In defense of the <i>a priori</i>




Commenter Constant submitted a response to Conjectures and Refutations's latest criticism of Austrian School economic methodology.

Mathematics suffers from the same so-called faults as Austrian economics. It is nevertheless useful. Let me explain. "Apodictically certain" principles play the same role in Austrian economics as axioms play in mathematics.

[1] Economics teaches that one finds more value in what one receives than in what one gives up in exchange. (says an Austrian)

That can be taken as axiomatically true, in the following way: to say that someone values A over B is nothing other than to say that, if he had a choice between A and B, he would choose A. This can be simply a matter of definition. Is that bad or useless? No, because mathematics is full of stuff that is true by definition but math is nevertheless not at all useless. Let's look at the attempted rebuttal to the above:

sometimes I buy something only to discover that it’s not as good as I thought it would be and that I’d probably have been better off spending my money on something else instead

But that does not contradict [1], because what it concerns is a change in preference. Before, when he was ignorant, he valued A over B, meaning he would have chosen A over B (proven by the fact that he did choose A over B). After, when he knew a bit more about A, he valued B over A, meaning that (had he had the choice to do over again) he would have chosen B over A.

Seems to me that the proper answer to an Austrian is not to contradict a straw man version of his assertion, not to contradict an artificially weakened version of his assertion. Or to put it another way, interpret your opponent's statement as if he meant the strongest, most defensible interpretation of his statement, rather than as if he meant a weak interpretation of his statement. I believe Popper recommended this approach: strengthen your opponent's case before answering it. If you interpretively weaken your opponent's case before answering it you will convince only yourself, because your opponent will see you as having addressed a straw man.

So how can the Austrian be answered? By pointing out to him that a person's preferences change over time, and that what he prefers today may not be what he prefers tomorrow, and so an action that maximizes his benefit today does not thereby maximize his benefit tomorrow.

He might acknowledge that.

I have to admit, one doesn’t usually see the argument from personal incredulity hanging out there all pink and naked like this outside of Creationist circles.

And yet mathematical axioms often are accepted largely because we cannot imagine them not being true. Indeed, mathematics is persuasive largely not only because the theorems follow from some arbitrary set of axioms, but because the theorems follow from axioms which we cannot imagine not being true.

If that's what's supposedly wrong with Austrian economics, then it's really just a matter of style. If there is something I'd criticize the Austrians for, it's not their own economics, but their intolerance to other economics: they are not taking the other economics on its own terms. But the same criticism applies in the opposite direction.

"We can deduce whatever we like a priori, but but this does not make any of it a priori true about the world we live in."

But some things are true a priori. It is true a priori that if you weigh less than I do, then I weigh more than you do. You can ask, "sure, that's a priori true, but what is the point of saying something so blindingly obvious?" The point is that sometimes people *deny tautologies*, in fact often their thinking amounts to denying tautologies. There is a name for this. It's called "muddled thinking". And aside from muddled thinking, there simply are limits to our capacity to draw logical inferences. Even if we know all the laws of physics, it takes a lot of labor to deduce the necessary consequences even for very simple systems, so difficult that people who go to the trouble deserve respect and a title - how about "economist"?

A large number of errors about economics are in fact errors of logic and reasoning, i.e., muddled thinking. It is not merely that people have empirically false beliefs, but that they *aren't making sense*, they are failing to rigorously apply logic. And in any case, mere a priori mathematics can be a tremendously powerful tool of inference. How can we draw the powerful inferences that we do from math, if it is a priori and therefore, supposedly, empirically empty? The reason is simple: the logical equivalence of two statements is only in the simplest cases blindingly obvious to us; often it is far from obvious - enter mathematics.

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I don't think Sautet's first

I don't think Sautet's first example of "apodictic certainty" is quite right. Voluntary trade comes with the expectation of mutual benefit. If I trade my $15 for a meal at Maggiano's, I expect that the satisfaction I obtain from my eggplant parmesan will exceed the satisfaction I obtain from my $15.

After eating, perhaps I will conclude that this expectation turned out to be true. Or perhaps I will decide that the food was cold and, in the sage words of Mario Batali, the balance was all wrong. I will look back and decide that I was not satisfied with the eggplant parmesan and ought to have retained possession of my $15.

