14 Austrian Rationalism in the Age of the Decline of Positivism I. RATIONALISM AND RELATIVISM IN THE NATURAL AND SOCIAL SCIENCES

Philosophical rationalism claims that man is capable of recognizing ultimate foundations and principles of knowledge. It recognizes that all knowledge which must be presupposed insofar as one argues about any knowledge claim whatsoever (and thus cannot be meaningfully disputed because it is the precondition of meaningful doubt) is ultimately justified or a priori valid. The law of contradiction is an example of such knowledge. Moreover, philosophical rationalism asserts that based on the recognition of such ultimate truths, man is capable of systematic scientific progress.

Relativism denies the existence of absolute foundations of knowledge and the possibility of scientific progress.

There appears to be little or no evidence in support of relativism in the natural sciences. It is undeniable that the history of the natural sciences has been one of continuous progress, and that man has achieved mastery over nature far surpassing that of bygone ages. Moreover, disciplines such as propositional logic, arithmetic, Euclidean geometry, rational mechanics (classical mechanics without gravitation), and chronometry, all of which have been termed “protophysics,” provide perfect examples of the rationalist idea of ultimately founded knowledge. Logic and protophysics must be presupposed if one is to say anything meaningful at all, or if one is to make any empirical measurement of space, time, and material and thus cannot possibly be invalidated by human experience or measurement. (Euclidean geometry, for instance, cannot be said to have been falsified by the theory of relativity because the establishment of the theory of relativity presupposes the validity of Euclidean geometry in the construction of the measurement instruments.)

On the contrary, in full agreement with the claims of rationalism, it appears that it is precisely the status of logic and protophysics as absolutely a priori justified theories which makes progress in the empirical natural sciences systematically possible. ¹

This view of the natural sciences and their development has come under criticism in the wake of Thomas Kuhn’s much celebrated book, The Structure of Scientific Revolutions. ² In detailed analyses of central episodes in the history of the empirical natural sciences, Kuhn therein challenged the view that the process of scientific development could be described as gradually progressing towards truth through a series of hypothetical conjectures, crucial experiments, and the elimination of experimentally falsified theories, with every future generation knowing more than the previous one. Instead, according to Kuhn it has been a noncumulative, nonteleological process. Different “paradigms” or fundamental views of the essence of nature followed and supplanted one another as temporary orthodoxies, with each paradigm immune from, and irrefutable by, experience, and different paradigms incommensurable with each other. Shifts of paradigms were not motivated by incontrovertible experiences but were akin to religious conversions. Old paradigms died out as the scientists who had promoted them died away; new ones took their place as new generations of scientists, infected by conversion fever, grew up, with each generation gaining new knowledge from the adoption of a new creed as well as losing old knowledge in having abandoned the paradigms of past generations.

Does Kuhn’s work, then, call for a revision of the rationalist interpretation of the natural sciences and establish a case for relativism? While Kuhn is inclined to think so, and while others, most notably Paul Feyerabend, have even radicalized Kuhn’s relativistic aspirations to a “methodological anarchism” with the battle cry “anything goes,” ³ there can be little doubt that neither Kuhn, Feyerabend, nor anyone else has successfully persuaded the general public outside of the ivory towers of academia to accept a relativistic model of the natural sciences. Now as before, the general public is convinced of the views of rationalism, and justly so.

This is not to say that there is not some partial truth contained in Kuhn’s and Feyerabend’s often fascinating investigations. It is certainly true, and noteworthy, that losses of knowledge can occur even in the natural sciences, and that it is therefore profitable to study not only the most recent publications in one’s field but also the writings of authors long past and forgotten. It is also true that motives such as power, prestige, income, animosity, and friendship do not become inoperative once people turn to the study of nature. (Who, for instance, is ready to abandon a theory to whose development he has committed his entire life’s work only because the world around is increasingly defecting to another incompatible paradigm?) Indeed, as an economist one can go even further and admit the possibility of scientific regression: A process of capital consumption, followed by lower general standards of living, a reduced population, a disintegration of markets, and the division of labor, as has repeatedly occurred in the history of mankind, would inevitably result in a decrease in man’s knowledge of nature.

