Theory And History

THEORY AND HISTORY AN INTERPRETATION OF SOCIAL AND ECONOMIC EVOLUTION LUDWIG VON MlSES PREFACE BY MURRAY N. ROTHBARD Lubwia von Mises Institute AUBURN, ALABAMA

All rights reserved. Written permission must be secured fromthe publisher to use or reproduce any part of this book, exceptfor brief quotations in critical reviews or articles.Copyright © 1957 by Yale University PressReprinted in 1969 by Arlington HouseCopyright © 1985 by Margit von MisesReprint in 2007 by the Ludwig von Mises InstituteLudwig von Mises Institute, 518 West Magnolia Avenue,Auburn, Alabama 36832 U.S.A.; www.mises.orgISBN: 978-1-933550-19-0

ContentsPREFACE BY MURRAY N. ROTHBARD xiINTRODUCTION 1 3 1. Methodological Dualism 4 2. Economics and Metaphysics 5 3. Regularity and Prediction 8 4. The Concept of the Laws of Nature 9 5. The Limitations of Human Knowledge 12 6. Regularity and Choosing 7. Means and Ends PART ONE VALUECHAPTER 1. JUDGMENTS OF VALUE1. Judgments of Value and Propositions of Existence . . . .192. Valuation and Action 203. The Subjectivity of Valuation 224. The Logical and Syntactical Structureof Judgments of Value 23CHAPTER 2. KNOWLEDGE AND VALUE 26 28 1. The Bias Doctrine 32 2. Common Weal versus Special Interests 34 3. Economics and Value 4. Bias and IntoleranceCHAPTER 3. THE QUEST FOR ABSOLUTE VALUES 35 37 1. The Issue 2. Conflicts with Society

vi CONTENTS 3. A Remark on the Alleged Medieval Unanimity 42 4. The Idea of Natural Law 44 5. Revelation 49 6. Atheistic Intuition 50 7. The Idea of Justice 51 8. The Utilitarian Doctrine Restated 55 9. On Aesthetic Values 6110. The Historical Significance of the Quest for 63 Absolute Values 73CHAPTER 4. THE NEGATION OF VALUATION 75 76 PART TWO 78 DETERMINISM AND MATERIALISM 82 84CHAPTER 5. DETERMINISM AND ITS CRITICS 92 1. Determinism 94 2. The Negation of Ideological Factors 97 3. The Free-Will Controversy 99 4. Foreordination and Fatalism 5. Determinism and Penology 102 6. Determinism and Statistics 106 7. The Autonomy of the Sciences of Human ActionCHAPTER 6. MATERIALISM 1. Two Varieties of Materialism 2. The Secretion Analogy 3. The Political Implications of MaterialismCHAPTER 7. DIALECTICAL MATERIALISM 1. Dialectics and Marxism 2. The Material Productive Forces

CONTENTS vii3. The Class Struggle 1124. The Ideological Impregnation of Thought 1225. The Conflict of Ideologies 1306. Ideas and Interests 1337. The Class Interests of the Bourgeoisie 1428. The Critics of Marxism 1479. Marxian Materialism and Socialism 155CHAPTER 8. PHILOSOPHY OF HISTORY1. The Theme of History 1592. The Theme of the Philosophy of History 1623. The Difference between the Point of View of Historyand That of Philosophy of History 1664. Philosophy of History and the Idea of God 1715. Activistic Determinism and Fatalistic Determinism . . .177 PART THREE EPISTEMOLOGICAL PROBLEMS OF HISTORYCHAPTER 9. THE CONCEPT OF HISTORICAL INDIVIDUALITY 183 184 1. The Ultimate Given of History 188 2. The Role of the Individual in History 195 3. The Chimera of the Group Mind 4. Planning HistoryCHAPTER 10. HISTORICISM 198 205 1. The Meaning of Historicism 210 2. The Rejection of Economics 214 3. The Quest for Laws of Historical Change 219 4. Historicist Relativism 5. Dissolving History

viii CONTENTS6. Undoing History 2277. Undoing Economic History 234CHAPTER 11. THE CHALLENGE OF SCIENTISM 240 250 1. Positivism and Behaviorism 256 2. The Collectivist Dogma 259 3. The Concept of the Social Sciences 4. The Nature of Mass PhenomenaCHAPTER 12. PSYCHOLOGY AND THYMOLOGY 264 271 1. Naturalistic Psychology and Thymology 272 2. Thymology and Praxeology 274 3. Thymology as a Historical Discipline 280 4. History and Fiction 283 5. Rationalization 6. IntrospectionCHAPTER 13. MEANING AND USE OF THE STUDY OF HISTORY 285 286 1. The Why of History 289 2. The Historical Situation 291 3. History of the Remote Past 293 4. Falsifying History 296 5. History and Humanism 298 6. History and the Rise of Aggressive Nationalism 7. History and Judgments of ValueCHAPTER 14. THE EPISTEMOLOGICAL FEATURES OF HISTORY 303 305 1. Prediction in the Natural Sciences 309 2. History and Prediction 312 3. The Specific Understanding of History 315 4. Thymological Experience 5. Real Types and Ideal Types

CONTENTS ix PART FOUR THE COURSE OF HISTORYCHAPTER 15. PHILOSOPHICAL INTERPRETATIONS OF HISTORY 323 324 1. Philosophies of History and Philosophical 326 Interpretations of History 332 337 2. Environmentalism 340 3. The Egalitarians' Interpretation of History 4. The Racial Interpretation of History 5. The Secularism of Western Civilization 6. The Rejection of Capitalism by AntisecularismCHAPTER 16. PRESENT-DAY TRENDS AND THE FUTURE 347 1. The Reversal of the Trend toward Freedom 351 2. The Rise of the Ideology of Equality 362 367 in Wealth and Income 370 3. The Chimera of a Perfect State of Mankind 378 4. The Alleged Unbroken Trend toward Progress 5. The Suppression of \"Economic\" Freedom 6. The Uncertainty of the FutureINDEX 381