Having said that, I think Matt is kicking around a strawman version of Austrianism. At the very basic level, starting with axioms and drawing conclusions purely based on logic is productive. By itself, I don't think it can encompass all of economics. I think very few Austrians would fall into this extreme a priori position. For example, I don't think you can a priori draw out the behavior of voters. But it can be helpful in extending the knowledge about the basic behavior of people at the individual level. As Constant said above, it does have value. If I may further his argument as to why -

Many aspects of economics are deeply counter-intuitive. Even taking certain aspects of everyday life as a given, the average person (as which I count myself) somehow takes those givens and proceeds to draw erroneous conclusions about the ramifications of the fact that we make choices in a universe of scarcity. Whatever it was evolutionarily that made our brains the way they are, they aren't intuitively built to have a native understanding of even simple economics. Taking starting points to their logical conclusions step by step is a way to counter those bad intutions.

Constant, Interesting post.

Constant,

Interesting post. I'm not at all qualified in talking about Austrian economics, but at least part of your post ventures into territory sometimes covered by utilitarians, so here I am anyway. Following is my attempt to restate the principle you attribute (quoting Matt quoting Sautet) to Austrians, namely, [1] Economics teaches that one finds more value in what one receives than in what one gives up in exchange.

Here's my reconstruction:

1' For all persons P and all exchanges E of object O for object O1 at time T, the value of O1 for P at T is greater than the value of O for P at T.

Despite its clunkyness (and the evidence that I've spent _way_ too much time reading analytic philosophy), the principle, I think, captures your charitable rereading of the original claim. I would submit that you (and Matt's interlocuter) are exactly right that this claim is _a priori_ true. Unfortunately, I think that it's also pretty much trivially true.

Consider: typically, something like [1] would be used as a premise in the following sort of argument:

1. Economics teaches that one finds more value in what one receives than in what one gives up in exchange
2. If both parties to a transaction receive a net gain in value, then allowing the parties to exchange will increase the total amount of utility in the world.
3. Individuals are the best judge of their own utility.
4. Allowing individuals to make transactions freely is thus the most efficient way to increase the total amount of utility in the world.
5. Thus, if I value utility maximization, I ought to allow individuals to make whatever transactions they wish.

This doesn't quite work as stated, since it would require appropriate caveats about transactions for the purpose of harming third parties (contract killings, say), and it also ignores externalities. There are more sophisticated versions of the argument, but all of them rest, at bottom, on [1] being true. It's in fact a crude version of Smith's invisible hand argument, and it seems to be a favorite among consequentialist defenders of marketism.

As you point out, though, strictly speaking, [1] is false. But substituting [1'] for [1] doesn't really make things better, as I don't think that [5] follows from [1']-4. The invisible hand argument, in other words, rests upon the implicit assumption that [1] really is true. The claim that people make transactions that they believe at the time makes them better off isn't a strong enough claim to get the invisible hand off the ground.

It's interesting that I'm

It's interesting that I'm being accused of kicking around a straw man when all I did was quote Sautet's own words. I certainly could have reformulated the Misesian position into something more unobjectionable, but then it wouldn't be the Misesian position anymore. There's little that I can add to Joe Miller's reformulation -- certainly true, but trivially true.

Look, for all the verbiage I throw out, this is really very simple: a theory can be true by definition or it can be predictive. Pick one, but you can't have both. To the extent that something is true by definition, it ceases to tell us anything about the world. I'm not sure how many different ways there are for me to say this, but nobody's been able to challenge it yet.

I also find this interesting: "So how can the Austrian be answered? By pointing out to him that a person’s preferences change over time, and that what he prefers today may not be what he prefers tomorrow, and so an action that maximizes his benefit today does not thereby maximize his benefit tomorrow. He might acknowledge that."

...since I thought that's what I did say! This is more or less the same argument I made, formulated in a difefrent way.

And this: "And yet mathematical axioms often are accepted largely because we cannot imagine them not being true. Indeed, mathematics is persuasive largely not only because the theorems follow from some arbitrary set of axioms, but because the theorems follow from axioms which we cannot imagine not being true."

