I simply could not resist the early posting of this study on Carl Menger, hoping it may benefit and regale our friends. Please note that this is a preliminary sketch and revised editions of this study will be posted soon - so be sure to check updates. Cheers to all.
Our last intervention was meant to demonstrate that
although it is a fallacy to think that human being can be scientifically
determined (in this sense, Heisenberg’s impossibility or indeterminacy theorem
in science and Alfred N. Whitehead’s “fallacy of misplaced concreteness”
provide inconfutable demonstrations), it is true nevertheless that human being
has developed “materially”, which is why inter-subjectivity
is not only possible, but is indeed an ineluctable reality. The notion of
“self” dissolves the moment we realize that it is an irreducibly human notion
that thereby dissolves the “self” itself! Arendt comes very close to
articulating the “materiality” of human experience in the very last paragraphs
of her inchoate and unfinished study of Kant’s Critique of Judgement – although she still clings to the Kantian
perception/imagination, intellect/judgement dichotomies:
In other words: What makes particulars communicable
is (a) that in perceiving a particular we have in the back of our minds (or in
the "depths of our souls") a "schema" whose
"shape" is characteristic of many such particulars and (b) that
this schematic shape is in the back of the minds of many different people.
These schematic shapes are products of the imagination, although "no
schema can ever be brought into any image whatsoever."19 All single
agreements or disagreements presuppose that we are talking about the same
thing—that we, who are many, agree, come together, on something that is one and
the same for us all. 4. The Critique of
Judgment deals with reflective judgments as distinguished from determinant
ones. Determinant judgments subsume the particular under a general rule;
reflective judgments, on the contrary, "derive" the rule from the
particular. In the schema, one actually "perceives" some
"universal" in the particular. One sees, as it were, the schema
"table" by recognizing the table as table. Kant hints at this
distinction between determinant and reflective judgments in the Critique of Pure Reason by drawing a
distinction between "subsuming under a concept" and "bringing to
a concept."20 5. Finally, our sensibility seems to need imagination not
only as an aid to knowledge but in order to recognize sameness in the manifold.
As such, it is the condition of all knowledge: the "synthesis of
imagination, prior to apperception, is the ground of the possibility of all
knowledge, especially of experience."21 As
84 PARTONE
such, imagination "determines the sensibility a
priori," i.e., it is inherent in all sense perceptions. Without it, there
would be neither the objectivity of the world—that it can be known—nor any
possibility of communication—that we can talk about it. (Lectures on
Kant, pp.83-4).
Whilst she often lingers on the ineffable nature of
thought, here Arendt seems finally to concede – though still in Kantian
antinomic terms – the essential unity of sensibility and sense, of imagination
and perception, of intellect and judgement. Yet, as our highlights in italic
bold clearly manifest, Arendt still sees this human capacity for judgement as
the adventitious attribute of
“individuals” – “the minds of many different
people” – and not as a fundamental faculty
of human being, that is, of being human. That Arendt was quite aware
of this “impasse”, as he styles it, is made explicit by R. Beiner in the
interpretative essay appended to the Lectures:
As Kant's Critique
of Judgment enabled him to break through some of the antinomies of the
earlier critiques, so she [Arendt] hoped to resolve the perplexities of
thinking and willing by pondering the nature of our capacity for
judging."2 It is not merely that the already completed accounts of two
mental faculties were to be supplemented by a yet-to-be-provided third but,
rather, that those two accounts themselves remain deficient without the promised
synthesis in judging, (R. Beiner, Interpretive Essay, in Arendt, op.cit., p.89)
As we saw in our analyses on the relation of
economic equilibrium to social reality, antinomies arise from the use of
aporetic concepts that seek to crystallize human reality, to freeze or reify
it, to reduce it to the state of a “thing” that is perpetual and immutable – to
something that is not subject to history.
And as we saw in our last section, ultimately the aim of every scientistic
reification is to remove thought from
history itself, to present history as ineluctable fate. The antinomy implicit
in this conception is the reason why the word “historicism” has come to acquire
diametrically opposed meanings in terms of “soul” and “form”: - on one side,
historicism stands for the idealist position that the human spirit is entirely
free to operate in its history (Dilthey); on the other side, history is seen as
a teleology of the human spirit (Hegel) or of human needs (Marx) or of race or
indeed of “matter”. (See the classic miscomprehension of this antinomic
opposition in K. Popper, The Poverty of
Historicism where the interdependence of the two poles is jejunely resolved
in favour of “individualism”. Much more refined is the discussion in RH Carr, What Is History?)
Indeed, as the theorization of past practice or
human actions, as the human appraisal of these actions, of humani generis res gestae, the sense of history may well be the
epitome of praxis, of the exercise of judgement. Here once again is Arendt:
Here we shall have to concern ourselves, not for the
first time,3 with the concept of history, but we may be able to reflect on the
oldest meaning of this word, which, like so many other terms in our political
and philosophical language, is Greek in origin, derived from historein, "to inquire in order to
tell how it was"— legein ta eonta
in Herodotus. But the origin of this verb is in turn Homer (Iliad XVIII), where the noun histör ("historian," as it
were) occurs, and that Homeric historian is the judge. If judgment is our faculty for dealing with the past, the
historian is the inquiring man who by relating it sits in judgment over it. If
that is so, we may reclaim our human dignity, win it back, as it were, from the
pseudo-divinity named History of the modern age, without denying history's
importance but denying its right to be the ultimate judge, (op.cit., p.5)
Thought is imprescindible.
Thought is ec-sistence itself because
thought is intrinsically reflective – whence comes the illusion that behind
thinking there must be a “thinker”, an Ego that thinks. Thought is action (cogitare from co-agitare). Impossible to go “beyond” it; impossible to en-compass
it. But it is equally impossible to oppose thought to matter – because “matter”
itself is a concept, and thought itself cannot but be “material”. (On all this,
please refer to my “The Philosophy of the Flesh”.)
Thought must not be confused with Ego-ity: as
Nietzsche validly proclaimed, it is vivo
ergo cogito, not cogito ergo sum!
Experience comes before knowledge. For Western thought, however, thought is the
Logos - real because rational and
rational because real. It is this identification of reality and rationality
(the rational is real and the real is rational), the ordo et connexio rerum et idearum that Nietzsche combats. Not only
is the world not rational, but the rational is not even real because “the real
world is a fable” (Nietzsche, Twilight).
