Patterico's Pontifications

8/27/2015

“Human Action” and Robert Murphy’s “Choice,” Part 6: The Importance of Ideas and Reason

Filed under: Economics,General,Human Action and Choice — Patterico @ 12:02 am

This is Part 6 of a 17-part series of posts summarizing Bob Murphy’s indispensable book Choice: Cooperation, Enterprise, and Human Action. Murphy’s book is itself is a summary of Ludwig von Mises’s classic treatise “Human Action.” As a result, this is a summary of a summary. Blog life.

The idea here is to popularize and spread the word about Austrian economics and educate the public. (Several of you have bought Murphy’s book, and that is very pleasing to me. Some have even started reading Mises himself, which is fantastic!) Rather than list all the previous parts, I have created a category for all these posts, called “Human Action and Choice,” so that all these posts can be read (in reverse order) with a single click. Note well: any errors in these summaries are mine and not Murphy’s.

Chapter 6 is a chapter devoted to summarizing Mises’s views on the importance of ideas in history. As Keynes said, most men are “the slaves of some defunct economist.” How ironic that quote is to the Austrian economist! — who watches governments haplessly careen from one absurd Keynesian “solution” to another, always prescribing the most counterproductive “cure” imaginable to the given diagnosed economic disease. The Austrian watches countries in a “bust” try to “fix” everything with huge infusions of cash and lowering of interest rates. The Austrian sees these actions as insane — like using trepanation to cure headaches, lobotomies to cure depression, or cigarettes to cure asthma. The Austrian longs for the day when the basics of economics are widely understood by policymakers, as real human suffering will thereby be alleviated to a previously unheard-of extent.

Mises literally believed that using reason “to grasp the advantages of social cooperation” (to use Murphy’s phrase) is the key to preventing the collapse of society.

Murphy spends much of chapter 6 drawing contrasts between Mises’s Austrian economics and other economic philosophies, such as Marxism and logical positivism.

The contrast with Marxism might sound like it would require a long explanation, but for now Mises (and Murphy) are concerned mainly with showing that Marx believed society molded men’s ideas, while Mises believed that ideas molded society. Other stark differences between Austrian economics and Marxism/socialism, such as Mises’s famous explication of the “socialist calculation problem” (also discussed by Hayek) will be reserved for future posts.

Probably the most interesting contrast is that between Mises and the logical positivists asserted that statements about economics lacked value unless they could be “verified.” This contrast, to me, appears related to Murphy’s final topic of the chapter: the notion that economics cannot be a “science” unless it makes testable predictions. Although Murphy separates the sections, I will discuss them together in this post.

Here, Murphy contrasts Mises with another well-respected economist (and a Patterico favorite): Milton Friedman. It turns out that Friedman and Mises are severely at odds with one another on the notion of economics as a “science” — and whether the correctness of economic principles depends upon those principles being validated by real-world data.

At this point the reader may be uneasy. We’re taking issue with Milton Friedman and rejecting the notion of using real-world data to validate our principles? Surely we are on shaky ground here! The fact that I know you are thinking this, to me, means I need to spend a little extra time on this final point.

This reminds us of Murphy’s analogy to geometry in Chapter 3 (see post number three in this series). As I summarized it in that post:

We do not derive the Pythagorean theorem by building 500 right triangles and measuring the angles and the sides. The proof of the theorem does not depend on experimentation. The proof is within us — it is simply a logical chain of thoughts that we need to reflect on.

Murphy quotes Mises on this point in chapter 6. Mises argued that while the Pythagorean theorem could be considered a “tautology” in the sense that “its deduction results in an analytic judgment,” that does not mean it is to be discounted:

Nonetheless nobody would contend that geometry in general and the theorem of Pythagoras in particular do not enlarge our knowledge. Congition from purely deductive reasoning is also creative and opens for our mind access to previously barred spheres. . . . It is its vocation to tender manifest and obvious what was hidden and unknown before.

Mises makes an analogy here to the quantity theory of money (the cornerstone of which he elsewhere modestly defined as “the idea that a connection exists between variations in the value of money on the one hand and variations in the relations between the demand for money and the supply of it on the other hand” — Theory of Money and Credit, p. 130) and says that it is like the Pythagorean theorem:

The quantity theory does not add to our knowledge anything which is not virtually contained in the concept of money. It transforms, develops, and unfolds; it only analyzes and is therefore tautological like the theorem of Pythagoras in relation to the concept of the rectangular [right] triangle. However, nobody would deny the cognitive value of the quantity theory. To a mind not enlightened by economic reasoning it remains unknown. A long line of abortive attempts to solve the problems concerned shows that it was certainly not easy to attain the present state of knowledge.

