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21.10.2003, 21:45

Psychology versus Praxeology / Artikel mises.org

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Psychology versus Praxeology
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by Robert Murphy

[Posted October 21, 2003]

<img alt src="http://www.mises.org/images3/triangle.gif" align="right" border="0" width="225" height="227">In
a recent article, I laid
out the Misesian approach of praxeology, or the science of human action. 
Contrary to the mainstream positivist position, in which all economic theories
must lead to falsifiable predictions that can be tested, Ludwig von Mises
believed that valid economic theorems must be deducible from the axiom,"Humans
act." <a id="_ftnref1" title href="http://www.mises.org/fullstory.asp?control=1351#_ftn1" name="_ftnref1">[1]</a>

Many readers
sent me email, challenging the Misesian view.  One major concern was
whether psychology should avail itself of the experimental method.  After
all, psychology too deals with human beings, and in particular with their
mental states and dispositions.  So does the Austrian believe that the
method of the natural sciences—in other words, the formulation of a
hypothesis that is then subjected to experimental verification or refutation—is
as inappropriate in psychology as it is in economics?

In response, I
pointed out that Mises was quite clear on the dividing line between psychology
and praxeology:  Psychology deals with theories to explain why
people choose certain ends, or how people will act in certain settings. 
Praxeology, on the other hand, deals with the logical implications of the fact
that people have ends and the fact that they act to achieve
them.  Because of this difference, it may be entirely appropriate for
psychologists to engage in experimental testing of hypotheses, while utterly
misguided for economists to similarly ape the method of physics.

I. 
A Psychological Law

To illustrate
the difference, let us compare two"laws" from the respective
disciplines.  Psychologists have conducted many experiments confirming
the apparent truth of the"bystander effect," which states that
people will be less likely to help someone (a stranded motorist, for example)
if there are a large number of other bystanders.  The intuition for this
apparent law is clear:  A person who drives by a stranded motorist in a
large city will think,"Somebody else, more suitable than me, will stop
and help that person."  On the contrary, a person who drives by a
stranded motorist in a rural area will realize that he is the only one who can
help.  Paradoxically, it is possible that a person is more likely to be
helped if his car breaks down in a relatively deserted area.

Although the
bystander effect sounds plausible, and indeed seems consistent with our
personal experiences, is it a scientifically validated theory?  Well, the
only way to test this is to set up a controlled experiment.  We can make
no a priori deductions about the validity of the bystander effect,
since we have no self-evident axioms that would lead to its deduction. 
It’s not enough to test the average response time in a big city versus a
rural area, because we are not dealing with the same population.  (It
might be that most people in a big city are just mean, for example.)

Therefore
psychologists have conducted experiments in which the subject is placed in a
room by himself, and talks over an intercom to other"subjects" (some
of whom are really confederates).  During the conversation, one of the
confederates casually mentions that she is prone to seizures.  Then the
confederate (whom the actual subject believes to be a test subject just like
himself) fakes a seizure over the intercom.  The psychologists then
observe whether the real subject will get up and leave the room, seeking help
for the seizure victim.  And lo and behold, through repeated trials
psychologists have found that subjects are less likely to leave their room and
seek help, the greater the number of other people involved in the intercom
conversation.  In particular, if the subject is the only person talking
to the victim when the"seizure" occurs, then the subject will just
about always get up and seek help.  But if he is only one of a dozen
people conversing on the intercom, he will be much less likely to get up.

Of course, even
this experimental confirmation does not prove the universal truth of
the bystander effect.  It could be that, despite their best efforts, the
psychologists did not really pick a representative sample of test subjects. 
Moreover, even if the bystander effect is indeed a fact for the current
population of humans, there is nothing to prevent the emergence in one hundred
years of a new breed of humans who, whether through culture or genetics, do
not obey the bystander effect.  Just like any"law" from the
natural sciences, the"laws" of psychology (insofar as they are
validated by the experimental method) are only tentative.

II. 
An Economic (Praxeological) Law

In contrast, let
us analyze a typical economic law:  If the government runs a deficit,
then interest rates will be higher than they otherwise would have been. 
Now this law too seems commonsensical (just as the bystander effect), but it
is more than that:  Once the economist takes care to precisely specify
the definitions of the terms, he or she can actually prove the
proposition as an exercise in pure logic.  There is no reason to go out
and"test" whether it is true, because this would miss the point. 
It would be as nonsensical as"testing" whether the interior angles
of a triangle (in Euclidean geometry) add up to 180 degrees.

During the
1980s, many apologists for the Reagan Administration’s profligate spending
used statistics in an attempt to refute this praxeological law.  They
showed that, contrary to those worrying about the"crowding out effect,"
the huge deficits in the 1980s were not correlated with huge increases in
interest rates.  Thus it seemed that the economy could have its savings
and eat them too; record-breaking deficits weren’t bad after all!

Murray Rothbard
explained the absurdity of this argument.  Statistics, he pointed out,
cannot trump logic.  If the government runs a deficit (i.e. spends more
money than it receives in tax and other revenues), then it necessarily reduces
the amount of savings available to the private sector.  To put it another
way, if the government floods the market with billions of dollars in new bonds,
the supply of bonds is necessarily higher than it otherwise would have been,
meaning the market-clearing interest rate (the inverse of the price of bonds)
is necessarily higher than it otherwise would have been.

What happened
during the 1980s, therefore, is that (for whatever reasons) <a id="_ftnref2" title href="http://www.mises.org/fullstory.asp?control=1351#_ftn2" name="_ftnref2">[2]</a>
interest rates would have fallen
tremendously from their heights in the 1970s.  But because Reagan ran
huge deficits at the same time, interest rates were prevented from falling as
much as they otherwise would have.  Without an antecedent theory to
relate savings, deficits, and interest rates, the statistician who looks at
economic data would be at a loss to come up with anything but shifting (and
often spurious) patterns.  In particular, there is no way to
"test" the rival interpretations of the Reagan era, because
economists cannot set up the same"initial conditions" and run the
experiment again, this time with a balanced budget.

In conclusion,
the Austrian methodological position remains solid.  It is true that
other disciplines dealing with human beings, such as psychology, can make use
of the experimental method.  However, insofar as one believes (as Mises
did) that economics proper is a subset of praxeology, then it is clear that
all economic theorems must be logically deduced from the action axiom. 
From the Austrian perspective, to copy the methods of the physicists is to
entirely misconceive the nature and purpose of economic theory.


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Robert Murphy has been a summer fellow at the Mises
Institute and now teaches economics at <ST1:PLACE>
<ST1:PLACENAME>
Hillsdale</ST1:PLACENAME>
<ST1:PLACETYPE>
College</ST1:PLACETYPE>
</ST1:PLACE>
. robert_p_murphy@yahoo.com.
See the Study
Guide on money. See
the Murphy
Archive. See also the Study
Guide on Method.

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<a id="_ftn1" title href="http://www.mises.org/fullstory.asp?control=1351#_ftnref1" name="_ftn1">[1]</a>
In addition to the self-evident
action axiom, some economic theorems also require subsidiary assumptions
such as"labor is onerous" and"labor is scarce relative to
land."

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<a id="_ftn2" title href="http://www.mises.org/fullstory.asp?control=1351#_ftnref2" name="_ftn2">[2]</a>Of
course, a Reagan apologist might argue that his policies were the reason
for the tendency for lower interest rates, and that a balanced budget (coinciding
with the 1981 tax cuts) was politically impossible.  That may very
well be.  But I am making the point that the Reagan record did not disprove
the"crowding out effect."


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