PrefaceLUDWIG von Mises published many books and articlesin his long and productive life, each of them makingimportant contributions to the theory and applicationof economic science. But there stands out among themfour towering masterpieces, immortal monuments tothe work of the greatest economist and scientist ofhuman action of our century. The first, which estab-lished Mises in the front rank of economists, was TheTheory of Money and Credit (1912), which for the firsttime integrated the theory of money and the theory ofrelative prices, and outlined his later theory of thebusiness cycle. Mises's second great work was Social-ism (1922), which provided the definitive, comprehen-sive critique of socialism and demonstrated that asocialist order could not calculate economically. Thethird was his stupendous treatise Human Action(1949), which set forth an entire structure of econom-ics and analysis of acting man. All three of these workshave made their mark in economics, and have beenfeatured in the \"Austrian\" revival that has flowered inthe United States over the past decade. XI

xii PREFACE But Mises's fourth and last great work, Theory andHistory (1957), has made remarkably little impact,and has rarely been cited even by the young econo-mists of the recent Austrian revival. It remains by farthe most neglected masterwork of Mises. And yet itprovides the philosophical backstop and elaboration ofthe philosophy underlying Human Action. It is Mises'sgreat methodological work, explaining the basis of hisapproach to economics, and providing scintillating cri-tiques of such fallacious alternatives as historicism,scientism, and Marxian dialectical materialism. It might be thought that, despite its great impor-tance, Theory and History has not made its markbecause, in this age of blind academic specialization,economics will have nothing to do with anything thatsmacks of the philosophic. Certainly, hyper-specializa-tion plays a part, but in the last few years, interest inmethodology and the basic underpinnings of econom-ics has blossomed, and one would think that at leastthe specialists in this area would find much to discussand absorb in this book. And economists are surely notso far gone in jargon and muddled writing that theywould fail to respond to Mises's lucid and sparklingprose. It is likely, instead, that the neglect of Theory andHistory has more to do with the content of its philo-sophical message. For while many people are aware ofthe long and lone struggle that Ludwig von Miseswaged against statism and on behalf of laissez-faire,few realize that there is far greater resistance in theeconomics profession to Mises's methodology than

PREFACE xiiithere is to his politics. Adherence to the free market,after all, is now not uncommon among economists(albeit not with Mises's unerring consistency), but feware ready to adopt the characteristically Austrianmethod which Mises systematized and named \"praxe-ology.\" At the heart of Mises and praxeology is the conceptwith which he appropriately begins Theory and His-tory, methodological dualism, the crucial insight thathuman beings must be considered and analyzed in away and with a methodology that differs radically fromthe analysis of stones, planets, atoms, or molecules.Why? Because, quite simply, it is the essence of humanbeings that they act, that they have goals and purposes,and that they try to achieve those goals. Stones, atoms,planets, have no goals or preferences; hence, they donot choose among alternative courses of action. Atomsand planets move, or are moved; they cannot choose,select paths of action, or change their minds. Men andwomen can and do. Therefore, atoms and stones can beinvestigated, their courses charted, and their pathsplotted and predicted, at least in principle, to theminutest quantitative detail. People cannot; every day,people learn, adopt new values and goals, and changetheir minds; people cannot be slotted and predicted ascan objects without minds or without the capacity tolearn and choose. And now we can see why the economics professionhas put up such massive resistance to the basicapproach of Ludwig von Mises. For economics, like theother social sciences in our century, has embraced the

xiv PREFACEmyth of what Mises has properly and scornfullyreferred to as \"scientism\"—the idea that the only truly\"scientific\" approach to the study of man is to ape theapproach of the physical sciences, in particular of itsmost prestigious branch, physics. To become truly\"scientific\" like physics and the other natural sciences,then, economics must shun such concepts as purposes,goals and learning; it must abandon man's mind andwrite only of mere events. It must not talk of changingone's mind, because it must claim that events are pre-dictable, since, in the words of the original motto ofthe Econometric Society, \"Science is prediction.\" Andto become a \"hard\" or \"real\" science, economics musttreat individuals not as unique creatures, each withhis or her own goals and choices, but as homogenousand therefore predictable bits of \"data.\" One reasonorthodox economic theory has always had great diffi-culty with the crucial concept of the entrepreneur isthat each entrepreneur is clearly and obviouslyunique; and neoclassical economics cannot handleindividual uniqueness. Furthermore, \"real\" science, it is alleged, must oper-ate on some variant of positivism. Thus, in physics, thescientist is confronted with a number of homogeneous,uniform bits of events, which can be investigated forquantitative regularities and constants, e.g., the rate atwhich objects fall to earth. Then, the scientist frameshypotheses to explain classes of behavior or motions,and then deduces various propositions by which he can\"test\" the theory by checking with hard, empiricalfact, with these observable bits of events. (Thus, the

PREFACE xvtheory of relativity can be tested by checking certainempirically observable features of an eclipse.) In theOld Positivist variant, he \"verifies\" the theory by thisempirical check; in the more nihilistic neopositivismof Karl Popper, he can only \"falsify\" or \"not falsify\" atheory in this manner. In any case, his theories mustalways be held tentatively, and can never, at least notofficially, be embraced as definitively true; for he mayalways find that other, alternative theories may beable to explain wider classes of facts, that some newfacts may run counter to, or falsify, the theory. The sci-entist must always wear at least the mask of humilityand open-mindedness. But it was part of the genius of Ludwig von Misesto see that sound economics has never proceeded inthis way, and to elaborate the good reasons for thiscurious fact. There has been much unnecessary confu-sion over Mises's rather idiosyncratic use of the terma priori, and the enthusiasts for modern scientificmethods have been able to use it to dismiss him as amere unscientific mystic. Mises saw that students ofhuman action are at once in better and in worse, andcertainly in different, shape from students of naturalscience. The physical scientist looks at homogenousbits of events, and gropes his way toward finding andtesting explanatory or causal theories for those empir-ical events. But in human history, we, as humanbeings ourselves, are in a position to know the cause ofevents already; namely, the primordial fact thathuman beings have goals and purposes and act to

xvi PREFACEattain them. And this fact is known not tentativelyand hesitantly, but absolutely and apodictically. One example that Mises liked to use in his class todemonstrate the difference between two fundamentalways of approaching human behavior was in looking atGrand Central Station behavior during rush hour. The\"objective\" or \"truly scientific\" behaviorist, he pointedout, would observe the empirical events: e.g., peoplerushing back and forth, aimlessly at certain predictabletimes of day. And that is all he would know. But thetrue student of human action would start from the factthat all human behavior is purposive, and he would seethe purpose is to get from home to the train to work inthe morning, the opposite at night, etc. It is obviouswhich one would discover and know more about humanbehavior, and therefore which one would be the gen-uine \"scientist.\" It is from this axiom, the fact of purposive humanaction, that all of economic theory is deduced; eco-nomics explores the logical implications of the perva-sive fact of action. And since we know absolutely thathuman action is purposive, we know with equal cer-tainty the conclusions at each step of the logical chain.There is no need to \"test\" this theory, if indeed thatconcept has much sense in this context. Is the fact of human purposive action \"verifiable\"?Is it \"empirical\"? Yes, but certainly not in the precise,or quantitative way that the imitators of physics areused to. The empiricism is broad and qualitative,stemming from the essence of human experience; it