Nietzsche’s condemnation of Historicism – which he understands as a form of
Platonism - and particularly the Historical School of Roscher and Knies is
precisely not aimed at its inaccuracy, but at its power-lessness (Ohn-macht)
with regard to what it pretends to defend history against - nihilism. (Cf. Twilight of the Idols, pp.225 ff.) To
understand is to com-prehend, to control. By seeking to understand
hermeneutically (Verstehen)
historical action, by seeking to describe it, Historicism ends up circum-scribing it, and therefore making
it vulnerable to scientisation. The Geistes-wissenschaften
have this in common with the Natur-wissenschaften
– that both make the ideo-graphic
already nomo-thetic. But how can the
ideo-graphic trans-cresce into the nomo-thetic? Only if the nomothetic and the
ideographic are defined and understood as antinomic poles! Thus, Historicist hermeneusis turns into historicist
teleology and scientistic determinism (cf. Popper, who did not even begin to
understand the untenability of his “open society” as a bulwark against its
“enemies”).
The individual
is already the general and vice versa because, antinomically, the
one implies (begs the question of) the other. (Interesting, in this context, to
note Alfred Marshall’s most idiotic notion of market prices being determined by
the “scissors” of supply and demand – something that Marx derided repeatedly.
It should be obvious to all but the most warped minds that “supply” requires
“demand” and vice versa, just as competition requires monopoly, and that
therefore one crutch cannot support the other! The epitome of stupidity was of
course Say’s Law according to which “supply creates its own demand”!) Indeed,
no theory of the general can long fail to de-fine the individual, and vice versa. The historicism that starts
with the idiosyncratic ends up understanding it, com-prehending it through the
general, through the principles of science. Thus, it loses sight of the only
way in which theory and science are possible: - as strategy. By glorifying the in-dividual, the particular, it neglects its antinomic dependence on the general.
Science is possible only as reification, not as rationality but as its
stultification, that is, as Rationalisierung,
only as rigid violent imposition or at the very least as convention (cf.
Nietzsche’s brief exposition in Uber
Wahrheit und Luge). The contractum
unionis implicit in all conventions always has the potential to become a contractum subjectionis - for Hobbes politically and for
Nietzsche semiotically. For Nietzsche, historicism ends up as its opposite, as
“science”, because it denies the tragicity
of ec-sistence, and therefore of thought:
Thucydides, and perhaps Machiavelli’s Principe, are most closely related to me
in terms of their unconditional will not to be fooled and to see reason in reality – not in ‘reason’, and even less in ‘morality’… (ToI, p.225)
This is what Nietzsche decried in Roscher who had
dared wrongfully to enlist Thucydides – the ultimate muse of tragicity for Nietzsche - in the
historicist camp and thereby opened himself up to the stinging critique of a Menger.
Reality does not contain or elicit “reason”: for there is no reason outside of
reality. There is and there can be no Scholastic ordo et connexio rerum idearumque. But this is far from saying that
Nietzsche did not believe that “reason” or “theory” can be applied to
“reality”. On the contrary, for Nietzsche “reason” can be imposed on “reality” – but only as a strategy, as a straitjacket, as Eskamotage,
as the ante litteram Weberian Rationalisierung! There is no “reality”
to which reason can apply or from which it can be deduced: reason is the
ultimate “rationalization” of human motives. For Nietzsche, real courage
consists in staring down this horrifying ability that human beings possess: to
impose a “rational” or rather “methodical” scheme on their violent or at least
coercive practices. This is the tragedy
of Weberian Verstehen and of all
hermeneutics: the tragedy of all historicism: - that it does not understand its
own quest and thus it cannot long remain ideo-graphic because its ratio sooner or later will turn
nomo-thetic (Windelband, Dilthey). Marx’s own lampooning of “Thukydides-Roscher”
in Book 9 of Das Kapital was meant to
highlight the inability of this historicism to draw the violent conclusions of
capitalist reality – without, for that reason, necessarily enlisting Thucydides
amongst the historicists.
Every theory, whether in the physical or in the
social sciences, is a strategy: we
owe this great realization above all to Nietzsche, though earlier hints of it
were already in Cusanus (cf. E. Cassirer’s masterly Individual and Cosmos), in Machiavelli, and then in Vico (La Scienza Nuova). Theory and practice
are indissolubly linked and failure to take conscience of this is the dangerous
fallacy of all positivism. (To be fair, despite our disagreement with his
entire neo-Kantian approach, this is the point of Habermas’s best work from Erkenntnis und Interesse to Theorie und Praxis.) The immediate
question for us now is: how does the bourgeoisie use economic theory in
practice to preserve and advance its interests? Ultimately, the crucial
question must be: what specific “tools” or institutions does the bourgeoisie
put in place to preserve its interests, accumulate capital and advance its
social hegemony?
Joseph Schumpeter provides a rare insight into this
process in his discussion of how Neoclassical economics replaced Classical
economics in bourgeois business, academic and political circles as the
“scientific paradigm” for theorizing and analysing capitalist society.
That
specifically historical spirit which alone turns the collection of facts, which
after all is necessary for any school, into something methodologically
distinct, did not develop. (Econ.
Doctrines, p.166)
Distinguishing between the Historical School and the
nascent Neoclassical School, Schumpeter at once draws attention to the
insistence of the former on including and canvassing “non-economic elements in the field of economics”. Now, if one
considers “the social process as a whole” – something Schumpeter urges us to do
later in the very opening sentence of the famous “Chapter 7” of the Theorie that was significantly omitted
from the English translation -; if one considers this, it is obvious that
whether or not a specific historical fact or “element” is “economic” or “non-economic”
is a matter for democratic agreement and not for “scientific” determination.
For if indeed economic theory is to be used to guide social policy at all, then
it is a matter for democratic consensus to agree as to the likely effect of
inclusion or not of specific facts to the formulation of economic theory to
guide economic policy.
Schumpeter himself makes clear that economic science
must be founded on historical facts and that indeed economic science is a “methodologically distinct” form of
historical knowledge:
That
specifically historical spirit which alone turns the collection of facts, which
after all is necessary for any school, into something methodologically
distinct, did not develop. (Econ. Doctrines, p.166)
The crux of the
methodological question now becomes vividly clear. The problem with the methodology
assumed by the Historical School was not so much that it failed to take account
of historical detail – in fact it took too
much account of such detail, to the point that it cluttered its research
with “non-economic elements”.
