Praxeology - Austrian School Approach

Austrian School Approach

Von Mises writes that action axiom is the basis of all praxeology, and it is the basic proposition that all specimens of the species Homo sapiens, the homo agens, purposefully utilize means over a period of time in order to achieve desired ends. In his magnum opus Human Action, Von Mises defined “action” in the sense of the action axiom by elucidating:

Human action is purposeful behavior. Or we may say: Action is will put into operation and transformed into an agency, is aiming at ends and goals, is the ego's meaningful response to stimuli and to the conditions of its environment, is a person's conscious adjustment to the state of the universe that determines his life. Such paraphrases may clarify the definition given and prevent possible misinterpretations. But the definition itself is adequate and does not need complement of commentary.

Von Mises argues that praxeology is not concerned with the individual's definition of end satisfaction, just the way he sought that satisfaction and that individual's increase of their satisfaction by removing sources of dissatisfaction or "uneasiness". In his theory, an acting man is defined as one capable of voluntary and conscious behaviour—to be otherwise would be to make one a mere creature who simply reacts to stimuli by instinct. Similarly, an acting man must have a source of dissatisfaction which he believes can be changed, otherwise he cannot act.

Von Mises writes that economics, the study of human choice under conditions of scarcity, can be treated as a specialization of praxeology, the study of all human action. Like other members of the Austrian School, von Mises rejected the standard scientific approach of relying upon empirical observation in the study of economics, and instead, favored the use of logical analysis, a logic which is influenced by Immanuel Kant's analytic–synthetic distinction. Von Mises writes that the empirical methods used in the natural sciences cannot be applied to the social sciences because the principle of induction does not apply. In essence, he believed that a theory constructed to predict how humans will act (what ends they will seek) in a "complex" situation could not arise from studying how they acted in "simple" situations. Furthermore, there are limits to how much can be learned from even a "simple situation". As a criticism to empirical studies seeking to find justification in the economic action of individuals, von Mises proposed that only the human actor knows the ends toward which he acts.

Another conclusion that von Mises reached was that decisions are made on an ordinal basis. That is, it is impossible to carry out more than one action at once, the conscious mind being capable of only one decision at a time—even if those decisions can be made in rapid order. Thus man will act to remove the most pressing source of dissatisfaction first and then move to the next most pressing source of dissatisfaction. Additionally, von Mises dismissed the notion that subjective values could be calculated mathematically; man can not treat his values with cardinal numbers, e.g., "I prefer owning a television 2.5 times as much as owning a DVD player." As a person satisfies his first most important goal and after that his second most important goal, then his second most important goal is always less important than his first most important goal. Thus, the satisfaction, or utility, that he derives from every further goal attained is less than that from the preceding goal. This assumes, of course, that the goals are independent, which is not always the case—for example, acquiring the television may enable one to pursue the goal of watching a documentary on biology, which may make one decide to study biology, which opens the goal of writing a research paper, and so on. In human society, many actions will be trading activities where one person regards a possession of another person as more desirable than one of his own possessions, and the other person has a similar higher regard for his colleague's possession than he does for his own. This assertion modifies the classical economic view about exchange, which posits that individuals exchange goods and services that they both appraise as being equal in value. This subject of praxeology is known as catallactics.