Praxeology

Praxeology is the study of the aspects of human action that are arrived at by reason based on theory, rather than from observation. Praxeology is based on the idea that humans have purposes or goals that guide their actions, as opposed to reflexive actions that do not move one toward goals.

The basics of praxeology were discussed by Greek philosophers and expanded upon over the centuries. Prominent economists and philosophers have developed praxeology from the late nineteenth century forward. Twentieth-century Austrian economist and social philosopher Ludwig von Mises (1881–1973) coined the term praxeology, and it is the methodology used by the Austrian School of economics.

Background

Ludwig Heinrich Edler von Mises was born September 29, 1881, in Lemberg (modern Lviv, Ukraine) in the region of Galicia. His father was a Viennese construction worker who was working on the Austrian railroads. Mises began higher education at the University of Vienna in 1900. When Mises read Carl Menger’s Principles of Economics, he began to look at individual actions in analyzing economic theory and developed an appreciation for the free-market economy. Menger was the founder of Austrian economics, whose ideas about goods and value influenced Mises and others. Menger believed that the value of goods is based not on the labor that goes into making them, but rather on the importance of their usefulness, or the ability of the goods to satisfy needs of varying importance.

Mises next earned a law degree and worked in a law firm. He remained interested in economics and lectured on the topic. In 1912 Mises published The Theory of Money and Credit. He integrated the theory of money into the general theory of marginal utility and price. His contemporaries disagreed with his theories, and so Mises founded his own school of economic theory. He strongly opposed socialism, interventionism, and governmental manipulation of currency.

Mises’s theories, developed during the 1920s, predicted the banking panic and the Great Depression (1929–1939) that followed the growth of the decade. While many economists, including those at the London School of Economics, paid attention to Mises’s theories, his ideas fell out of favor during the mid- to late-1930s. Instead, British economist John Maynard Keynes’s theories gained traction and became the twentieth-century standard of economic thought.

Mises’s monetary theory held that more money does not benefit society. Increased currency and credit cause inflation and business cycles. He advocated for a 100 percent gold standard or the equivalent. He also held that by expanding credit, banks cause malinvestment, meaning they encourage business to overinvest in higher orders, such as machine tools, and underinvest in consumer goods. The inevitable recession caused by an inflationary boom, he believed, forces the market to liquidate unsound investments and rebalance to meet the needs and demands of consumers.

Mises was teaching at the University of Vienna while also serving as an economist for the Vienna Chamber of Commerce and the chief economic adviser to the Austrian government. As a Jew, he was concerned about his future as Nazis gained power and influence. He moved to Geneva, Switzerland, where he was a professor at the Graduate Institute of International Studies. He emigrated to the United States in 1940, taking up residence in New York City.

His first two books in English were well-received. He published both Omnipotent Government and Bureaucracy in 1944. He further explained his theories of praxeology in his 1949 book, Human Action. It proved to be highly influential over time, despite the dominance of Keynes’s theories.

His last major work, Theory and History, was published in 1957. Meanwhile, he was a visiting professor at New York University from 1945 to 1969, when he retired at age 88. Mises died in New York City on October 10, 1973, at the age of 92. Llewellyn Rockwell Jr. founded a libertarian academic organization, the Ludwig von Mises Institute in Auburn, Alabama, in 1982, to further share Mises’s ideas, in particular his writings and teachings on praxeology.

Overview

Praxeology describes a field of study involving the sciences of human action. The modern fields of anthropology, economics, political science, and sociology would be regarded as sciences of human action. Mises believed economics, which he called catallactics, or “the science of exchange,” was the most well-developed science within praxeology.

The basic truth of praxeology in economics is that people act and have logical reasons for doing so. This is known as the action axiom. Each individual, however, has unique ideas and needs, and therefore has unique reasons for acting. Many actions are taken with economic benefits in mind, while others are based on individuals’ values—for example, human beings often place a value on leisure, and may act to achieve more leisure time or activities.

According to the action axiom, action implies purpose. The fact of action suggests the actor has decided to pursue the goal through the action. The actor must value the goal and must have values that influence their choices. Taking action suggests that the actor believes that the act will take them closer to achieving a goal. This latter point—the actor’s belief in the correctness of the action—is what praxeology endorses. Praxeology does not pass judgment on the wisdom or propriety of the actor or the act.

According to praxeology, acts in the present are taken to achieve goals in the future. This may be the near or far future; either indicates that a person recognizes that attaining goals requires effort. Making this effort suggests that individuals believe action will effect change, and the result will be preferable to taking no action. Action also suggests that humankind cannot see the future. Otherwise, people would have no reason to act, because their actions would have no effect. Action suggest the world and the future are uncertain.

The theory of praxeology also includes scarcity and abundance. If the means of achieving a goal are scarce, action is required. If the means are overabundant, the goal would already have been achieved, and the resources would no longer be means. In a perfect world, in which everyone could have what they wanted immediately, the one resource that would continue to be scarce is time. If an individual devotes time to one goal, that person’s finite time is not devoted to another purpose.

Bibliography

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