With Knies
the matter
is somewhat different. His resistance to the splitting up
of the
personality into individual 'urges' and to their treatment in
isolation—although
we must stress the fact that this does not constitute
the essence
of classical economic thought, as Knies thought
—and the
emphasis which he places on the vital part played by
non-economic
elements even in the field of economics (Heteronomy
of
Economics) places him more closely to the genuine historical
school.
(p.157)
Now it is clear that
once a society becomes detached from “traditional” social forms such as those
associated with feudalism and becomes instead focused exclusively on the
production of Value, that is the potential control over labour-power, over
living labour, which is what happens with rise of capitalism, it is then
evident that as the reproduction of a society becomes less autochthonous and
localised and is instead more centrally controlled through the development of a
strong statal administration and government, what we call “the State” – it is
then clear that all those “non-economic elements” associated with “traditional”
societies must be eliminated with the object purpose to maximize capitalist
production. This is at bottom what Schumpeter and the Austrian School from
Menger onwards were driving at. And obviously the various Historical Schools in
Germany and Austria stood in the way of such a development – at least from a
“methodological” or “scientific” stance, because nothing is more ideologically
correct than the imposition of an ideology as “science”.
The question then
becomes one of determining how such a “methodology” can be developed out of
“that specifically historical spirit”, - how, that is, “the collection of
facts” can give rise to a theory that is specifically “economic”. (Schumpeter
refers to Weber’s methodological studies in this context close to
neo-Kantians.) More specifically, the problem becomes one of how historical
facts may be divided not just into “economic” and “non-economic”, but also into
what may be called “regularities” and “laws”. In other words, even admitting positivistically that it is possible to
isolate “regularities” of an “economic” nature in social life (cf. M.
Friedman’s essay), there is still the greatest difficulty in determining
whether such “regularities” can be described as “laws”.
For, though they may
represent and describe the present
reality of social life, it may well be that such regularities do not amount to
immutable “laws” of social life but are attributable instead to the particular
culture and political form of government that prevails in a given society! The
greatest difficulty is of course that not only are these regularities not laws,
but they are always subject to change – and above all else therefore the
regularities cannot possibly form the foundation of a positive science of
economics or of any social science at all!
This is something that
even the acutest bourgeois minds in economic theory simply cannot see. Here is
the Nobel prize-winner Milton Friedman:
Positive economics is
in principle independent of any particular ethical position or normative
judgments.
As [Neville] Keynes says, it deals with "what is," not with
"what ought to be." Its task is to provide a system of
generalizations that can be used to make correct predictions about the
consequences of any change in circumstances. Its performance is to be judged by
the precision, scope, and conformity with experience of the predictions it
yields. In short, positive economics is, or can be, an "objective"
science, in precisely the same sense as any of the physical sciences. Of
course, the fact that economics deals with the interrelations of human beings,
and that the investigator is himself part of the subject matter being
investigated in a more intimate sense than in the physical sciences, raises
special difficulties in achieving objectivity at the same time that it provides
the social scientist with a class of data not available to the physical [5]
scientist. But neither the one nor the other is, in my view, a fundamental
distinction between the two groups of sciences.3 Normative economics and the
art of economics, on the other hand, cannot be independent of positive
economics. Any policy conclusion necessarily rests on a prediction about the
consequences of doing one thing rather than another, a prediction that must be
based - implicitly or explicitly - on positive economics. (M. Friedman, “The
Methodology of Positive Economics” in Essays
in Positive Economics, pp.4-5)
Note
Menger’s analogous position:
38 ] BOOK
ONE The above contrast is not infrequently characterized, even if in a somewhat
different sense, by the separation of the sciences into historical and theoretical.
History and the statistics of economy are historical sciences in the above
sense; economics is a theoretical science.5 Besides the two above large groups
of sciences we must bear in mind here still a third one, the nature of which is
essentially different from that of the two previously named: we mean the
so-called practical sciences or
technologies. The sciences of this type do not make us aware of phenomena,
either from the historical point of view or from the theoretical; they do not
teach us at all what is. Their
problem is rather to determine the basic principles by which, according to the
diversity of conditions, efforts of a definite kind can be most suitably
pursued. They teach us what the conditions are supposed to be for definite
human aims to be achieved. Technologies of this kind in the field of economy
are economic policy and the science of finance.
Menger’s
classification is to be preferred to Friedman’s because it does not dissect
economics into “positive” and “normative” but rather in “theoretical” and
“practico-technical” despite his Aristotelian reference to “what is”. (On Menger’s Aristotelianism, see
the admirable work of Barry Smith. Whilst Smith’s thesis is certainly
applicable to Menger – especially through the influence of Franz Brentano whose
work on Aristotle inspired Heidegger, he is wrong about the later Austrian
School from Mises onwards, which was clearly premised on neo-Kantian and
Machian lines, as we shall see presently.) Both Menger and Friedman seek to
divorce economic reality from policy choices, but whereas Menger maintains a
continuum between reality and policy, with the latter being merely an
application of knowledge about reality, Friedman’s nuanced distinction between
normative and positive economics ends up being extremely naïve because it begs
the question of how a “positive” economics can presume “to be independent of
normative economics”! Either we argue, with Menger, that policy is always a
matter of applying positive knowledge either correctly or incorrectly, or else,
like Friedman, we introduce a normative sphere of action – but then this sphere
must be precluded by the presumed existence of a positive reality!
For
Menger no normative or ethical choices are possible in economic
theory or policy: policies are either right or wrong depending on the perfection of one’s theory of reality. If
indeed it were possible to isolate “positive” economics from the “normative”,
then there would be no reason for “normative” economics to exist at all, for
the simple reason that once we can isolate what
is from what ought to be, then
the what is, the real, would be the only option left, “the only thing there is”,
because reality understood as “what is”, as “physis”, could never change!
Present reality, if it is to be “real” at all, cannot allow of any “normative
change” or any change at all – because any “reality” that can be “changed”
cannot ever be “really real”! Any attempt to change reality, “what is”, along
normative lines would be bound to fail according to Menger if it did not
conform with that positive reality! That is why, for Menger, there could never
be any “normative” physics as against “positive” physics: there can only be one
“scientific” physics. Otherwise, the Hegelian empyrean where the real is
rational and the rational real would have been accomplished by now!