In chapter 6, Murphy gives us a hypothetical in which aliens visit Earth. We might not expect them to already know things that are purely a matter of human convention — such as the idea that a “bachelor” is someone without a wife. But we would expect that they would know geometry. And (if they engage in specialization and trade) we would expect that they would know economic principles like marginal utility theory. And if the aliens didn’t know geometry, or economic principles, we would expect that they would be grateful to learn these things — and that they would recognize their inherent truth.

Murphy quotes Friedman as disdaining an economic theory based on “a structure of tautologies” as being nothing but “disguised mathematics” if it cannot predict action in the real world. Let me quote Murphy at length in response:

From the starting point that humans act, the economist could logically deduce — thereby forming a tautology, it’s true — that individuals have subjective preferences with ordinal rankings, that choices come with opportunity costs, and that the value of second-order capital goods is dependent on the value of the first-order consumer goods that the individual believes they have the technological power to produce. Say what one will about these types of statements, they are clearly within the realm of economics and are not merely “disguised mathematics.” Although they have not been derived by reference to empirical observation, thinking through these tautologies definitely aids acting individuals as they navigate the real world. Logical, deductive economics as championed by Ludwig von Mises is not mere word games.

That’s how Murphy ends his chapter, and it’s a good way to end this blog post. We’re about 1/3 of the way through the project so far. Keep reading and sharing!

35 Responses to ““Human Action” and Robert Murphy’s “Choice,” Part 6: The Importance of Ideas and Reason”

  1. Reasonings have their limitations, beginning with the actuality that reason is, in fact, conviction’s biach:

    http://www.zerohedge.com/news/2015-08-26/deflationary-collapse-ahead

    Ya can’t know what you purpose not to know.

    DNF (755a85)

  2. Did Friedman also disagree with Mises’ deductions, or was his concern solely with the fact that they could not be proven?

    DRJ (1dff03)

  3. This what Murphy quotes Friedman as saying, DRJ:

    The relevant question to ask about the “assumptions” of a theory is not whether they are descriptively “realistic,” for they never are, but whether they are sufficiently good approximations for the purpose in hand. And this question can be answered only by seeing whether the theory works, which means whether it yields sufficiently accurate predictions.

    In this article: https://mises.org/library/chicago-school-versus-austrian-school

    nk (dbc370)

  4. I’m on the side of Friedman in this. No, not because “Chicago!” ;). Economies are not thought experiments. Wealth, poverty and their relative distributions are very real things.

    nk (dbc370)

  5. Deductive systems are only guides to real-world actions if they make testable predictions. The predictions don’t have to be always and everywhere exact; Euclidean geometry will tell you how to build houses and Newtonian gravitation will get your spacecraft to right place and time to take pictures of Pluto, even though there are real-world instances where these deductive systems are not sufficient.

    But the universe has a way of throwing curve balls. And people have a way of ignoring what is in front of their faces in favor of convictions that they didn’t derive from evidence.

    So yes, deduction from principles is a wonderful tool, it’s how physics and math work. But to say that we don’t have to care if the predictions work out in real life, because we already know our “system” is correct–then that applies just as well to astrology or phrenology.

    Gabriel Hanna (13a147)

  6. We do encounter a complication in the implied power of a social science to emulate the pure sciences.

    If we were to expect a 50% correlation with our expected outcome in the case of a physical law, and 5% for a biological law what might we expect of an economic law to say the hypothesis is validated?

    Two per cent? Less?

    DNF (ffe548)

  7. Here’s Friedman talking about Mises. Not very useful, but amusing, informative and under two minutes: https://www.youtube.com/watch?v=tkQfK8hn0ds

    nk (dbc370)

  8. Thank you, nk, and that is a delightful Friedman video.

    DRJ (1dff03)

  9. Friedman, the supporter of a guaranteed annual income (!) and manipulating the economy through interest rates, said the Austrian Business Cycle Theory was dangerous. Because it counseled that government should respond to the Great Depression by doing nothing — and Friedman the monetarist believed in manipulating the quantity of money to respond to it. To some degree his calling the Austrians dangerous is similar to FDR’s “at least try something!” philosophy.