PREFACE xviihas nothing to do with statistics or historical events.Furthermore, it is dependent on the fact that we areall human beings and can therefore use this knowledgeto apply it to others of the same species. Still less is theaxiom of purposive action \"falsifiable.\" It is so evident,once mentioned and considered, that it clearly formsthe very marrow of our experience in the world. It is just as well that economic theory does not need\"testing,\" for it is impossible to test it in any way bychecking its propositions against homogeneous bits ofuniform events. For there are no such events. The useof statistics and quantitative data may try to mask thisfact, but their seeming precision is only grounded onhistorical events that are not homogeneous in anysense. Each historical event is a complex, uniqueresultant of many causal factors. Since it is unique, itcannot be used for a positivistic test, and since it isunique it cannot be combined with other events in theform of statistical correlations and achieve any mean-ingful result. In analyzing the business cycle, forexample, it is not legitimate to treat each cycle asstrictly homogeneous to every other, and therefore toadd, multiply, manipulate, and correlate data. To aver-age two time series, for example, and to proudly pro-claim that Series X has an average four-month leadcompared to Series Y at some phase of the cycle, meansnext to nothing. For (a) no particular time series mayeven have the four-month lead-lag, and the lags mayand will range widely; and (b) the average of any pastseries has no relevance to the data of the future, which

xviii PREFACEwill have its own ultimately unpredictable differencesfrom the previous cycles. By demolishing the attempted use of statistics toframe or test theory, Ludwig von Mises has beenaccused of being a pure theorist with no interest in orrespect for history. On the contrary, and this is the cen-tral theme of Theory and History, it is the positivistsand behaviorists who lack respect for the unique his-torical fact by trying to compress these complex his-torical events into the Procrustean mold of move-ments of atoms or planets. In human affairs, the com-plex historical event itself needs to be explained byvarious theories as far as possible; but it can never becompletely or precisely determined by any theory. Theembarrassing fact that the forecasts of would-be eco-nomic sooth-sayers have always faced an abysmalrecord, especially the ones that pretend to quantitativeprecision, is met in mainstream economics by thedetermination to fine-tune the model once more andtry again. It is above all Ludwig von Mises who recog-nizes the freedom, of mind and of choice, at the irre-ducible heart of the human condition, and who realizestherefore that the scientific urge to determinism andcomplete predictability is a search for the impossible—and is therefore profoundly unscientific. Among some younger Austrians, an unwillingnessto challenge the prevailing methodological orthodoxyhas led to either the outright adoption of positivism orelse the abandonment of theory altogether on behalf of

PREFACE xixa vaguely empirical institutionalism. Immersion inTheory and History would help both groups to realizethat true theory is not divorced from the world of real,acting man, and that one can abandon scientisticmyths while still using the apparatus of deductive the-ory. Austrian economics will never enjoy a genuine ren-aissance until economists read and absorb the vital les-sons of this unfortunately neglected work. Withoutpraxeology no economics can be truly Austrian or trulysound. Murray N. Rothbard New York City, 1985



Introduction1. Methodological DualismMORTAL MAN does not know how the universe and allthat it contains may appear to a superhuman intelli-gence. Perhaps such an exalted mind is in a position toelaborate a coherent and comprehensive monistic inter-pretation of all phenomena. Man—up to now, at least—has always gone lamentably amiss in his attempts tobridge the gulf that he sees yawning between mind andmatter, between the rider and the horse, between themason and the stone. It would be preposterous to viewthis failure as a sufficient demonstration of the sound-ness of a dualistic philosophy. All that we can inferfrom it is that science—at least for the time being—must adopt a dualistic approach, less as a philosophicalexplanation than as a methodological device. Methodological dualism refrains from any proposi-tion concerning essences and metaphysical constructs.It merely takes into account the fact that we do notknow how external events—physical, chemical, andphysiological—affect human thoughts, ideas, and judg-ments of value. This ignorance splits the realm ofknowledge into two separate fields, the realm of exter-nal events, commonly called nature, and the realm ofhuman thought and action. Older ages looked upon the issue from a moral or 1

2 INTRODUCTIONreligious point of view. Materialist monism was rejectedas incompatible with the Christian dualism of the Cre-ator and the creation, and of the immortal soul and themortal body. Determinism was rejected as incompatiblewith the fundamental principles of morality as well aswith the penal code. Most of what was advanced inthese controversies to support the respective dogmaswas unessential and is irrelevant from the methodologi-cal point of view of our day. The determinists did littlemore than repeat their thesis again and again, withouttrying to substantiate it. The indeterminists denied theiradversaries' statements but were unable to strike at theirweak points. The long debates were not very helpful. The scope of the controversy changed when the newscience of economics entered the scene. Political partieswhich passionately rejected all the practical conclu-sions to which the results of economic thought inevita-bly lead, but were unable to raise any tenable objec-tions against their truth and correctness, shifted theargument to the fields of epistemology and method-ology. They proclaimed the experimental methods ofthe natural sciences to be the only adequate mode ofresearch, and induction from sensory experience theonly legitimate mode of scientific reasoning. They be-haved as if they had never heard about the logicalproblems involved in induction. Everything that wasneither experimentation nor induction was in their eyesmetaphysics, a term that they employed as synony-mous with nonsense.