But
Menger overlooks the fact that whereas it is possible to determine “wrong” and
“right” outcomes in experimental physics because of the confined and controlled
nature of “experiments” in time and in space, this is simply impossible in
society because of the irreproducibility of experimental conditions to a
precise “locality” that extend into the indefinite future! Nor can mere
“predictability” of outcomes be the sufficient condition for a science, as
Menger believed.
The
investigation of types and of typical relationships of phenomena is of really
immeasurable significance for human life, of no less significance than the
cognition of concrete phenomena. Without the knowledge of empirical forms we
would not be able to comprehend the myriads of phenomena surrounding us, nor to
classify them in our minds; it is the presupposition for a more comprehensive
cognition of the real world. Without cognition of the typical relationships we would be deprived not only of a deeper
understanding of the real world, as we will show further on, but also, as may
be easily seen, of all cognition extending beyond immediate observation, Le.,
of any prediction and control of things. All human prediction
and, indirectly, all arbitrary shaping of things is conditioned by that
knowledge which we previously have called general.
The statements made here are true of all realms of the world of phe
CHAPTER ONE
[ 37
nomena, and
accordingly also of human economy in general and of its social form,
"national economy,"2 in particular.
As
Weber shows in his methodological studies, there are infinite “predictions”
that can be made about the world without this being sufficient to justify their
scientific pursuit. Furthermore, the fact that an outcome may be predictable
now and for the foreseeable future does not mean that the same outcome will
occur once the experiment is repeated indefinitely, which is what
a “scientific law” requires – immutability. This is a point astutely made by
Leo Strauss in an essay on Socrates and Western science. The presupposition of
the “natural” sciences is that their “laws” are “positive” because they are
presumed to be “immutable” and therefore “indefinitely repeatable”. There can
be no “normative” and “positive” physics – there is only “physics” and that is
all! Even when a “change” to a present state of matter is operated by physical
scientists, the “laws” that they apply remain the same. The application of
physical “laws” to the physical universe does not change the validity of those
“laws”. In essence, physical laws make the outcomes of their experiments “deducible”.
Yet, experiments
are not repeatable indefinitely without transforming the very reality that they
are supposed to demonstrate. Therefore, it is obvious that all science,
natural and social, is not and cannot be “immutable” but that its experimental
outcomes will change with enough “repetitions”.
In
fact, even the “laws” of natural science have a questionable “legality” in
terms of how scientific knowledge or “truth” is indeed a “will to truth”,
Nietzsche’s Wille zum Leben. If
scientific “laws” described the “real”, if reality could never be changed, then
there would be no room left for science at all – because science, no matter how
“immutable” its “laws”, remains a human practice, a praxis, an inter-vention, a
mani-pulation! Ultimately, what is important is not the immutability of
scientific laws – because these in fact do change: science has a history! What
is important is what human beings “do” with such “laws”, and even what they do
to discover them!
Not only are “changes”
to social reality subject to normative considerations: what is most important
of all, the paramount consideration here is that it is impossible to define
“what is”, social reality itself, without introducing normative values, “what
ought to be”, into that de-finition and into the “scientific” tools to be used
in analyzing, assessing and defining social and indeed even physical reality! The
mere “observation” of any reality requires an inter-vention on that reality
that transforms and changes it. Heisenberg’s Indeterminacy Principle is not an
objective notion for the simple reason that it abolishes objectivity – and in
doing so it unmasks science as scientificity, which is a practical notion.
Science is not “the discovery of truth”; science is a particular way of acting
in the world – this is why Nietzsche referred to “the will to Truth”.
First
of all, Friedman is arguing that “what is” has greater reason to be than “what
ought to be” (cf. Leibniz’s Principle of Sufficient Reason) – he is thus
surreptitiously presenting the status quo, the established order, as something
that is intrinsically more “scientific” than the “normative” because “what is”
is a matter for empeiria, for inquiry
and inspection or observation, whereas “what ought to be” is a matter of choice
and values. But this is already a normative choice – “what is real is rational”
(Savigny, Jhering) – discussed by Schumpeter as “conservative”, against the
“what is rational is real” of the Neoclassics. As Weber took pains to point
out, every “is” in fact is necessarily filtered through “what ought to be”
because, first, we still choose to select one “what is” instead of another and,
second, we choose the tools to be used in the “empirical” research. Friedman
acknowledges this:
Of
course, the fact that economics deals with the interrelations of human beings,
and that the investigator is himself part of the subject matter being
investigated in a more intimate sense than in the physical sciences, raises
special difficulties in achieving objectivity at the same time that it provides
the social scientist with a class of data not available to the physical [5]
scientist. But neither the one nor the other is, in my view, a fundamental
distinction between the two groups of sciences.3
This
is a simplistic regurgitation of the Machiavelli-Vico-Bacon line. It is not so
much that the social scientist lacks objectivity
because of the more “intimate” role with the subject-matter: the problem is
rather that the presumed “objectivity” of scientific study is inapplicable once
we see science – all science, physical and social – as a human activity! And
this is not cured by the Windelbandian distinction between idiographic and
nomothetic – as if the size of the population made findings more “objective” or
“rational”! If “objectivity” is required, then the size of the sample is
categorically irrelevant! That is why the physical sciences never invoke sample
size when fixing their “laws”. Still, physical scientists universally refuse to
see their “science” as human activity!
Friedman’s
error is one to which Menger and Schumpeter and Weber were very alert and they rightly
insisted on denouncing it: it makes no sense to think that an individual’s
behavior is “idio-syncratic” – meaning “irrational” – whereas the behavior of
many individuals becomes more “rational” by reason of the larger numbers. It
makes even less sense to associate “irrationality” or “idiosyncrasy” with
“freedom”. These are fallacies into which the Old Historical School very easily
fell, only to be attacked by the Historical School of Law (Savigny, Jhering)
even before Weber (Roscher und Knies).
Indeed, as Weber duly pointed out, “rationality” in the sense of “acting in
one’s own interest” and not “irrationality” constitutes the true “freedom” of
the individual in society. But here already, with Savigny and the Historical
School of Law and then Windelband, “rationality” is dictated by numbers, by the
nomo-thetic. More correctly, rationality
no longer has any substantive value as it always had in all Western metaphysics
from Plato onwards. With the Neoclassics, and explicitly with Weber,
rationality becomes naked Rationalisierung
– a specific methodical exercise of
social power aimed at maximizing the accumulation of capital or objectified
labour.