...is just plain false. For centuries, everybody thought Euclidian gemotry was the geometry, but then Lobachevsky and Reimann came along and proved independently that Euclid's Axiom of Parallels could be replaced by alternatives which yielded other consistent geometries (hyperboloid and spherical). People's intuitions on something so apparently a prioristic as gemoetry turned out to be flawed. Again, the argument from personal incredulity will not carry the day no matter how hard you thump the table. People have a hard time thinking in Lobachevskian gemoetry, but it's no less real for that.

"If there is something I’d criticize the Austrians for, it’s not their own economics, but their intolerance to other economics: they are not taking the other economics on its own terms. But the same criticism applies in the opposite direction."

This I would agree with. "There is no Austrian economics, only good and bad economics."

"The point is that sometimes people deny tautologies, in fact often their thinking amounts to denying tautologies. ... A large number of errors about economics are in fact errors of logic and reasoning, i.e., muddled thinking. It is not merely that people have empirically false beliefs, but that they aren’t making sense, they are failing to rigorously apply logic."

No argument here either, but there's more than one way to be wrong: failures of internal consistency and lack of rigorous deduction are one, but lack of consistency with the empirical facts is another. Good theorizing requires attention to both.

"And in any case, mere a priori mathematics can be a tremendously powerful tool of inference. How can we draw the powerful inferences that we do from math, if it is a priori and therefore, supposedly, empirically empty? The reason is simple: the logical equivalence of two statements is only in the simplest cases blindingly obvious to us; often it is far from obvious - enter mathematics."

I've been brewing a post on this subject for a while too, so bear with me and I'll link to it when I post it. For now, let me just say briefly that I agree that what Misesians are doing is fundamentally the same thing as mathematics (which no doubt some of them would be a little surprised to hear), but as I said in my post, when mathematical economists and Misesians get things wrong, it's largely for the same reasons -- one group asserts, over and over again, that the map is the territory, while the other group simply acts as though it is without actually saying so.

Joe,

"But substituting [1?] for [1] doesn’t really make things better, as I don’t think that [5] follows from [1?]-4."

Actually as they're written, [5] follows directly from [4] by itself. I think what you mean is that [4] doesn't follow from [1']-[3], but I would argue that it does as long as you throw in an added assumption that there's no known method for discovering new information about people's preferences that performs better than the market process. Your set of premises takes people's preferences as a given, but as Hayek pointed out a long time ago, if we assume such perfect information then the market process becomes utterly pointless. The essence of the invisible hand is the spontaneous discovery of, and adjustment to, new information.

Jonathan - I pretty much agree with everything you said except this:

"I think very few Austrians would fall into this extreme a priori position."

Certainly a lot of them wouldn't, but there are many who certainly do claim to take this position, and I merely take them at their word. Trust me when I say I could dig up plenty of references.

I really like having you all

I really like having you all around here. I learn so much.

Matt, Actually as they’re

Matt,

Actually as they’re written, [5] follows directly from [4] by itself. I think what you mean is that [4] doesn’t follow from [1?]-3

You're right, of course. [5] basically restates [4]. That's what I get for trying to finish right before class instead of waiting until afterward.

but I would argue that it does as long as you throw in an added assumption that there’s no known method for discovering new information about people’s preferences that performs better than the market process.

I'm not so sure that this would work, at least not without reworking some of the other claims, too. The invisible hand argument works only to the extent that [1] and [1'] usually converge. If people are frequently mistaken about their preferences, then market transactions would, on the whole, tend to make people worse off.

In fact, the more I think about it, the more I think that [3] might be problematic. I think that maybe it smuggles [1] back in again. [1] just says that people are _always_ the best judge of their own utility. So if we exchange [1'] for [1], then we'd have to alter [3] as well. Indeed, [4] follows from [1] and [2] alone. So [1'] and [3] together say something like, "people always think that they are maximizing their own utility when they exchange and they are typically right." But the 'and they are typically right' part is at least open for debate.

a theory can be true by definition or it can be predictive. Pick one, but you can’t have both. To the extent that something is true by definition, it ceases to tell us anything about the world.