INTRODUCTION 32. Economics and Metaphysics The sciences of human action start from the fact thatman purposefully aims at ends he has chosen. It isprecisely this that all brands of positivism, behaviorism,and panphysicalism want either to deny altogether orto pass over in silence. Now, it would simply be sillyto deny the fact that man manifestly behaves as if hewere really aiming at definite ends. Thus the denial ofpurposefulness in man's attitudes can be sustainedonly if one assumes that the choosing both of ends andof means is merely apparent and that human behavioris ultimately determined by physiological events whichcan be fully described in the terminology of physicsand chemistry. Even the most fanatical champions of the \"UnifiedScience\" sect shrink from unambiguously espousing thisblunt formulation of their fundamental thesis. Thereare good reasons for this reticence. So long as no defi-nite relation is discovered between ideas and physicalor chemical events of which they would occur as theregular sequel, the positivist thesis remains an epistemo-logical postulate derived not from scientifically estab-lished experience but from a metaphysical world view. The positivists tell us that one day a new scientificdiscipline will emerge which will make good theirpromises and will describe in every detail the physicaland chemical processes that produce in the body ofman definite ideas. Let us not quarrel today about suchissues of the future. But it is evident that such a meta-

4 INTRODUCTIONphysical proposition can in no way invalidate the re-sults of the discursive reasoning of the sciences of hu-man action. The positivists for emotional reasons donot like the conclusions that acting man must neces-sarily draw from the teachings of economics. As theyare not in a position to find any flaw either in the rea-soning of economics or in the inferences derived fromit, they resort to metaphysical schemes in order to dis-credit the epistemological foundations and the method-ological approach of economics. There is nothing vicious about metaphysics. Mancannot do without it. The positivists are lamentablywrong in employing the term \"metaphysics\" as asynonym for nonsense. But no metaphysical propositionmust contradict any of the findings of discursive rea-soning. Metaphysics is not science, and the appeal tometaphysical notions is vain in the context of a logicalexamination of scientific problems. This is true also ofthe metaphysics of positivism, to which its supportershave given the name of antimetaphysics.3. Regularity and Prediction Epistemologically the distinctive mark of what wecall nature is to be seen in the ascertainable and inevita-ble regularity in the concatenation and sequence of phe-nomena. On the other hand the distinctive mark ofwhat we call the human sphere or history or, better,the realm of human action is the absence of such auniversally prevailing regularity. Under identical con-ditions stones always react to the same stimuli in the

INTRODUCTION 5same way; we can learn something about these regularpatterns of reacting, and we can make use of this knowl-edge in directing our actions toward definite goals. Ourclassification of natural objects and our assigning namesto these classes is an outcome of this cognition. Astone is a thing that reacts in a definite way. Men re-act to the same stimuli in different ways, and the sameman at different instants of time may react in waysdifferent from his previous or later conduct. It is im-possible to group men into classes whose members al-ways react in the same way. This is not to say that future human actions aretotally unpredictable. They can, in a certain way, beanticipated to some extent. But the methods appliedin such anticipations, and their scope, are logically andepistemologically entirely different from those appliedin anticipating natural events, and from their scope.4. The Concept of the Laws of Nature Experience is always experience of past happenings.It refers to what has been and is no longer, to eventssunk forever in the flux of time. The awareness of regularity in the concatenation andsequence of many phenomena does not affect this ref-erence of experience to something that occurred oncein the past at a definite place and time under the cir-cumstances prevailing there and then. The cognitionof regularity too refers exclusively to past events. Themost experience can teach us is: in all cases observedin the past there was an ascertainable regularity.

6 INTRODUCTION From time immemorial all men of all races and civili-zations have taken it for granted that the regularity ob-served in the past will also prevail in the future. Thecategory of causality and the idea that natural eventswill in the future follow the same pattern they showedin the past are fundamental principles of humanthought as well as of human action. Our material civili-zation is the product of conduct guided by them. Anydoubt concerning their validity within the sphere ofpast human action is dispelled by the results of tech-nological designing. History teaches us irrefutably thatour forefathers and we ourselves up to this very mo-ment have acted wisely in adopting them. They are truein the sense that pragmatism attaches to the concept oftruth. They work, or, more precisely, they have workedin the past. Leaving aside the problem of causality with its meta-physical implications, we have to realize that the nat-ural sciences are based entirely on the assumption thata regular conjunction of phenomena prevails in therealm they investigate. They do not search merely forfrequent conjunction but for a regularity that prevailedwithout exception in all cases observed in the past andis expected to prevail in the same way in all cases to beobserved in the future. Where they can discover only afrequent conjunction—as is often the case in biology,for example—they assume that it is solely the inade-quacy of our methods of inquiry that prevents us tem-porarily from discovering strict regularity. The two concepts of invariable and of frequentconjunction must not be confused. In referring to in-

INTRODUCTION 7variable conjunction people mean that no deviationfrom the regular pattern—the law—of conjunction hasever been observed and that they are certain, as faras men can be certain about anything, that no suchdeviation is possible and will ever happen. The bestelucidation of the idea of inexorable regularity in theconcatenation of natural phenomena is provided by theconcept of miracles. A miraculous event is somethingthat simply cannot happen in the normal course ofworld affairs as we know it, because its happening couldnot be accounted for by the laws of nature. If none-theless the occurrence of such an event is reported, twodifferent interpretations are provided, both of which,however, fully agree in taking for granted the inexo-rability of the laws of nature. The devout say: \"Thiscould not happen in the normal course of affairs. Itcame to pass only because the Lord has the power toact without being restricted by the laws of nature. It isan event incomprehensible and inexplicable for thehuman mind, it is a mystery, a miracle.\" The rationalistssay: \"It could not happen and therefore it did not hap-pen. The reporters were either liars or victims of adelusion.\" If the concept of laws of nature were tomean not inexorable regularity but merely frequentconnection, the notion of miracles would never havebeen conceived. One would simply say: A is frequentlyfollowed by B, but in some instances this effect failedto appear. Nobody says that stones thrown into the air at anangle of 45 degrees will frequently fall down to earthor that a human limb lost by an accident frequently