Yet
Menger fails to see just how problematic this nexus between individual
idiosyncrasy or “freedom” and general or typical nomothetic “predictability”
is, and then above all how impossible the distinction between “individual or
concrete phenomena” and the “typical forms” is, both in terms of the choice of
direction of scientific “research” (Weber, Wissenschaft als Beruft) and the
choice of application of that “research”. And finally between “laws” and
“things”.
(Investigations, p.36)
The
investigation of types and of typical relationships of phenomena is of really
immeasurable significance for human life, of no less significance than the
cognition of concrete phenomena. Without the knowledge of empirical forms we
would not be able to comprehend the myriads of phenomena surrounding us, nor to
classify them in our minds; it is the presupposition for a more comprehensive
cognition of the real world. Without cognition of the typical relationships we would be deprived not only of a deeper
understanding of the real world, as we will show further on, but also, as may
be easily seen, of all cognition extending beyond immediate observation, Le.,
of any prediction and control of things. All human prediction
and, indirectly, all arbitrary shaping of things is conditioned by that
knowledge which we previously have called general.
The statements made here are true of all realms of the world of phe
CHAPTER ONE
[ 37
nomena, and
accordingly also of human economy in general and of its social form,
"national economy,"2 in particular. The phenomena of the latter we
also can consider from the above two so thoroughly different points of view;
and in the field of economy, also, we will thus have to differentiate on the
one hand between individual (concrete) phenomena and their individual
(concrete) relationships in time and space, and on the other between types
(empirical forms) and their typical relationships (laws in the broadest sense
of the word). Also in the field of
economy we encounter individual and general knowledge, and correspondingly
sciences of the individual aspect of phenomena and sciences of the general
aspect. To the former belong history and the statistics of economy, to the
latter theoretical economics; for the first two have the task of investigating
the individual economic phenomena, even if from different points of view. The
latter have the task of investigating the empirical forms and laws (the general
nature and general connection) of economic phenomena.4
2 See
Appendix I: "The Nature of National Economy." 3 The
"individual" is by no means to be confused with the
"singular," or, what is the same thing, individual phenomena are by
no means to be confused with singular phenomena. For the opposite of
"individual" is "generaL" whereas the opposite of a
"singular phenomenon" is the "collective phenomenon." A
definite nation, a definite state, a concrete economy, an association, a
community, etc., are examples of individual phenomena, but by no means of
singular phenomena (but of collective phenomena instead); whereas the
phenomenal forms of the commodity, of the use value, of the entrepreneur, etc.,
are indeed general, but not collective phenomena. The fact that the historical
sciences of economy represent the individual phenomena of the latter by no
means excludes their making us aware of these from the collective point of
view. However, the contrast between the
investigation and description of the individual and the general aspect of human
phenomena is always what distinguishes the historical social sciences from the
theoretical. Theoretical economics
has the task of investigating the general nature and the general connection of
economic phenomena, not of analyzing economic concepts and of drawing the
logical conclusions resulting from this analysis. The phenomena, or certain
aspects of them, and not their linguistic image, the concepts, are the object
of theoretical research in the field of economy. The analysis of the concepts
may in an individual case have a certain significance for the presentation of
the theoretical knowledge of economy, but the goal of research in the field of
theoretical economics can only be the determination of the general nature and
the general connection of economic phenomena. It is a sign of the slight
understanding, which individual representatives of the historical school in
particular have for the aims of theoretical research, when they see only
analyses of concepts in investigations into the nature of the commodity, into
the nature of economy, the nature of value, of price and similar things, and
when they see "the setting up of a system of concepts and judgments"
in the striving for an exact theory of economic phenomena (ct. particularly
Roscher's Thukydides, p. 27). A number of French economists fall into a
similar error when, with an erroneous view of the concepts "theory"
and "system," they understand by these terms nothing more than
theorems obtained deductively from a priori axioms, or systems of these
(cf. particularly J. B. Say, Cours [18521, I, p. 14 ff. Even J. Garnier says
"C'est dans Ie sens de doctrine erronnee qu'on prend Ie mot 'systeme' en
economie politique." Traite d'Econ. Pol. [1868], p. 648).
Note
the similarity between Menger’s “types” and Weber’s “ideal types”. But note
also the important distinction: Menger intends “types” to be scientific laws of
causation between phenomena in Aristotelian fashion. For Weber instead ideal
types are pure Kantian categories where causation is impossible to establish
(because phenomena are eventuated by “things in themselves” which are
inscrutable). Weber’s world is already Machian: it links phenomena as
“sensations”, not as real physical events in a Galilean or Aristotelian manner.
Menger’s key
distinction between the individual
and the general – from Irrthumer to the Untersuchungen – is aimed at this power of theory to abstract from “concrete phenomena” to
“phenomenal forms”, that is to say, from the material social conditions of
workers to their ability to produce abstract value, from concrete labour to abstract
labour – to which correspond Menger’s concreten
Erscheinungen and Erscheinungsformen
- measured in “man-hours”, just like “horse-power”. Menger’s astute criticism
of the Classical Labour Theory of Value (in the Principles, Appendices C and D on the “nature” and the “measure of
value”, respectively) is precisely that “labour” cannot be at once the content
or substance of Value, its “nature”, and also its measure, just as a metre is
not space and a second is not time! This objection formed the entire basis of
Marx’s critique of political economy
as the metaphysics of labour – the distinction between concrete or living
labour (Arbeit) and its abstract or
crystallised form as imposed by capitalists, that is to say, labour-power (Arbeits-kraft). Marx’s critique clearly
did not intend labour value to be an absolute but rather a relative quantity in
that “socially necessary labour time” can refer to the labour time made “socially
necessary” through the political violence of capitalists. Bohm-Bawerk’s
critique of Marx will move from this “quantitative” – hence “essentialist” and
objectivist – understanding of Value, which Menger was the first to eschew
despite his Aristotelian straying.
That
he was aware of the role of “theory” in promoting the interests of a particular
class, Menger shows by his own critique of Savigny’s Historical School of Law. For
Savigny and his school, the “organic” evolution of society is ipso facto rational because it is
“spontaneous” – hence the real is rational – whereas for Weber and the
Neoclassics scientific rationality requires the jettisoning of atavistic
“feudal” institutions in favour of market individualism or methodological individualism as the Neoclassics called it, whereby
for them “the rational is real”. Thus, the two aspects of Hegel’s famous dictum
are set off against each other.