This seems right to me. If you're looking for your _a priori_ axiom...

Joe, I don't see what this

Joe,

I don't see what this has to do with Smith's Invisible Hand argument, which states essentially two things -

1) People can mutually benefit each other even if they are acting individually selfish.
2) Complex order can be an emergent property of individual action.

Jonathan, It's the argument

Jonathan,

It's the argument for the first claim that I'm talking about. Our acting selfishly is mutually beneficial only if it is the case that our expected utility usually does map onto our actual utility. Your wording of the claim, in fact, nicely points out the tension.

People can mutually benefit each other

This part of the claim deals with actual utility. The claim seems to be that, at the end of the day, you and I will actually be better off.

even if they are acting individually selfish.

But this part of the claim deals with expected utility. When I act in my self-interest, what I am really doing is saying that, in exchanging R for Q, I believe that Q is likely to make me happier/more satisfied than R will make me. That claim, which is similar to my [1'], is about _expected_ utility.

So the whole claim will be true only if it is the case tht expected utility usually maps on to actual utility.

The claim would also be true if we read the second part as actual utility as well. But that would be to hold the position that all of our transactions really do make each person better off. It would be, in other words, to hold [1]. [1] however, suffers from being, well, empirically false.

The Austrian view is limited

The Austrian view is limited to purposeful action, at the instant of that action.

However, I can make a non-Austrian argument that utility is always increased as follows:

If I believe that a given action is to my advantage, then failing to take that action will immediately leave me worse off in my own judgement. Therefore I will take that action and will immediately be better off, also in my own judgement. If it were to turn out that my judgement was wrong, the very finite speed of human perception means that there must be a non-zero time period in which I am subjectively better off, only ended by a change in perception, whether it involves reality or not.

Regards, Don

And this: “And yet

And this: “And yet mathematical axioms often are accepted largely because we cannot imagine them not being true. Indeed, mathematics is persuasive largely not only because the theorems follow from some arbitrary set of axioms, but because the theorems follow from axioms which we cannot imagine not being true.” is just plain false.

[I had to edit that slightly because the blog system was choking on it]

No, it is not false, you just need to read it for what it actually states and not for what you read into it.

For centuries, everybody thought Euclidian gemotry was the geometry, but then Lobachevsky and Reimann came along and proved independently that Euclid’s Axiom of Parallels could be replaced by alternatives which yielded other consistent geometries (hyperboloid and spherical). People’s intuitions on something so apparently a prioristic as gemoetry turned out to be flawed. Again, the argument from personal incredulity will not carry the day no matter how hard you thump the table. People have a hard time thinking in Lobachevskian gemoetry, but it’s no less real for that.

I said that a mathematical theory is persuasive largely because we cannot imagine the axioms not being true. I did not say exclusively. And I did not say that the axioms *are* true. All you have said here is that the people's intuitions turned out to be flawed. But that does not contradict my statement. People nevertheless accepted the axioms largely on the basis of their intuitions.

By the way, it was not the mathematicians who proved people's intuitions flawed. All those mathematicians did was to show that you could imagine a geometry in which the parallel postulate was false. But that does not prove that the parallel postulate is false as a statement of the geometry of the actual world or that the intuition underlying it is flawed, it only shows that the parallel postulate is *independent* of the other axioms, not derivable from them. People had tried many times to derive it and now Lobachevsky and Bolya had shown by counterexample that it could not be done. So all this showed was that the axioms were not compressible to fewer axioms (at least, not by deriving the parallel postulate).

That doesn't prove people's intuitions flawed. It just proves that a certain axiom was not compressible to the remaining axioms. What proved people's intuitions flawed was, I think, Einstein, because I think it was Einstein's general relativity which was the first (widely accepted) theory of physics to describe the world as having a geometry in which the parallel postulate was false. *Then* people's intuitions about the actual world were shown to be flawed.

Egad, I posted the above

Egad, I posted the above comment to the wrong article - I must have had multiple windows open and picked the wrong one. Oh well, I'll just leave it here. My face feels very hot right now.

I think I can fix that.

I think I can fix that.