    Friedman would have favored the giant bailouts during the financial crisis.

    He was a smart guy but not infallible.

    Gabriel Hanna, in my view there are no testable hypotheses in economics because there can never be a controlled experiment. That’s why Kuugman thinks Obama’s stimulus worked, but to the extent that it didn’t, it’s because it should have been bigger.

    Why do you believe protectionism is wrong? Can you provide me the links to the peer-reviewed controlled studies that prove tariffs are harmful? If not then your opposition has no place in my real world, where we care about data.

    Patterico (e55d19)

  10. There exist many problems with using theoretical models to understand real phenomena without frequent tests to ensure that the theoretical models give the same results as real experiments. One of these is that, without experiments, the only way you can detect an error in a theoretical model is when you derive a contradiction — a conjunction of S and not S for some declarative sentence S. As it turns out, it is surprisingly easy to create theoretical models that do not contain contradictions.

    The earliest examples that I know of involve mathematicians’ attempts to prove Euclid’s fifth postulate from the earlier four. The first four axioms are so easy to state that nobody questioned it, but the fifth axiom is

    If a line segment intersects two straight lines forming two interior angles on the same side that sum to less than two right angles, then the two lines, if extended indefinitely, meet on that side on which the angles sum to less than two right angles.

    Needless to say, asserting something that involved as being obviously true feels like asking a lot to people who work with theory. It gets even more suspicious when you learn that other long-to-state-but-acceptable-when-you-understand-what-they’re-saying assertions actually can be proved from simpler axioms. For example, I expect most readers have encountered the assertion

    Every integer greater that 1 can be factored into a product of primes; furthermore, this factorization is unique (up to the ordering of the list).

    What you might not have heard is that this is in fact a theorem proven from simpler axioms, and not an axiom itself. This, despite the fact that it is even simpler than Euclid’s fifth postulate.
    The reason I assert that Euclid’s fifth postulate is independent of the others is because it is possible to create a logically consistent structure where the first four axioms are true, but the fifth axiom is demonstrably false. The reason I know that this structure is logically consistent is because it is possible to embed this structure inside a model where all five axioms are true, and so any contradiction in this model will necessarily yield a contradiction in Euclidean geometry. Incidentally, trustworthy mathematicians assure me it is also possible to embed Euclidean geometry inside this model, so the existence of contradictions go both ways; I just don’t remember the construction for it.
    I should also add that these models can even have practical value outside the realm of theory. For example, if you omit Euclid’s fifth postulate from geometry and omit the existence of parallel lines, you get spherical geometry, which I gather was used for celestial navigation & other long-distance travel planning. The Pythagorean theorem is false in spherical geometry — you can easily have triangles with two or three right angles — so we have to be extremely careful about using purely deductive reasoning to enlarge our knowledge.
    This is one of the reasons why it can be so difficult to dissuade Keynesians, Marxists, etc. that their logical models of economics are fallacious: They may easily be internally consistent; they simply don’t match the phenomena they purport to model (I don’t know enough about Keynes, Marx, etc. to know if they’re contradiction-free, but even if the “official” models are self-contradictory, the person you’re trying to dissuade may have mutated the model away from the official version anyway). Since I think Austrian Economics is, indeed, the best existing model of human (and presumably alien) interaction involving decisions about limited resources, I want to see more people adopt it; since I think matching theoretical models with real phenomena is essential for both persuasion and for establishing logical soundness, I must argue in its favor.

    CayleyGraph (dfcefe)

  11. Gabriel Hanna, in my view there are no testable hypotheses in economics because there can never be a controlled experiment

    …which is the reason I have to admit that matching theoretical models with real phenomena is virtually impossible in economics. Granted, I think that any field more complicated that chemistry has this problem.

    That said, this problem applies to the Keynesians, Marxists, etc. as well. I just don’t think that giving up this matching is effective for proving theoretical soundness or for convincing people; announcing that you have no intention of trying seems to me to be self-defeating. Thus, I want Austrian boosters to keep looking for

    A. Historical examples that match Austrian economics

    B. Historical examples that don’t match Keynesian, Marxist, etc. models

    These aren’t sufficiently controlled to be called experiments, but I’m not convinced that they’re never worth the effort. I agree with those who say that economics shouldn’t be called a “science” because of the absence of controlled experiments, but I can’t say I’ve only ever been convinced of something because of science. I expect there are others who are as pliable as I am.