Weber
and Menger are right to insist that what is irrational is the individual-social
distinction. Yet neither of them was ever able to reconcile individual content and general form – the concrete and the
abstract in social theory. (Refer to Hayek’s “Carl Menger” – individualism
presupposes inter-subjectivity and ownership, and both presuppose a social
definition of Value, and thus “subjective value” is an oxymoron. Menger’s late sprawling
fruitless studies in ethnography and his preoccupation with the theory of money
truly expose this “desperation” in his theoretical quest.
But his
interests and the scope of the proposed work continued to expand to wider and
wider circles. He found it necessary to go far in the study of other
disciplines. Philosophy, psychology and ethnography claimed more and more of
his time, and the publication of the work was again and again postponed. In
1903 he went so far as to resign from his chair at the comparatively early age
of 63 in order to be able to devote himself entirely to his work, Hayek, p.32)
I wish to
contest the opinion of those who question the existence of laws of economic
behavior by referring to human free will, since their argument would deny
economics altogether the status of an exact science. Whether and under what
conditions a thing is useful to me,
whether and under what conditions it is a good,
whether and under what conditions it is an economic good, whether and under
what conditions it possesses value
for me and how large the measure of
this value is for me, whether and under what conditions an economic exchange of goods will take place between two economizing
individuals, and the limits within which a price
can be established if an exchange does occur—these and many other matters are
fully as independent of my will as any law of chemistry is of the will of the
practicing chemist. The view adopted by these persons rests, therefore, on an
easily discernible error about the proper field of our science. For economic
theory is concerned, not with practical rules for economic activity, but with the conditions
under which men engage in provident activity directed to the satisfaction of
their needs. Economic theory is related to the practical activities of
economizing men4 in much the same way that chemistry is related to the
operations of the practical chemist. Although reference to freedom of the human
will may well be legitimate as an objection to the complete predictability of
economic activity, it can never have force as a denial of the conformity to
definite laws of phenomena that condition the outcome of the economic activity
of men and are entirely independent of the human will. (Principles, Preface, p.48)
Interestingly, Menger
includes in the domain of economics the question of “whether” something is
“useful”. But then the question of “will” must be included unless we assume
that some exchanges must take place and the exchange is pure barter. This
“anthropology” is something the other Neoclassics will omit from their
“science” because it points to the uncomfortable sphere of use values that are
supposedly only “subjective”. Menger thinks in humanistic essentialist or
anthropological terms of cause and effect, of “wealth”. By contrast, utility
can only be thought of in relative and subjective terms of potential “exchange”
– in terms of “marginal utility”. But
if these matters of “will” are omitted, the sphere of “whether” and
“usefulness” is barred from economics! If they are excluded, then the content
of economics is emptied out: economics becomes pure formal mathematics!
Marginal utility theory cannot be concerned with use values because they are
inscrutable, metaphysical. Yet obviously, the psychological metaphysics of
possessive individualism (Macpherson) have to be included or subsumed under the
categories of “supply”, “demand”, and therefore “scarcity”, and then “value”
and finally, to include money, “price”.
Klein at p.8:
Economics, for Menger,
is the study of purposeful human choice, the relationship between means and
ends. “All things are subject to the law of cause and effect,” he begins his
treatise. “This great principle knows no exception.”2 Jevons and Walras
rejected cause and effect in favor of simultaneous determination, the technique
of modeling complex relations as systems of simultaneous equations in which no
variable “causes” another. Theirs has become the standard approach in contemporary
economics, accepted by nearly all economists but the followers of Carl Menger.
Hayek at 17:
It is not the purpose
of the present introduction to give a connected outline of Menger’s argument.
But there are certain less known, somewhat surprising, aspects of his treatment
which deserve special mention. The careful initial investigation of the causal
relationship between human needs and the means for their satisfaction, which
within the first few pages leads him to the now celebrated distinction between
goods of the first, second, third and higher orders, and the now equally
familiar concept of complementarity between different goods, is typical of the
particular attention which, the widespread impression to the contrary
notwithstanding, the Austrian School has always given to the technical
structure of production—an attention which finds its clearest systematic
expression in the elaborate “vorwerttheoretischer Teil” which precedes the
discussion of the theory of value in Wieser’s late work, the Theory of Social
Economy, 1914.
Hayek at 19 fn,1:
1Further aspects of
Menger’s treatment of the general theory of value which might be mentioned are
his persistent emphasis on the necessity to classify the different commodities
on economic rather than technical grounds, his distinct anticipation of the
Böhm-Bawerkian doctrine of the underestimation of future wants, and his careful
analysis of the process by which the accumulation of capital turns gradually
more and more of the originally free factors into scarce goods.
Hayek at p.22, fn.2:
2An exception should,
perhaps, be made for Hack’s review in the Zeitschrift
für die gesamte Staatswissenschaft, 1872, who not only emphasized the
excellence of the book and the novelty of its method of approach, but
also pointed out as opposed to Menger that the economically relevant
relationship between commodities and wants was not that of cause and effect but
one of means and end.
Hayek, p17-8:
Even more remarkable
is the prominent role which the element of time plays from the very beginning.
There is a very general impres
1 8 P rin ciple s o f
E c o n o mic s
sion that the earlier
representatives of modern economics were inclined to neglect this factor. In so
far as the originators of the mathematical exposition of modern equilibrium
theory are concerned, this impression is probably justified. Not so with
Menger. To him economic activity is essentially planning for the future…
On yet another and a more
interesting point in connection with the pure theory of subjective value
Menger’s views are remarkably modern. Although he speaks occasionally of value as measurable,
his exposition makes it quite clear that by this he means no more than that the
value of any one commodity can be expressed by naming another commodity of
equal value. Of the figures which he uses to represent the scales of utility he
says expressly that they are not intended to represent the absolute, but only
the relative importance of the wants, and the very examples he gives when he
first introduces them makes it perfectly clear that he thinks of them not as
cardinal but as ordinal figures.1 (Hayek, p.19)
If I mean by “supply”
the available quantity of a “good” that is “scarce”, then obviously there must
be a corresponding “demand”, without which “supply” and “scarcity” would be
meaningless. But in this I also have to include the “want” of an “individual”,
without which “supply” and “scarcity” would be meaningless. And this “want” has
to be of diminishing intensity (Gossen).