8 INTRODUCTIONdoes not grow again. All our thinking and all our ac-tions are guided by the knowledge that in such caseswe are not faced with frequent repetition of the sameconnection, but with regular repetition.5. The Limitations of Human Knowledge Human knowledge is conditioned by the power ofthe human mind and by the extent of the sphere inwhich objects evoke human sensations. Perhaps thereare in the universe things that our senses cannot per-ceive and relations that our minds cannot comprehend.There may also exist outside of the orbit we call theuniverse other systems of things about which we can-not learn anything because, for the time being, no tracesof their existence penetrate into our sphere in a waythat can modify our sensations. It may also be thatthe regularity in the conjunction of natural phenomenawe are observing is not eternal but only passing, thatit prevails only in the present stage (which may lastmillions of years) of the history of the universe and mayone day be replaced by another arrangement. Such and similar thoughts may induce in a conscien-tious scientist the utmost caution in formulating theresults of his studies. It behooves the philosopher to bestill more restrained in dealing with the apriori cate-gories of causality and the regularity in the sequenceof natural phenomena. The apriori forms and categories of human thinkingand reasoning cannot be traced back to something ofwhich they would appear as the logically necessary

INTRODUCTION 9conclusion. It is contradictory to expect that logic couldbe of any service in demonstrating the correctness orvalidity of the fundamental logical principles. All thatcan be said about them is that to deny their correctnessor validity appears to the human mind nonsensical andthat thinking, guided by them, has led to modes of suc-cessful acting. Hume's skepticism was the reaction to a postulateof absolute certainty that is forever unattainable toman. Those divines who saw that nothing but revela-tion could provide man with perfect certainty wereright. Human scientific inquiry cannot proceed beyondthe limits drawn by the insufficiency of man's sensesand the narrowness of his mind. There is no deductivedemonstration possible of the principle of causality andof the ampliative inference of imperfect induction;there is only recourse to the no less indemonstrablestatement that there is a strict regularity in the conjunc-tion of all natural phenomena. If we were not to referto this uniformity, all the statements of the naturalsciences would appear to be hasty generalizations.6. Regularity and Choosing The main fact about human action is that in regardto it there is no such regularity in the conjunction ofphenomena. It is not a shortcoming of the sciences ofhuman action that they have not succeeded in discover-ing determinate stimulus-response patterns. What doesnot exist cannot be discovered. If there were no regularity in nature, it would be

10 INTRODUCTIONimpossible to assert anything with regard to the be-havior of classes of objects. One would have to studythe individual cases and to combine what one haslearned about them into a historical account. Let us, for the sake of argument, assume that allthose physical quantities that we call constants arein fact continually changing and that the inadequacyof our methods of inquiry alone prevents us from be-coming aware of these slow changes. We do not takeaccount of them because they have no perceptible in-fluence upon our conditions and do not noticeably affectthe outcome of our actions. Therefore one could saythat these quantities established by the experimentalnatural sciences may fairly be looked upon as constantssince they remain unchanged during a period of timethat by far exceeds the ages for which we may planto provide. But it is not permissible to argue in an analogous waywith regard to the quantities we observe in the field ofhuman action. These quantities are manifestly variable.Changes occurring in them plainly affect the result ofour actions. Every quantity that we can observe is ahistorical event, a fact which cannot be fully describedwithout specifying the time and geographical point. The econometrician is unable to disprove this fact,which cuts the ground from under his reasoning. Hecannot help admitting that there are no \"behavior con-stants.\" Nonetheless he wants to introduce some num-bers, arbitrarily chosen on the basis of a historical fact,as \"unknown behavior constants.\" The sole excuse headvances is that his hypotheses are \"saying only that

INTRODUCTION 11these unknown numbers remain reasonably constantthrough a period of years.\"* Now whether such aperiod of supposed constancy of a definite number isstill lasting or whether a change in the number has al-ready occurred can only be established later on. Inretrospect it may be possible, although in rare casesonly, to declare that over a (probably rather short)period an approximately stable ratio—which the econo-metrician chooses to call a \"reasonably\" constant ratio—prevailed between the numerical values of two fac-tors. But this is something fundamentally different fromthe constants of physics. It is the assertion of a historicalfact, not of a constant that can be resorted to in at-tempts to predict future events. Leaving aside for the present any reference to theproblem of the human will or free will, we may say:Nonhuman entities react according to regular patterns;man chooses. Man chooses first ultimate ends and thenthe means to attain them. These acts of choosing aredetermined by thoughts and ideas about which, at leastfor the time being, the natural sciences do not knowhow to give us any information. In the mathematical treatment of physics the dis-tinction between constants and variables makes sense;it is essential in every instance of technological compu-tation. In economics there are no constant relations be-tween various magnitudes. Consequently all ascertain-able data are variables, or what amounts to the same 1. See die Cowles Commission for Research in Economics, Reportfor Period, January 1, 1948-June 30, 1949 (University of Chicago),p. 7.

12 INTRODUCTIONthing, historical data. The mathematical economistsreiterate that the plight of mathematical economicsconsists in the fact that there are a great number ofvariables. The truth is that there are only variablesand no constants. It is pointless to talk of variableswhere there are no invariables.7. Means and Ends To choose is to pick one out of two or more possiblemodes of conduct and to set aside the alternatives.Whenever a human being is in a situation in whichvarious modes of behavior, precluding one another, areopen to him, he chooses. Thus life implies an endlesssequence of acts of choosing. Action is conduct directedby choices. The mental acts that determine the content of achoice refer either to ultimate ends or to the means toattain ultimate ends. The former are called judgmentsof value. The latter are technical decisions derived fromfactual propositions. In the strict sense of the term, acting man aims onlyat one ultimate end, at the attainment of a state ofaffairs that suits him better than the alternatives.Philosophers and economists describe this undeniablefact by declaring that man prefers what makes himhappier to what makes him less happy, that he aims athappiness.1 Happiness—in the purely formal sense in 1. There is no need to refute anew the arguments advanced formore than two thousand years against the principles of eudaemonism,hedonism, and utilitarianism. For an exposition of the formal and sub-

INTRODUCTION 13which ethical theory applies the term—is the onlyultimate end, and all other things and states of affairssought are merely means to the realization of thesupreme ultimate end. It is customary, however, toemploy a less precise mode of expression, frequentlyassigning the name of ultimate ends to all those meansthat are fit to produce satisfaction directly and imme-diately. The characteristic mark of ultimate ends is that theydepend entirely on each individual's personal and sub-jective judgment, which cannot be examined, measured,still less corrected by any other person. Each individualis the only and final arbiter in matters concerning hisown satisfaction and happiness. As this fundamental cognition is often considered tobe incompatible with the Christian doctrine, it may beproper to illustrate its truth by examples drawn fromthe early history of the Christian creed. The martyrsrejected what others considered supreme delights, inorder to win salvation and eternal bliss. They did notheed their well-meaning fellows who exhorted themto save their lives by bowing to the statue of the divineemperor, but chose to die for their cause rather than topreserve their lives by forfeiting everlasting happinessin heaven. What arguments could a man bring for-jectivistic character of the concepts \"pleasure\" and \"pain\" as em-ployed in the context of these doctrines, see Mises, Human Action(New Haven, Yale University Press, 1949, pp. 14-15), and LudwigFeuerbach, Euddmonismus, in Sammtliche Werke, ed. Bolin and Jodl(Stuttgart, 1907), 10, 230-93. Of course, those who recognize no\"happiness\" but that given by the orgasm, alcohol, and so forth con-tinue to repeat the old errors and distortions.