    CayleyGraph (dfcefe)

  12. And Mises wrote this:

    “It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.”

    https://mises.org/library/foundations-liberal-policy

    Nobody wants to take up permanent residence in an intensive care unit. But dire times call for dire measures.

    nk (dbc370)

  13. @Patterico:in my view there are no testable hypotheses in economics because there can never be a controlled experiment.

    If you take that view you have reduced economic theories to just so stories, and why shouldn’t we believe the Krugman narrative vs the Mises narrative if we have decided in principle that the real world does not matter?

    But it is possible to do controlled experiments. Perhaps not on the scale of a nation state, but a city not far from me (Seattle) is experimenting with a very high minimum wage. And it’s much easier to do controlled microeconomic experiments.

    Do you really believe that no one can tell if Cash for Clunkers turned out the way any economist of any stripe said it would? The Krugmans said it would do have these costs and those benefits, and the classical economists said something different. Do you really think we cannot and should not look at how that turned out, because it doesn’t matter? Then how do you show the Krugmans are wrong? Why should anyone not go their way if we decide we don’t need to check to see if their promises don’t pan out?

    Why do you believe protectionism is wrong?

    Because it extracts money by force from the pockets of the many and puts it into the pockets of a few. Because it is immoral. So far no real world data is needed to justify those views, those are moral views and not scientific ones. The fallacy of protectionism is in straining at gnats and swallowing camels–they want to talk about second-order and higher effects when they argue that protecting one industry benefits us all, but they want to exclude that discussion when I point out that the second-order and higher effects of protectionism cost us all.

    I might agree to a restriction on my liberty if it can be shown to produce benefits that outweigh the costs, and protectionists have never shown this. I do not need to produce data to oppose protectionism because I am not advocating the restriction of anyone’s liberty and justifying it with claimed benefits that will offset the loss.

    If not then your opposition has no place in my real world, where we care about data

    Do you need a peer-reviewed study to show you that cannibalism is wrong? Does your opposition to cannibalism have no place in the real world?

    Gabriel Hanna (64d4e1)

  14. The thing about all social philosophy, including theoretical economics, is that it is self-fulfilling. If enough people believe that society will collapse without a pharaoh on the throne, society will collapse without a pharaoh on the throne. Which does not mean that it will not also collapse with a pharaoh on the throne. If enough people believe that the worker has the right to the product of his labor, he will have the right to the product of his labor. As far as other people are concerned. Whether there is any product to have any right to is a different matter.

    nk (dbc370)

  15. The last six and half years have been a huge “economic” experiment. There are many reasons for our economic failures in this period, but they are all based on non-market interventions. The reason we seem so impotent in protesting, or even recognizing, this failure is that our “leaders,” in what is nominally the opposition party, are pathetic buffoons who value their personal power and perquisites foremost. They believe that they can continue to “lead” this castrated opposition simply by offering to manage the decline more efficiently than the Democrats. Incitatus, Caligula’s horse, had at least the virtue of being swift. I am hard pressed to name any virtues associated with the names McConnell and McCain.

    bobathome (279337)

  16. If you take that view you have reduced economic theories to just so stories, and why shouldn’t we believe the Krugman narrative vs the Mises narrative if we have decided in principle that the real world does not matter?

    Nobody said the real world doesn’t matter.

    The only point is that in deductive disciplines, to the extent you are confident your principles are right, the apparent failure of the world to conform to your principles does not change the correctness of the deductive principles.

    I can prove this to you quite easily.

    If you placed two marbles in the empty left hand of a man, and two marbles in his empty right hand, and he was continually able to close his hands, open them, and show you five marbles, you would not conclude that empiricism has disproved the notion that 2+2=4. You would conclude that there is some other factor at play. Perhaps the man is a talented sleight of hand artist.

    And no matter how many people ran the experiment, you would (presumably) never change your mind about the concept of 2+2 equalling 4. You could watch the experiment run 1000 times and presumably you would continue to say: “there’s something going on here that I am unaware or, and I’d like to know what it is — but whatever it is, it doesn’t mean 2+2=5. 2+2 still equals 4.”