Another, perhaps less important
but not insignificant instance of Menger’s refusal to condense explanations in
a single formula, occurs even earlier in the discussion of the decreasing
intensity of individual wants with increasing satisfaction. This physiological
fact, [m.e.] which later under the name of “Gossen’s law of the
satisfaction of wants” was to assume a somewhat disproportionate position in
the exposition of the theory of value, and was even hailed by Wieser as
Menger’s main discovery, takes in Menger’s system the more appropriate minor
position as one of the factors which enable us to arrange the different individual
sensations of want in order of their importance. (Hayek, p.18)
If you could produce
something that created higher demand with production, then the law of supply
and demand – their antinomic link – would break down (obviously Neoclassics
never thought of Apple!).
Hayek in “Carl Menger”
traces the “logic” of this chain of thought. The notion of “good” is also meant
to eliminate the process of pro-duction from the supply of pro-ducts, which
otherwise could not be treated in isolation and abstraction from the process!
(How can a pro-duct be distinguished from its pro-duction, also and especially
in terms of “ownership”?)
It is obvious that
Menger is con-fusing lots of interesting questions here. But Classical
economics abstracts from use values by restricting their “supply” to what is
pro-duced so that only the partial allocation of the total Value (the quantity
of labour) to individual items is measured. This supply is taken to be an
exogenous amount dependent of the available quantity of labour and its
productivity in various processes of production. This allocation is then called
“exchange value” and the question of use value is eliminated. Except that the
substance and the measure are fused and confused as “labour” rather than distinguished
as living labour and labour-power so that the intensity of labour (the temporal
intensity of labour, Marx’s socially necessary labour time, which is not
“necessary” at all – it is simply violence) is left to one side. This is how
“labour” and “Value” become metaphysical for the Neoclassics.
Whilst defending on
one hand the ability of Savigny’s School to draw “principles” from individual
facts – the “general” from the “particular” -, Menger criticizes nevertheless
the atavism, the conservatism of the school aimed at protecting
backward-looking “feudal-aristocratic” interests:
It [Savigny’s
Historical School of Law] concluded that the desire for a reform of social and
political conditions aroused in all Europe by the French Revolution really
meant a failure to
INTRODUCTION [9]
recognize the nature
of law, state and society and their "organic origin." It concluded
that the "subconscious wisdom" which is manifested in the political
institutions which come about organically stands high above meddlesome human
wisdom. It concluded that the pioneers of reform ideas accordingly would do
less well to trust their own insight and energy than to leave the re-shaping of
society to the "historical process of development." And
it espoused other such conservative basic principles highly useful to the
ruling interests.20 (Investigations,
p.91)
But Menger fails to
make explicit the kind of “interests” that his “reformed Political Economy”
science will be serving. In Die Irrthumer
after denouncing the effete “eclecticism” of the Historical School, he makes
the litmus test of the new “science” its ability “to serve the economy” in
terms of the Resultate to which it
leads. This also is a Friedmanite positivist trait – above all, the predictability of policy actions and
changes!
In the centre of
the discussion there stands the great methodological achievement of C. Menger: Untersuchungen über die Methode der
Sozialwissenschaften und der politischen Oekonomie insbesondere. It led
people out of the stage of observation and individual arguments and attempted
to clarify the struggle about methods by a thorough discussion of principles.
In doing so it defended the theoretical position against the misunderstandings
to which it had been exposed.1 In this respect there was indeed a great deal to
be done. With the specifically historical range of ideas there was closely
connected the view that economic theory was not in any way based on the
observation of facts but on premises of a dubious character, that it was
fundamentally prescientific and was destined to be replaced by a serious
investigation of the facts. In consequence it was assumed that the task of
science in the field of economic theory was not to develop it further but
merely to describe it and to explain its ever-changing systems in historical
terms. At
1 The following
writers have the same basic approach: Böhm-Bawerk, 'Method in Political
Economy', Annals of American Academy, 1; v. Philippovich, Ueber Aufgabe und
Methode der Politischen Oekonomie, 1886; Sax, Wesen und Aufgaben der
Nationalökonomie, 1884; Dietzel, *Beiträge zur Methodik der
Wirtschaftswissenschaften', Conrad`'s ]ahrh. 1884, and other works; Lifschitz,
Untersuchungen über die Methodologie der Wirtschaftswissenschaft, 1909. Also
the following English writers on methodology: Jevons, 'The Future of Political
Economy', Fortnightly Review, 1876, and 'Principles of Science', 1874; Cairnes,
The Character and Logical Method of Political Economy, 1875; Keynes, Scope and
Method of Political Economy, 1st ed 1891, and article 'Method* in Palgrave's
Dictionary. Bagehot's attitude {Economic Studies, ed. 1880) is similar to that
of K. Bücher: With these two thinkers theory appears indispensable for an
understanding of the events in the modern exchange economy, beyond this,
however, it is without any value. Furthermore, we find methodological
discussions of a similar character in most of the systematic works, e.g. in A.
Wagner, Philippovich, G. Cohn, J. Conrad, Seligman, Marshall and others.
ECONOMIC DOCTRINE
AND METHOD
best it might be
possible to recognize the establishment and elaboration of a system of
conceptions which could be put at the disposal of a science of society as a
task of a theoretical nature, though of comparatively secondary importance. It
was also believed that it was hardly possible any longer to talk of 'laws' in
the field of social science and that at best it might be possible to talk of
such regularities as can be discovered by detailed historical and statistical
research. These 'regularities' might possibly be termed 'empirical laws'. The
term 'theory' became so outlawed that it is today sometimes replaced by that of
'intellectual reproduction' or 'doctrine', in order not to evoke from the start
a whole host of prejudices. And even if 'theory' in the sense of generally
valid concepts was not regarded as absolutely impossible, the existing theory
was considered as wrong in principle. Although Menger opposed these views he
recognized at once the necessity of an historical basis for the solution of a
great many economic problems and he considered such an historical basis
essential for the investigation of individual cases.