14 INTRODUCTIONward who wanted to dissuade his fellow from martyr-dom? He could try to undermine the spiritual founda-tions of his faith in the message of the Gospels and theirinterpretation by the Church. This would have been anattempt to shake the Christian's confidence in the ef-ficacy of his religion as a means to attain salvation andbliss. If this failed, further argument could avail noth-ing, for what remained was the decision between twoultimate ends, the choice between eternal bliss andeternal damnation. Then martyrdom appeared themeans to attain an end which in the martyr's opinionwarranted supreme and everlasting happiness. As soon as people venture to question and to examinean end, they no longer look upon it as an end butdeal with it as a means to attain a still higher end. Theultimate end is beyond any rational examination. Allother ends are but provisional. They turn into meansas soon as they are weighed against other ends ormeans. Means are judged and appreciated according totheir ability to produce definite effects. While judg-ments of value are personal, subjective, and final, judg-ments about means are essentially inferences drawnfrom factual propositions concerning the power of themeans in question to produce definite effects. Aboutthe power of a means to produce a definite effect therecan be dissension and dispute between men. For theevaluation of ultimate ends there is no interpersonalstandard available. Choosing means is a technical problem, as it were,

INTRODUCTION 15the term \"technique\" being taken in its broadest sense.Choosing ultimate ends is a personal, subjective, indi-vidual affair. Choosing means is a matter of reason,choosing ultimate ends a matter of the soul and the wilL



PART ONE. VALUE



Chapter 1. Judgments of Value1. Judgments of Value and Propositions of ExistencePROPOSITIONS asserting existence (affirmative existen-tial propositions) or nonexistence (negative existentialpropositions) are descriptive. They assert somethingabout the state of the whole universe or of parts of theuniverse. With regard to them questions of truth andfalsity are significant. They must not be confoundedwith judgments of value. Judgments of value are voluntaristic. They expressfeelings, tastes, or preferences of the individual whoutters them. With regard to them there cannot be anyquestion of truth and falsity. They are ultimate and notsubject to any proof or evidence. Judgments of value are mental acts of the individualconcerned. As such they must be sharply distinguishedfrom the sentences by means of which an individualtries to inform other people about the content of hisjudgments of value. A man may have some reason to lieabout his valuations. We may describe this state ofaffairs in the following way: Every judgment of valueis in itself also a fact of the actual state of the universeand as such may be the topic of existential propositions.The sentence \"I prefer Beethoven to Lehar\" refers to ajudgment of value. If looked upon as an existentialproposition, it is true if I really prefer Beethoven and 19

20 VALUEact accordingly and false if I in fact prefer Lehar andfor some reasons lie about my real feelings, taste, orpreferences. In an analogous way the existential propo-sition \"Paul prefers Beethoven to Lehar\" may be trueor false. In declaring that with regard to a judgment ofvalue there cannot be any question of truth or falsity,we refer to the judgment as such and not to the sen-tences communicating the content of such a judgmentof value to other people.2. Valuation and Action A judgment of value is purely academic if it does notimpel the man who utters it to any action. There arejudgments which must remain academic because it isbeyond the power of the individual to embark uponany action directed by them. A man may prefer a starrysky to the starless sky, but he cannot attempt to substi-tute the former state which he likes better for the latterhe likes less. The significance of value judgments consists pre-cisely in the fact that they are the springs of humanaction. Guided by his valuations, man is intent uponsubstituting conditions that please him better for con-ditions which he deems less satisfactory. He employsmeans in order to attain ends sought. Hence the history of human affairs has to deal withthe judgments of value that impelled men to act anddirected their conduct. What happened in history can-not be discovered and narrated without referring tothe various valuations of the aeting individuals. It is

JUDGMENTS OF VALUE 21not the task of the historian qua historian to pass judg-ments of value on the individuals whose conduct is thetheme of his inquiries. As a branch of knowledge his-tory utters existential propositions only. But these exis-tential propositions often refer to the presence or ab-sence of definite judgments of value in the minds of theacting individuals. It is one of the tasks of the specificunderstanding of the historical sciences to establishwhat content the value judgments of the acting indi-viduals had. It is a task of history, for example, to trace back theorigin of India's caste system to the values whichprompted the conduct of the generations who devel-oped, perfected, and preserved it. It is its further taskto discover what the consequences of this system wereand how these effects influenced the value judgments oflater generations. But it is not the business of the his-torian to pass judgments of value on the system as such,to praise or to condemn it. He has to deal with its rele-vance for the course of affairs, he has to compare itwith the designs and intentions of its authors and sup-porters and to depict its effects and consequences. Hehas to ask whether or not the means employed were fitto attain the ends the acting individuals sought. It is a fact that hardly any historian has fully avoidedpassing judgments of value. But such judgments arealways merely incidental to the genuine tasks of history.In uttering them the author speaks as an individualjudging from the point of view of his personal valua-tions, not as a historian.

