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Praxeology and Understanding: An Analysis of the Controversy in Austrian Economics – Austrian economics faces the challenge of skepticism. GLS Shackle has suggested that economic laws aren’t really useful because the economy is typified by patternless “kaleidic” change. Some Austrians have adopted this view as well on some level.
Praxeology: The Method of Economic Theory – Economic laws come from logically deducing from the action axiom, which is undeniable.
Ideal Types and “Exact Laws” – Praxeological laws are true regardless the specific content of people’s preferences or the specific circumstances in which they find themselves. The question is simply whether they apply in a specific case or not. This means that praxeological laws cannot be “exact” (in the sense of being numerically precise). We may use ideal types to fill in some “common sense” preferences and so on when doing historical work. However, Mises draws a sharp distinction between history and theory. Theory is purely the logic of choice. History allows for (and requires) consideration of specific preferences and interpretations of situations.
From Mises to Lachmann: Austrian Revisionism – Three thinkers led some Austrians to question the value of praxeological reasoning. (1) Hayek suggested that praxeology by itself provides very little real-world insight, and suggested supplementing it with “common sense” assumptions about the content of preferences. (2) Shackle focused on the importance of uncertainty – but in a radical form. In the strong form, Shackle’s view is that economics cannot deal with the “kaleidic” nature of the future. In this, Shackle confuses determinism in concrete application with determinism in logical patterns. (3) Lachmann emphasizes the need to deal with “divergent expectations”. Profit and loss provide good feedback for past expectations – but provide little guidance for future expectations.
Equilibration and Coordination – the praxeological understanding of equilibration is really just about the removal of a felt uneasiness. So, while we may never reach “equilibrium” (a state where there is no felt uneasiness), action is equilibrating in as far as it is successful. But, to be successful requires foresight. If the future is “kaleidic” (that is, basically unpredictable), then there is no reason to expect that action will generally be successful. The claim from Shackle and Lachmann is that human action is radically unpredictable. So, in as far as my action being successful requires the action of others, there is no reason to expect that it will be successful.
Implications of the Kaleidic Society – In short: praxeology can’t really “prove” that society isn’t kaleidic. Rather, what it can prove is that a kaleidic society is one where action doesn’t really happen in any meaningful sense. If the future is kaleidic, then one can’t really undertake purposeful behavior – that is, action – in any meaningful sense. Since there is no clear connection between our behavior and the effects of our behavior, we will never be able to remove any specific felt uneasiness except by pure chance. In addition, the advocates of the kaleidic view have failed to explain their own bothering to engage in economic theorizing. If the future is kaleidic, then engaging in economic research can’t be expected to serve any particular purpose. So, why do it? Rather, their own behavior suggests that those that claim to believe in a kaleidic future don’t actually believe in it in any practical sense.