Here is where the
essence of the methodological debate between the Old Historical School of
Roscher and Knies and the Neoclassics really lies. Not only, but it is indeed
possible even to distinguish between the Old Historical School and the Young
one established by Schmoller, one that became in fact far more closely aligned
with the Neoclassics than with its older predecessor in the Methodenstreit. In terms of “being of
service to the economy” the aim was amply shared by Schmoller, as Schumpeter
points out. Indeed, it can be said that from a purely business standpoint,
Schmoller’s research with his Verein fur
Sozialpolitik - “social policy”, not “science”! - was far more “useful” to
the nascent German capitalist bourgeoisie than the theoretical divagations of a
Menger and the nascent Austrian School of Economics! Clearly, the issue was far
weightier in terms of the ideological
service of the new “science”, in terms of its “principles” against
“particulars”, against an “eclecticism” that was liable to raise more questions
than it answered about the legitimacy of capitalist enterprise, especially with
regard to its “non-economic” repercussions. (Schumpeter himself will seek to
address these “extra-economic” repercussions more seriously in his later work,
and especially in Capitalism, Socialism
and Democracy where the scientificity of capitalism is questioned - and
indeed its extinction is even hypothesized.)
Schmoller’s
historicism was always going to be saddled with its being “political”, that is,
connected to “policies” – whereas the Neoclassics wished to present capitalist
practice as pure theory, as “science”.
Schmoller1
retorted in a polemical form which was necessitated by the occasion, but as
regards the subject-matter his approach was by no means simply a negative one. Already
at this time he recognized not only that some of Menger's critical observations
were justified but also how essentially similar the causal nexus in social
science and natural science is; he also described the explanation of social
phenomena in the form of cause and effect and in the form of laws—for him at
this time both coincided—as the aim of scientific effort. Indeed
we find even the far-reaching proposition that all perfect science is
'deductive', that is, that the state of ideal perfection is only reached when
it has become possible to explain concrete phenomena completely with the help
of theoretical premises. This proposition implies the acknowledgment that such
a state of the science is possible in principle—even if in actual fact it
1 Zur Methodologie
der Staats-und Sozialwissenschaften, Jahrbuch für Gesetzgebung, 1883; comp.
also Zur Literaturgeschìchte der StaatsundSozialwissenschaft, 1888, and
Wechselnde Theorien undfeststehende Wahrheiten ..., 1897; earlier statements by
Schmoller on questions of method can be found in the symposium Grundfragen der
Soiialpolitik und Volkswirtschaftslehrey 1898.
HISTORICAL SCHOOL
AND MARGINAL UTILITY 171
should remain unattainable
for us. It also implies a complete rejection of the specifically historical
belief in the 'incalculable5 and essentially 'irrational' nature of social
events.
Note
how Schumpeter distinguishes above between “cause and effect” and “economic
laws” – suggesting that “the box of tools” contains just “tools of analysis”
and not empirical findings of causal relationships – which both Menger and
Schmoller did:
He [Schmoller] also described the explanation of
social phenomena in the form of cause and effect and in the form of laws—for him at this time both coincided—as
the aim of scientific effort.
This is similar to Hayek’s pointing
out Menger’s “error” of seeing economic laws as “causational” whereas they are
means-ends, science-of-choice, “rational” or “pure logic of choice” relations.
This is a clear contrast between the Aristotelianism of Menger and the clearly
Neo-Kantian and Machian orientation of the Austrian School from Mises onwards.
The
impossible reconciliation of empiricism and formalism reached its apogee with
Mises. Of course, Schmoller’s deductionism stands in contrast to Menger’s
“generalism” in the sense that the former is purely conceptual whereas Menger
meant a theory that is based empirically and is not the mere elucidation of
concepts, as he says at p.38 of the Investigations.
Schmoller is closer to Roscher’s Thucydides,
to historicism; Menger instead preannounces Schumpeter in his insistence on the
history/theory distinction. Nevertheless, Schumpeter is right to intimate that
historicism will lead to determinism – to “science” even where this science is
sheer classification (anatomy as in the Statik)
or evolution as in the Dynamik, or
indeed formal mathematical identities with no cause-effect temporal nexus as in
General Equilibrium.
Schmoller goes
further here than most of the theorists would have been prepared to do. In his
works on method in the Handwörterbuch der
Staatswissenschaften he emphasises the causal and theoretical task of
social science even more forcefully. This approach is quite compatible with his
view that the theory of social science needs to a large extent an historical
'substructure'. All these statements do not at all reveal an opposition to
theory on principle, although of course they do not exclude an opposition to
the existing theory. This latter kind of opposition, however, could only be an
opposition 'within the theory', because as soon as the historian sets out to
obtain general perceptions on the basis of his detailed historical research he
would be forced to isolate facts and to arrive at abstractions, that is, he
would in fact change into a theorist. It does not matter what these general
perceptions are called. As v. Schmoller strikingly remarks, it makes no
difference whether we talk of laws or whether we employ a different term for a
complex of facts which remains essentially the same whatever name we might give
to it. It is true that 'empirical laws', that is the identification of
regularities in facts which remain unanalysed, would be possible even without
abstractions, but they would, firstly, not be numerous and would, secondly, not
tell us very much, they would be 'incomprehensible'. It is interesting to observe how
closely representatives of schools, which are usually considered as essentially
hostile, approached each other when they came to debate the principles of the
matter. Even some of Schmoller's followers, as, e.g. Hasbach1, assumed
the attitude which is characterized by the recognition of generally valid
1 *Ein Beitrag zur
Methodologie der Nationalökonomie', Schmoller9 s Jahrbücker, 1885, and *Mit
welcher Methode werden die Gesetze der theoretischen Oekonomie gefunden',
Conrads Jahrbücher, 1894. Yet not all did so. Apart from methodological works
of an historical point of view already mentioned we may quote: Grabski, *Zur
Erkenntnislehre der volkswirtschaftlichen Erscheinungen', Tübinger Zeitschrift,
1861; Held, *Uber den gegenwärtigen Prinzipienstreit in der Nationalökonomie,
Preussische Jahrbücher, 1872; Rümelin, 'Ueber den Begriff des sozialen
Gesetzes', Reden und Aufsät^ I, 1875. The points of view of these authors,
however, differ from each other.
172 ECONOMIC
DOCTRINE AND METHOD
laws. Gradually
this attitude began to prevail until finally in recent times any argumentative
hostility to theory died out, and the distinction which had already been
stressed by Menger between the perception of the general and the individual was
recognized. This distinction was given philosophical support. (Wïndelband:
'nomothetical' and 'ideographic' point of view, Rickert: 'scientific' and
'historical' approach.) This, however, had only very little effect on
the contrast which continued to exist between the two methods of work, and it
was rather because people became tired of the controversy than because they
composed their differences that the quarrel gradually became less bitter.