22 VALUE3. The Subjectivity of Valuation All judgments of value are personal and subjective.There are no judgments of value other than those as-serting I prefer, I like better, I wish. It cannot be denied by anybody that various individ-uals disagree widely with regard to their feelings,tastes, and preferences and that even the same indi-viduals at various instants of their lives value the samethings in a different way. In view of this fact it is use-less to talk about absolute and eternal values. This does not mean that every individual draws hisvaluations from his own mind. The immense majorityof people take their valuations from the social environ-ment into which they were born, in which they grewup, that moulded their personality and educated them.Few men have the power to deviate from the traditionalset of values and to establish their own scale of whatappears to be better and what appears to be worse. What the theorem of the subjectivity of valuationmeans is that there is no standard available whichwould enable us to reject any ultimate judgment ofvalue as wrong, false, or erroneous in the way we canreject an existential proposition as manifestly false. Itis vain to argue about ultimate judgments of value aswe argue about the truth or falsity of an existentialproposition. As soon as we start to refute by argumentsan ultimate judgment of value, we look upon it as ameans to attain definite ends. But then we merely shiftthe discussion to another plane. We no longer view the

JUDGMENTS OF VALUE 23principle concerned as an ultimate value but as a meansto attain an ultimate value, and we are again faced withthe same problem. We may, for instance, try to show aBuddhist that to act in conformity with the teachingsof his creed results in effects which we consider disas-trous. But we are silenced if he replies that these effectsare in his opinion lesser evils or no evils at all comparedto what would result from nonobservance of his rulesof conduct. His ideas about the supreme good, happi-ness, and eternal bliss are different from ours. He doesnot care for those values his critics are concerned with,and seeks for satisfaction in other things than they do.4. The Logical and Syntactical Structure of Judgments of Value A judgment of value looks upon things from thepoint of view of the man who utters it. It does not as-sert anything about things as they are. It manifests aman's affective response to definite conditions of theuniverse as compared with other definite conditions. Value is not intrinsic. It is not in things and condi-tions but in the valuing subject. It is impossible toascribe value to one thing or state of affairs only. Val-uation invariably compares one thing or condition withanother thing or condition. It grades various states ofthe external world. It contrasts one thing or state,whether real or imagined, with another thing or state,whether real or imagined, and arranges both in a scaleof what the author of the judgment likes better andwhat less.

24 VALUE It may happen that the judging individual considersboth things or conditions envisaged as equal. He is notconcerned whether there is A or B. Then his judgmentof value expresses indifference. No action can resultfrom such a neutral disposition. Sometimes the utterance of a judgment of value iselliptical and makes sense only if appropriately com-pleted by the hearer. \"I don't like measles\" means \"Iprefer the absence of measles to its presence.\" Suchincompleteness is the mark of all references to freedom.Freedom invariably means freedom from (absence of)something referred to expressly or implicitly. The gram-matical form of such judgments may be qualified asnegative. But it is vain to deduce from this idiomaticattire of a class of judgments of value any statementsabout their content and to blame them for an allegednegativism. Every judgment of value allows of a formu-lation in which the more highly valued thing or stateis logically expressed in both a positive and a negativeway, although sometimes a language may not have de-veloped the appropriate term. Freedom of the press im-plies the rejection or negation of censorship. But, statedexplicitly, it means a state of affairs in which the authoralone determines the content of his publication as dis-tinct from a state in which the police has a right tointerfere in the matter. Action necessarily involves the renunciation of some-thing to which a lower value is assigned in order toattain or to preserve something to which a higher valueis assigned. Thus, for instance, a definite amount of lei-sure is renounced in order to reap the product of a defi-

JUDGMENTS OF VALUE 25nite amount of labor. The renunciation of leisure is themeans to attain a more highly valued thing or state. There are men whose nerves are so sensitive that theycannot endure an unvarnished account of many factsabout the physiological nature of the human body andthe praxeological character of human action. Such peo-ple take offense at the statement that man must choosebetween the most sublime things, the loftiest humanideals, on the one hand, and the wants of his body onthe other. They feel that such statements detract fromthe nobility of the higher things. They refuse to noticethe fact that there arise in the Me of man situations inwhich he is forced to choose between fidelity to loftyideals and such animal urges as feeding. Whenever man is faced with the necessity of choos-ing between two things or states, his decision is ajudgment of value no matter whether or not it is ut-tered in the grammatical form commonly employed inexpressing such judgments.

Chapter 2. Knowledge and Value1. The Bias DoctrineT H E ACCUSATION of bias has been leveled againsteconomists long before Marx integrated it into his doc-trines. Today it is fairly generally endorsed by writersand politicians who, although they are in many respectsinfluenced by Marxian ideas, cannot simply be consid-ered Marxians. We must attach to their reproach ameaning that differs from that which it has in the con-text of dialectical materialism. We must therefore dis-tinguish two varieties of the bias doctrine: the Marxianand the non-Marxian. The former will be dealt with inlater parts of this essay in a critical analysis of Marxianmaterialism. The latter alone is treated in this chapter. Upholders of both varieties of the bias doctrine rec-ognize that their position would be extremely weak ifthey were merely to blame economics for an allegedbias without charging all other branches of science withthe same fault. Hence they generalize the bias doctrine—but this generalized doctrine we need not examinehere. We may concentrate upon its core, the assertionthat economics is necessarily not wertfrei but is taintedby prepossessions and prejudices rooted in value judg-ments. For all arguments advanced to support the doc-trine of general bias are also resorted to in the endeav-ors to prove the special bias doctrine that refers to 26

KNOWLEDGE AND VALUE 27economics, while some of the arguments brought for-ward in favor of the special bias doctrine are manifestlyinapplicable to the general doctrine. Some contemporary defenders of the bias doctrinehave tried to link it with Freudian ideas. They contendthat the bias they see in the economists is not consciousbias. The writers in question are not aware of theirprejudgments and do not intentionally seek results thatwill justify their foregone conclusions. From the deeprecesses of the subconscious, suppressed wishes, un-known to the thinkers themselves, exert a disturbing in-fluence on their reasoning and direct their cogitationstoward results that agree with their repressed desiresand urges. However, it does not matter which variety of the biasdoctrine one endorses. Each of them is open to the sameobjections. For the reference to bias, whether intentional or sub-conscious, is out of place if the accuser is not in a posi-tion to demonstrate clearly in what the deficiency ofthe doctrine concerned consists. All that counts iswhether a doctrine is sound or unsound. This is to beestablished by discursive reasoning. It does not in theleast detract from the soundness and correctness of atheory if the psychological forces that prompted itsauthor are disclosed. The motives that guided thethinker are immaterial to appreciating his achieve-ment. Biographers are busy today explaining the workof the genius as a product of his complexes and libidi-nous impulses and a sublimation of his sexual desires.Their studies may be valuable contributions to psychol-