    I can already hear you objecting that 2+2 does equal four in the real world, usually (when magicians or other unpredictable factors are not at work), so our confidence is based on empiricism. Well, if you re-read Murphy’s quote in the post, he believes that thinking through Mises’s principles “definitely aids acting individuals as they navigate the real world.” Murphy lists, as some principles that are so obviously correct that one could consider them “tautologies,” principles such as the idea “that choices come with opportunity costs” or “that the value of second-order capital goods is dependent on the value of the first-order consumer goods.” Well, these principles (to me) are both a) obviously true and b) not without value to learn and reflect on.

    Now, you can debate whether Mises’s principles are indeed correct. I am happy to have that debate. But please stop pretending that the contention is that “the real world doesn’t matter.” The contention is that these principles, which we believe do reflect actual behavior in the real world, are inherently true — and if the real world appears to contradict them, then there is something else going on besides the principles being incorrect.

    If you reject that, then would you accept that 2+2 is 5?

    Patterico (3cc0c1)

  17. The fallacy of protectionism is in straining at gnats and swallowing camels–they want to talk about second-order and higher effects when they argue that protecting one industry benefits us all, but they want to exclude that discussion when I point out that the second-order and higher effects of protectionism cost us all.

    In trying to win an argument, you claim to oppose protectionism on moral grounds only — but you obviously believe protectionism doesn’t work, and can’t help saying so (see the bold passage). It’s OK. I’m not attacking you for believing protectionism doesn’t work. You’re right. I agree with you.

    But the reason you and I agree that protectionism doesn’t work is not because people have run controlled peer-reviewed experiments. It’s because we believe in free trade, not just morally but as the best engine for improving people’s lives. We don’t reject empiricism as a basis for our views, but if someone tried to show us that socialism is actually working somewhere, I would know (like I know that 2+2 is not 5) that there is something wrong with that analysis.

    There is real power in understanding why socialism cannot possibly work, anywhere, any time. And if you’re patient, and follow this series of posts, you’ll see why Mises proved socialism cannot work. If it were possible to have had access to a time machine, and to have read Mises’s Human Action when Walter Duranty’s articles about how awesome Stalin was came out, one would be unfazed. They would know either than Duranty was lying, or that the situation he described was temporary. (Both were true.) Nobody can ever prove to me, empirically, that socialism will work anywhere, because I have read Mises and his followers and I understand why it can’t work. When I read an article like I saw recently that suggested that Stalin failed, not because he did anything wrong, but because he came at the wrong time, I know it’s wrong and I know why. There is value in that.

    Again, we’re not saying the real world doesn’t matter. Of course it does. But some truths are so fundamental that if the real world seems to disprove them, you know there’s something else going on. It could be that the “something else going on” means that the principles you have derived are not the correct principles to apply to your current situation — e.g. you can’t treat the world as though the representations on a flat map are accurate. But that doesn’t mean that deductive principles about straight lines are “wrong” — just that they may not apply in the way you thought they did. The shortest distance between any two points on the globe is still a straight line — but that doesn’t mean that’s the way to travel, if that straight line bores deep into the earth’s crust.

    If what you’re saying is, well, Patterico, you haven’t convinced me that Mises will allow me to predict the real world with certainty, I agree. No economic concept has ever done that and no economic concept ever will. It does not mean that economics is useless, in my view — although bad economics is worse than useless.

    Patterico (3cc0c1)

  18. nk at 11: someone’s been poking around Rational Wiki! They hate FIRE too. They are the Gawker of Wikis. Let’s not pretend Mises was a fan of fascism. In the same essay he says:

    But when the fresh impression of the crimes of the Bolsheviks has paled, the socialist program will once again exercise its power of attraction on the masses. For Fascism does nothing to combat it except to suppress socialist ideas and to persecute the people who spread them. If it wanted really to combat socialism, it would have to oppose it with ideas. There is, however, only one idea that can be effectively opposed to socialism, viz., that of liberalism.

    Patterico (3cc0c1)

  19. @Patterico:to the extent you are confident your principles are right

    And this confidence is based on, what, exactly, if the results of applying the principles are not to be evaluated against the real world?

    In physics the results of applying the principles are always done with the intention of comparing the results to the real world and then possibly revising those principles if they turn out to be unsatisfactory.

