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BOOK REVIEW

The Science Called Economics

NOVEMBER 01, 1960 by PERCY L. GREAVES JR.

Mr. Greaves is an economist and free-lance writer.

"It is no part of the task of science to examine ultimate questions or to prescribe values and determine their order of rank…. The sim­pler task of science is to develop a theoretical system of cause-and ­effect relationships enabling us to arrange our action in such a way that we can attain the goals we aim at….

"Metaphysics and science per­form different functions…. They can work side by side without en­mity because they need not dispute each other’s domain as long as they do not misconstrue their own character. A conflict arises only when one or the other attempts to overstep the boundary between them… Reason and science deal only with isolated fragments de­tached from the living whole…. We are unable to grasp the whole by reasoning, but we can experi­ence it in living."

These are the words of Ludwig von Mises as translated by George Reisman in Epistemological Problems of Economics (D. Van Nos­trand Company, 239 pp., $5.50), which first appeared in 1933 under the German title Grundprobleme der Nationalökonomie. In making this basic work available in Eng­lish, Mr. Reisman and his editor, Mr. Arthur Goddard, have per­formed a valuable service for seri­ous students, although in a few cases the translated words are not those Professor Mises would now use. The volume contains eight es­says devoted to the fundamental problems of human knowledge which had to be solved before man’s grasp of economics could be called scientific. They reveal some of the many steps by which the eminent professor reached the con­clusions so succinctly presented in the first two hundred pages of his great treatise, Human Action.

"The purpose of this book," as Mises’ Preface tells us, "is to es­tablish the logical legitimacy of the science that has for its object the universally valid laws of hu­man action, i.e., laws that claim validity without respect to the place, time, race, nationality, or class of the actor…. I considered it essential to reformulate, in this context," he writes, "several basic ideas of economic theory in order to free them of the inconsistencies and confusions that had generally attached to them in previous pre­sentations. I thought it pertinent also to expose the psychological factors that nourish the opposition to the acceptance of economic theory."

The first and longest essay dis­cusses "The Task and Scope of the Science of Human Action." Dr. Mises defines human action as "conscious behavior on the part of a human being."

A man without ideas is inca­pable of seeing any significance in any facts his senses may register. He is thus incapable of acting. Ideas are "always logically prior" to human experience or under­standing, hence they precede hu­man action, and thus action is, by definition, always rational.

This means that "what we know about our action under given con­ditions is derived not from experi­ence, but from reason. What we know about the fundamental cate­gories of action—action, econo­mizing, preferring, the relation­ship of means and ends, and every­thing else that, together with these, constitutes the system of human action—is not derived from ex­perience. We conceive all this from within…. Nor could experience ever lead anyone to the knowledge of these things if he did not com­prehend them from within him­self."

The concept of action implies, as prerequisites, "a state of dissatis­faction," and "the possibility of removing or alleviating it by tak­ing action." In short, the concept of action implies an understanding of cause and effect. The effect that each action is designed to bring about is "the removal of a dis­satisfaction" the actor believes would exist if the action were not undertaken.

"Everyone again and again finds himself confronted with a situa­tion in which his conduct… helps to determine whether or not his goals are attained…. The point at which the science of action be­gins its work is the mutual incom­patibility of individual desires and the impossibility of perfect satis­faction. Since it is not granted to man to satisfy all his desires com­pletely, inasmuch as he can attain one end only by foregoing another… he must choose and value, pre­fer and set aside—in short, act….

"Economic action consists in the endeavor… to satisfy wants as far as the scarcity of means allows…. Goals change, ideas of tech­nology are transformed, but action… always seeks means to realize ends, and it is in this sense always rational and mindful of utility. It is, in a word, human."

In a short review one cannot list all the important points that Dr. Mises makes in his second essay, "Sociology and History," which deals with the basic distinctions and overlappings of history and economic theory.

His careful scalpel exposes the fine points that historians and economists must first grasp before they can add to man’s knowledge of their subjects. He applies the principles of his first essay to show that men cannot even think of his­tory, much less interpret it, with­out first having some ideas about action and causality.

He thus explodes the "naive be­lief that, unprejudiced by any theory, one can derive history di­rectly from the sources." He finds that "no explanations reveal them­selves directly from the facts." Since "history cannot be imagined without theory," the historian must choose between "naive ob­solete theory" and "universally valid propositions about human action."

The shorter essays cover a num­ber of other important points that popular thinking now neglects. In one he distinguishes between "con­ception," which "seeks the mean­ing of action through discursive reasoning," and "understanding “which "seeks the meaning of ac­tion in empathic intuition of a whole." He also points out that "where conception is at all applic­able, it takes precedence over un­derstanding in every respect." For "what has been arrived at by means of conception must be ac­knowledged as established, or else must be shown to be either un­proved or confuted." In short, we never "play a hunch" when our reasoning presents us with an an­swer we consider sound.

We also learn that "using con­cepts of changeable content, one can argue excellently…. However… this is not a need of scientific thought… but the need of politi­cal parties that are unable to justi­fy their programs logically. Today these parties are striving for world dominion with good prospect of success. The masses follow them, the State has handed over all the schools to them, and the literati praise them to the skies." Written thirty years ago, this statement still stands.

Several of the essays present de­tails of man’s slowly developing knowledge of scientific economic thought. Mises cites many of the confusions that led to the popular fallacies of our day. He also points out the fundamental weaknesses of the classical economists and how their errors led to the now ex­ploded theory of "the economic man." He devotes many pages to the slow evolution of man’s under­standing of the full significance of the subjective theory of value. He indicates errors in the original presentations that led to later am­biguities. The correct application of this theory provides all the clues we need to diagnose the causes of the so-called "business cycle." He stresses the senselessness of try­ing to solve this and other econom­ic problems by gathering and studying facts and statistics with­out benefit of a scientific theory of cause and effect.

One valuable essay, "The Psy­chological Basis of the Opposition to Economic Theory," goes a long way toward explaining present conditions. He considers here the views of those who discount the teachings of economics because they are "deliberately not taught at the universities." Such people "consider a theory to be finally dis­posed of merely because the au­thorities who control appointments to academic positions want to know nothing of it." These people see "the criterion of truth in the approval of a government office."

This essay also traces the an­tipathy and disdain for the crea­tors of wealth from Cicero to mod­ern times. It has been propagated throughout history by the "great aristocratic landowners, princely courtiers, officers of the army and government officials…. It springs directly from the views held in the circles of the educated classes who were in public service and enjoyed a fixed salary and a politically rec­ognized status." Perhaps it is only natural that such vested interests should resent a science that re­veals who are the real parasites of our civilization.

The world today is sadly in need of the knowledge that only the science of economics can provide. Millions believe that economic laws can be repealed and poverty wiped out by voting to do so at the polls. Too few know that there are un­alterable laws in the social realm that must be learned and har­nessed if the world is to prosper in peace.

The fallacies we hear and read every day were originally the ideas of men little known to most Ameri­cans. Dr. Mises has traced a goodly number of these fallacies to their sources. He then uses the lucidity of his logic to expose them.

Ludwig von Mises is the modern master of the science known as economics. His writings may be difficult, but if each of us would read and digest what he could, we would all then have a better grasp of the policies we must pursue, if ever we are to enjoy the continu­ous prosperity of a durable free society.

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November 1960

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