke, 2012), (Kirzner, 2001, 69-92), and (Selgin, 1990, 11-18),
⁴ Mises recognized the observational, i.e. synthetic, component of his axiom (Kirzner, 2001, 88-9).

Bibliography

Blaug, M. (1992). The Methodology of Economics: Or how economists explain (2nd ed.). Cambridge: Cambridge University Press.

Boettke, P. J. (1998). Ludwig von Mises. In J. Davis, D. W. Hands, & U. Mäki (Eds.), The Handbook of Economic Methodology (pp. 534-40). Aldershot: Edward Elgar Publishing. Retrieved October 24, 2013, from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1531088

Boettke, P. J. (2012). Was Mises Right? In P. J. Boettke, Living Economics: Yesterday, today, and tomorrow (pp. 192-212). Oakland, California: The Independent Institute.

Caldwell, B. (1982). Beyond Positivism: Economic Methodology in the Twentieth Century. London: George Allen & Unwin.

Cziko, G. (1995). Without Miracles: Universal Selection Theory and the Second Darwinian Revolution. Cambridge, MA: The MIT Press.

Kirzner, I. M. (2001). Ludwig von Mises. Wilmington, Delaware: ISI Books.

Mises, L. v. (1966). Human Action: A treatise on economics (3rd ed.). Chicago: Henry Regnery.

Mises, L. v. (1969). Theory and History: An interpretation of social and economic evolution. New Rochelle, New York: Arlington House.

Mises, L. v. (2003). Epistemological Problems of Economics (3rd ed.). Auburn, Alabama: Ludwig von Mises Institute.

Mises, L. v. (2006). The Ultimate Foundation of Economic Science: An essay on method (2nd ed.). Indianapolis, Indiana: Liberty Fund.

Popper, K. R. (1957). The Poverty of Historicism. Boston: The Beacon Press.

Popper, K. R. (1972). Epistemology Without a Knowing Subject. In K. R. Popper, Objective Knowledge: An Evolutionary Approach (pp. 106-52). Oxford: Oxford University Press.

Popper, K. R. (1999). The logic and evolution of scientific theory. In K. R. Popper, All Life is Problem Solving (pp. 3-22). London: Routledge.

Selgin, G. A. (1990). Praxeology and Understanding: An analysis of the controversy in Austrian economics. Auburn, Alabama: Ludwig von Mises Institute.

Smith, B. (1996, Spring). In Defense of Extreme (Fallibilistic) Apriorism. Journal of Libertarian Studies, 12(1), 179-192.

Wilson, E. O. (1998). Consilience: The Unity of Knowledge. New York: Alfred A. Knopf.

The GDP Fixation

Every Friday I receive a free investment letter from John Mauldin, an investment advisor who has enough credibility to get on CNBC, hold conferences with top speakers and produce an investment letter read by millions. Recently, he has been harping on GDP (as in GDP = C + I + G + (X-M), where C is consumption, I is investment, G is government spending, X is exports and M is imports). Now, if we accept that increased GDP is good, then any decrease in G is bad. However, some economists disagree and suggest that G should, in fact, be subtracted from the equation, as government spending is spending that people would otherwise forgo or channel into activities other than invading Iraq, bailing out banks or purchasing car companies that have failed to be competitive. Such an economist is Murray N. Rothbard who, in America's Great Depression, describes a measure he calls the Gross Private Product, or GPP. To quote him (pg 224),

In the pleasant but illusory world of "national product statistics," government expenditures on goods and services constitute an addition to the nation's product. Actually, since government's revenue, in contrast to all other institutions, is coerced from the taxpayers rather than paid voluntarily, it is far more realistic to regard all government expenditures as a depredation upon, rather than an addition to the national product. (emphasis in original)

So, Rothbard's equation is

GPP = C + I - G + (X-M)

where G now represents the maximum of government revenues and government spending - the value it extracts from the economy. Rothbard elaborates more on GPP and the reader may want to follow up on his ideas. In fact, I think that Rothbard may be too harsh on government spending, as there is some value produced in some spending - it's just impossible to know what it is as it is not subject to consumer sovereignty or profit and loss.

Now, if Mauldin were like Paul Krugman - that is completely ignorant of the Austrian School of economics and a shill for Democrats - I wouldn't blame him. However, Mauldin does know about the Austrian School and was apparently present when Gary North and Mark Skousen interviewed F. A. Hayek. Mauldin does disagree with the Austrian Business Cycle Theory (ABCT) and has said in his newsletter that he is more inclined to Irving Fisher's views; but how can a thinking person suggest that G - government spending - must not be reduced too quickly as it will lead to a reduction in GDP and further economic pain? Yes, a reduction of government spending will injure some parts of the population, but that capital is then freed up for productive uses. The longer we delay that reduction the greater - and wider - will be the pain.

What Do We Favor?

I have been reading Jeremy Shearmur's Hayek and After: Hayekian liberalism as a research programme (London, Routledge, 1996) and am struck by the recurring discussion about how Hayek's ideas will or will not produce the result he (Hayek) favors. The amazing thing to me is that he favors any particular results, other than the satisfaction of consumer wants. Hayek is the chief proponent of what may be called "spontaneous order" - market-generated order that appears when no central plan is imposed on the market - and one finds it difficult to reconcile that with the idea that any particular outcome may be preferred. It is this very idea of a preferred outcome, especially when uttered by an economist, that supports the interventionism that Hayek generally rejects. This inability to accept market outcomes, no matter how displeasing they might be to your sensibilities, has led to the acceptance of the state or the invention of extra-market moralities by those who could have known better.