    I can already hear you objecting that 2+2 does equal four in the real world

    Two apples + two oranges = ? Two hours + two miles = ? 2 + 2 = 4 is purely a logical construction. Sometimes it applies to the real world. It has nothing to do with empiricism whatever. 2 + 2 = 4 has the same status as “a bachelor is not married”.

    some principles that are so obviously correct that one could consider them “tautologies”

    Tautologies are just definitions. Definitions are neither empirically true nor empirically false. They may be applicable or not. They may be useful or not. They contain no information about the real world whatever and may be changed at will. Either Murphy and Mises are confused about what a tautology is or you are. I don’t think you should wade out into waters you’re not ready to swim in.

    I think the fundamental issue here is that you are sliding back and forth between incompatible definitions of “true” and you are not aware there is a difference.

    2 + 2 = 4 is logically true. It follows from the definitions of the symbols. If “+” means “multiply” then 2 + 2 = 4 is still logically true, but 3 + 1 = 4 is logically false. If “+” means “add” then both statements are logically true. It’s purely definitions.

    If a man has two apples in one hand and two apples in the other, I can predict he has four apples in both hands, but I can’t know it until I check; i.e. compare with the real world. If he turns out not to have four apples in his hands AT THE TIME I CHECK, I cannot explain that with arithmetic. What I have proved is that the principles of arithmetic, applied to the information I had, were not sufficient to explain the number of apples in his hands.

    And that’s it right there. Are you starting to see the difference? I used the principles of arithmetic to model the hand-apple system. Arithmetic is purely definitional. The logical status of 2 + 2 = 4 is not impeached if the man does not have four apples, but the real world has impeached my application of those principles to that system, and so I need to apply other principles to explain that system. Perhaps I needed additional rules of arithmetic, or perhaps I need to use something other than math.

    “Logically true” and “empirically true” are entirely different concepts that ought not to represented by the same word.

    Gabriel Hanna (64d4e1)

  20. Do you really believe that no one can tell if Cash for Clunkers turned out the way any economist of any stripe said it would? The Krugmans said it would do have these costs and those benefits, and the classical economists said something different. Do you really think we cannot and should not look at how that turned out, because it doesn’t matter? Then how do you show the Krugmans are wrong? Why should anyone not go their way if we decide we don’t need to check to see if their promises don’t pan out?

    Anyone who wants to defend it can say “the principle was right but we needed to do more x” where x is their preferred form of interventionism.

    Again: the stimulus could be considered an experiment. Some say it succeeded and some say it obviously failed. Even those like Krugman who must concede it didn’t do as well as they predicted, can simply say that’s not because we did it — it’s because we didn’t do it big enough.

    People can’t even agree on the lessons of the Great Depression. This just isn’t physics and never, ever will be, as much as we might like for it to be.

    Patterico (3cc0c1)

  21. ? I got this from https://mises.org/library/foundations-liberal-policy (same link with quote).

    The masthead is MISES INSTITUTE: Austrian Economics, Freedom, and Peace. Are they a Trojan site?

    nk (dbc370)

  22. A tautology is “a statement that is true by necessity or by virtue of its logical form.” When you say:

    2 + 2 = 4 is logically true. It follows from the definitions of the symbols. If “+” means “multiply” then 2 + 2 = 4 is still logically true, but 3 + 1 = 4 is logically false. If “+” means “add” then both statements are logically true. It’s purely definitions.

    And yet presumably you would agree that math is not that simple, and that learning it is of great value.

    If a man has two apples in one hand and two apples in the other, I can predict he has four apples in both hands, but I can’t know it until I check; i.e. compare with the real world. If he turns out not to have four apples in his hands AT THE TIME I CHECK, I cannot explain that with arithmetic. What I have proved is that the principles of arithmetic, applied to the information I had, were not sufficient to explain the number of apples in his hands.

    And that’s it right there. Are you starting to see the difference? I used the principles of arithmetic to model the hand-apple system. Arithmetic is purely definitional. The logical status of 2 + 2 = 4 is not impeached if the man does not have four apples, but the real world has impeached my application of those principles to that system, and so I need to apply other principles to explain that system. Perhaps I needed additional rules of arithmetic, or perhaps I need to use something other than math.

    OK . . . doesn’t it seem like we’re saying the exact same thing in different words?

    Does that mean it’s pointless to learn math? Does that mean math has no bearing on the real world?

    Patterico (3cc0c1)

  23. And I don’t think he was a fan of fascism, either. That was not my point.

    nk (dbc370)

  24. When I feel like we’re saying the same thing in different words, I think we need to define what we’re arguing about. Let me give a series of propositions and you can tell me where you disagree.