28 VALUEogy, or rather to thymology (see below p. 265), butthey do not affect in any way the evaluation of the biog-raphee's exploits. The most sophisticated psychoana-lytical examination of Pascal's life tells us nothing aboutthe scientific soundness or unsoundness of his mathe-matical and philosophical doctrines. If the failures and errors of a doctrine are unmaskedby discursive reasoning, historians and biographers maytry to explain them by tracing them back to their au-thor's bias. But if no tenable objections can be raisedagainst a theory, it is immaterial what kind of motivesinspired its author. Granted that he was biased. Butthen we must realize that his alleged bias producedtheorems which successfully withstood all objections. Reference to a thinker's bias is no substitute for arefutation of his doctrines by tenable arguments. Thosewho charge the economists with bias merely show thatthey are at a loss to refute their teachings by criticalanalysis.2. Common Weal versus Special Interests Economic policies are directed toward the attain-ment of definite ends. In dealing with them economicsdoes not question the value attached to these ends byacting men. It merely investigates two points: First,whether or not the policies concerned are fit to attainthe ends which those recommending and applying themwant to attain. Secondly, whether these policies do notperhaps produce effects which, from the point of view

KNOWLEDGE AND VALUE 29of those recommending and applying them, are unde-sirable. It is true that the terms in which many economists,especially those of the older generations, expressed theresult of their inquiries could easily be misinterpreted.In dealing with a definite policy they adopted a mannerof speech which would have been adequate from thepoint of view of those who considered resorting to it inorder to attain definite ends. Precisely because theeconomists were not biased and did not venture toquestion the acting men's choice of ends, they pre-sented the result of their deliberation in a mode of ex-pression which took the valuations of the actors forgranted. People aim at definite ends when resorting toa tariff or decreeing minimum wage rates. When theeconomists thought such policies would attain the endssought by their supporters, they called them good—justas a physician calls a certain therapy good because hetakes the end—curing his patient—for granted. One of the most famous of the theorems developedby the Classical economists, Ricardo's theory of com-parative costs, is safe against all criticism, if we mayjudge by the fact that hundreds of passionate adver-saries over a period of a hundred and forty years havefailed to advance any tenable argument against it. It ismuch more than merely a theory dealing with the ef-fects of free trade and protection. It is a propositionabout the fundamental principles of human coopera-tion under the division of labor and specialization andthe integration of vocational groups, about the origin

30 VALUEand further intensification of social bonds between men,and should as such be called the law of association. Itis indispensable for understanding the origin of civili-zation and the course of history. Contrary to popularconceptions, it does not say that free trade is good andprotection bad. It merely demonstrates that protectionis not a means to increase the supply of goods pro-duced. Thus it says nothing about protection's suita-bility or unsuitability to attain other ends, for instanceto improve a nation's chance of defending its independ-ence in war. Those charging the economists with bias refer totheir alleged eagerness to serve \"the interests.\" In thecontext of their accusation this refers to selfish pursuitof the well-being of special groups to the prejudice ofthe common weal. Now it must be remembered thatthe idea of the common weal in the sense of a harmonyof the interests of all members of society is a modernidea and that it owes its origin precisely to the teach-ings of the Classical economists. Older generations be-lieved that there is an irreconcilable conflict of interestsamong men and among groups of men. The gain of oneis invariably the damage of others; no man profits butby the loss of others. We may call this tenet the Mon-taigne dogma because in modern times it was firstexpounded by Montaigne. It was the essence of theteachings of Mercantilism and the main target of theClassical economists' critique of Mercantilism, to whichthey opposed their doctrine of the harmony of therightly understood or long-run interests of all membersof a market society. The socialists and interventionists

KNOWLEDGE AND VALUE 31reject the doctrine of the harmony of interests. Thesocialists declare that there is irreconcilable conflictamong the interests of the various social classes of anation; while the interests of the proletarians demandthe substitution of socialism for capitalism, those of theexploiters demand the preservation of capitalism. Thenationalists declare that the interests of the variousnations are irreconcilably in conflict. It is obvious that the antagonism of such incompati-ble doctrines can be resolved only by logical reasoning.But the opponents of the harmony doctrine are notprepared to submit their views to such examination.As soon as somebody criticizes their arguments andtries to prove the harmony doctrine they cry out bias.The mere fact that only they and not their adversaries,the supporters of the harmony doctrine, raise this *e-proach of bias shows clearly that they are unable toreject their opponents' statements by ratiocination.They engage in the examination of the problems con-cerned with the prepossession that only biased apolo-gists of sinister interests can possibly contest the cor-rectness of their socialist or interventionist dogmas. Intheir eyes the mere fact that a man disagrees with theirideas is the proof of his bias. When carried to its ultimate logical consequencesthis attitude implies the doctrine of polylogism. Poly-logism denies the uniformity of the logical structure ofthe human mind. Every social class, every nation, race,or period of history is equipped with a logic that differsfrom the logic of other classes, nations, races, or ages.Hence bourgeois economics differs from proletarian

32 VALUEeconomics, German physics from the physics of othernations, Aryan mathematics from Semitic mathematics.There is no need to examine here the essentials of thevarious brands of polylogism.1 For polylogism neverwent beyond the simple declaration that a diversity ofthe mind's logical structure exists. It never pointed outin what these differences consist, for instance how thelogic of the proletarians differs from that of the bour-geois. All the champions of polylogism did was to rejectdefinite statements by referring to unspecified peculi-arities of their author's logic.3. Economics and Value The main argument of the Classical harmony doc-trine starts from the distinction between interests in theshort run and those in the long run, the latter beingreferred to as the rightly understood interests. Let usexamine the bearing of this distinction upon the prob-lem of privileges. One group of men certainly gains by a privilegegranted to them. A group of producers protected bya tariff, a subsidy, or any other modern protectionistmethod against the competition of more efficient rivalsgains at the expense of the consumers. But will the restof the nation, taxpayers and buyers of the protectedarticle, tolerate the privilege of a minority? They willonly acquiesce in it if they themselves are benefited byan analogous privilege. Then everybody loses as muchin his capacity as consumer as he wins in his capacity 1. See Mises, Human Action, pp. 74-89.