    1. Purely deductive disciplines can be worth studying.
    2. Purely deductive disciplines can reveal insights that are not immediately intuitive or obvious, yet can be helpful once understood.
    3, Purely deductive disciplines may not allow people to make consistent predictions about real-world phenomena, especially when those phenomena are complex.

    There are other possible things to say, but tell me if you disagree with any of these.

    Patterico (3cc0c1)

  25. OK, nk, sorry — that’s just a quote seized on by some snarky Gawker-style critics of Mises and I figured you had found it through them. Sorry if I was wrong.

    I have the flu and may have been testier than usual in the past few days as a result. I’m staying home today and trying to get some rest; hence the debate during the day, which you would not normally get from me.

    Patterico (3cc0c1)

  26. No apology necessary. I’ve been an on-off visitor to mises.org even before this series of posts. Mises himself is very readable, more so than some of his interpreters.

    nk (dbc370)

  27. If a man has two apples in one hand and two apples in the other, I can predict he has four apples in both hands, but I can’t know it until I check; i.e. compare with the real world. If he turns out not to have four apples in his hands AT THE TIME I CHECK, I cannot explain that with arithmetic. What I have proved is that the principles of arithmetic, applied to the information I had, were not sufficient to explain the number of apples in his hands.

    In other words, a) it’s worth learning arithmetic, b) arithmetic is inherently correct regardless of the outcome of “experiments,” but c) arithmetic can’t always infallibly tell you the answer to real-world phenomena, because of stuff like sleight of hand. (But really, if you knew all the facts, it could — because arithmetic is always right, and if the actual answer was that the magician snuck in an extra ball, arithmetic could have properly predicted the answer to be five rather than four.)

    The point here is: one can assert that arithmetic is always right and worth knowing, and admit that with our imperfect ability to collect and analyze data, arithmetic alone may not be sufficient to reliably predict a real-world outcome every single time. But the failure of empiricism to corroborate the predictions of arithmetic in any given instance does not impeach arithmetic.

    Patterico (3cc0c1)

  28. @Patterico:Anyone who wants to defend it can say “the principle was right but we needed to do more x” where x is their preferred form of interventionism.

    And when they do we call that “special pleading”. The difference between science and the things that are not science is that science justification by argument is never enough, you always have to check your predictions against other predictions made using different principles.

    Again: the stimulus could be considered an experiment. Some say it succeeded and some say it obviously failed.

    In scientific terms, the competing economic theories did not make specific enough predictions that the evidence allows you to decide which one preformed better. (The term of art here is the <a href="https://en.wikipedia.org/wiki/Duhem%E2%80%93Quine_thesis""auxiliary hypothesis problem".) There’s nothing wrong with saying that. What is wrong is saying that because it’s difficult to distinguish given the available evidence and the specificity of the prediction, we should not bother to try and just abandon trying to use evidence to judge between them.

    And yet presumably you would agree that math is not that simple, and that learning it is of great value.

    Obviously so, since I need it to do my job. I have applied math to the real world literally every day of my adult life.

    doesn’t it seem like we’re saying the exact same thing in different words?

    No, we’re not. You’re saying that logical truth tells you about reality. It can’t. Logical truth is definitions. Definitions can be changed whenever we want in whatever way we want. You cannot change the real world by changing definitions, symbols and rules are not magic spells.

    Does that mean it’s pointless to learn math? Does that mean math has no bearing on the real world?

    Where is this coming from? Who said anything like this?

    Math has bearing SOMETIMES. You have to CHECK. CONSTANTLY. Math is just rules and symbols we sometimes use to represent things. When they cease to be a good representation you will know because you’re math will not agree with what is happening.

    Gabriel Hanna (64d4e1)

  29. No, we’re not. You’re saying that logical truth tells you about reality.

    That’s too imprecise. I’m saying that logical truth can help us assess reality, but cannot always give us perfect predictions. The failure to give us perfect predictions does not mean the logical truth is either a) incorrect or b) utterly useless.

    I think my positions are fully fleshed out and I happen to think we agree, because most of what you say, I agree with. It’s only when you say that you disagree with me that I disagree.

    I’d ask you to respond to my comment 24 and tell me whether you agree or disagree with any of the three stated propositions. That might help clarify where we disagree, since you seem to think we do. I’d like to isolate the point of disagreement, if there is one.

    Patterico (3cc0c1)

  30. @Patterico:
    1. Purely deductive disciplines can be worth studying.
    2. Purely deductive disciplines can reveal insights that are not immediately intuitive or obvious, yet can be helpful once understood.
    3, Purely deductive disciplines may not allow people to make consistent predictions about real-world phenomena, especially when those phenonema are complex.

    I agree 100% with all of these things, and have never said otherwise.

    a) it’s worth learning arithmetic,

    No one said different, of course.

    b) arithmetic is inherently correct regardless of the outcome of “experiments,”

    Only if you mean “logically consistent” when you say “correct”. If you use any other defintion of “correct” then your statement b) is false.

    c) arithmetic can’t always infallibly tell you the answer to real-world phenomena, because of stuff like sleight of hand

    And other things, like “adding” 2 miles and 2 dollars together. The rules of addition are insufficient to produce a meaningful answer to “What is two miles plus two dollars equal to?”

    (But really, if you knew all the facts, it could — because arithmetic is always right, and if the actual answer was that the magician snuck in an extra ball, arithmetic could have properly predicted that.)

    Not at all. If we knew all the facts it might not be possible to use the rules of arithmetic to model the situation. Arithmetic is always logically true nonetheless. But it may not be a good representation of the real world. We have to check and revise the set of principles we wish to use.

    I had an engineering professor who started the first day of class by writing on the board “3 + 4 = 5″. He invited us to dispute the point with him. Then he showed us a real-world interpretation of the symbols “3”, “+”, “4”, “=”, “5” that made “3 + 4 = 5″ the obviously correct result, though expressed in an unusual way.

    Geometry and math are rules for the manipulation of symbols. We can only use them to interpret the real world when we have agreed what real things are represented by them and when we know that the rules of manipulating the symbols are good representations of the behavior of the real things, and we only know that through observing the real world.

    Let’s not cross post anymore, I will wait until this afternoon to answer anything else you may have said in the meantime.

    Gabriel Hanna (64d4e1)

  31. I’m fine with leaving it here. I acknowledge that Mises’s economic theories may not always allow people to make consistent, specific predictions about all real-world phenomena, especially when those phenomena are complex. In particular, making predictions about the timing of certain events is always difficult and often impossible. However, I believe Austrian economics is nevertheless worth studying and can reveal insights that are not immediately intuitive or obvious, yet can be helpful once understood. I believe those insights can help us understand the real world. I think this is consistent with Murphy’s claim that Mises’s principles “definitely aid[] acting individuals as they navigate the real world.”

    Patterico (3cc0c1)

  32. I’m very pleased with tomorrow’s post, which addresses the labor theory of value and shows (with examples I constructed, based on Murphy’s examples) how barter prices emerge. And elaborates on the importance of monetary calculation.

    Patterico (3cc0c1)

  33. When I publish my social theory, there will be a chapter which I will call the Vicks Vapo-Rub Theory of Crisis Management, which is essentially that the government must be seen to give a darn, even if it what it does is scientifically unsound, messy, smells bad, and all it comes down to is “There, mommy loves you. Your cold will be better tomorrow. Now let me tuck you in, kiss you goodnight, and you get a good night’s sleep like the big, brave boy you are”.

    (Another chapter will be “Calories, The Real Opiate of the People”.)

    nk (dbc370)

  34. Gabriel Hanna, in my view there are no testable hypotheses in economics because there can never be a controlled experiment. …

    This is wrong in two ways.

    First while the ability to do controlled experiments is certainly helpful it is not necessary in order to develop and test theories. You can learn a lot from natural experiments. For example meteorologists can’t do much in the way of controlled experiments they can still develop theories about how weather changes over time and then they can test those theories by seeing how well their predictions match reality. There are aspects of the economy (such as how stock prices move) for which one can (and people do) develop hypothesis and test them against reality.

    Second (at least at a micro level) there can be controlled experiments. For example if you are Amazon and you have an idea for changing your website to improve sales you can look at say 200000 of your customers, divide them at random into two groups of 100000, implement the change for one group but not the other and see what happens.

    James B. Shearer (84bde5)

  35. I think Mr. Hanna would be well advised to pick up Wittgenstein and spend a year or two in rumination without forming undigested execra.

    DNF (ffe548)


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