Yet even when all this is said, rationalism’s claims are not affected in the least. For one thing, Kuhn’s and Feyerabend’s relativism surely cannot be extended to logic and protophysics. If one wants to make a meaningful proposition, or any measurement at all, “anything” does not go. Such disciplines, which incidentally have remained largely outside the scope of Kuhn’s and Feyerabend’s considerations, are absolutely indispensable for any empirical natural science (and not merely irrefutable paradigms capable of substitution by other, incommensurable ones). However, once this is recognized, and once it is understood that proposition-making, counting, the construction of measurement instruments, and measuring, all of which make the empirical natural sciences possible, are purposeful activities, it immediately becomes clear that the paradigms of the natural sciences must be conceived of as means toward some universal, indispensable human end, and that they must be commensurable as regards their efficiency in attaining this end. ⁴

The relativistic impression of the development of the empirical natural sciences that Kuhn and Feyerabend try to convey can be traced to the fact that they both misconceive of scientific theories as mere systems of verbal propositions and systematically ignore their foundation in the reality of action. Only if one regards theories as being completely detached from action does any single theory not only become immunizable, but any two rival theories whose respective terms cannot be reduced to and defined in terms of each other must then appear completely incommensurable so as to exclude any rational choice between them. However, this affects neither the refutability of any one theory, nor the commensurability of rival paradigms, on the entirely different level of applying them in the reality of action, of using them as instruments for the attainment of a practical purpose. On the level of mere words, paradigms may be irrefutable and incommensurable, but in practice they never can be. In fact, one could not even state that any single paradigm was irrefutable or any two paradigms were incommensurable and in what respect, unless one presupposed a common categorical framework that could serve as the basis for such an assessment or comparison. It is this practical refutability and commensurability of the paradigms of the empirical natural sciences that explains the possibility of technological progress.

In systematically ignoring the fact that theories and theoretically interpreted observations are those of an actor, built and made in order to act successfully, Kuhn and Feyerabend have deprived themselves of the very criterion against which all knowledge concerning nature is continually tested and commensurated: the criterion of successfully reaching a set goal by applying knowledge in a given situation, or of failing to do so. Without the criterion of instrumental success, relativism would be inescapable. Yet in each of our actions visà-vis nature, we confirm the claim of rationalism that one can identify a range of applications for some theoretical knowledge and test it for its success within this range, and hence, that competing theories must be considered commensurable as regards such ranges of application and success. No situation is conceivable in which it would be rational to give up an intellectual tool which had once proven successful in a range of applications if no better tool were available. Yet if a superior tool were available, for example, a theory or paradigm that allowed one to reach a goal that could not be reached equally successfully by applying another, incompatible theory, it would be irrational for an actor not to adopt it. To be sure, such irrational behavior is empirically possible. However, whoever chose it would have to pay a price for doing so. He would deprive himself of the ability to achieve goals that he otherwise could accomplish, and isolated from all social contexts which might offer other, socio-psychological reasons not to adopt it, alone vis-à-vis nature, no one capable of distinguishing between successful and unsuccessful action would ever want to pay such a price. It is this which explains the unacceptability of a relativist view of the natural sciences and the possibility of the actually observable continuous—if at times for socio-psychological reasons somewhat erratic—progress in man’s mastery of nature, which Kuhn and Feyerabend would declare nonexistent, although all the while it seems to be staring them in the face. ⁵

The situation is very different if one turns from the natural to the social sciences. Here the claims of rationalism seem to find far less support, and relativism has gained widespread public acceptance. ⁶

Foremost among the indicators cited in support of relativism is the observation that there is nothing in the development of the social sciences resembling the progress which has been achieved in the natural sciences. While our predictive powers and instrumental control over nature have dramatically increased since the times of Plato and Aristotle, the development of the empirical social sciences has been characterized by a standstill. In spite of the availability of all sorts of technical gadgets, such as high-speed computers, it appears that we are in no better position today to predict social events or to planfully bring about social change than were Plato or Aristotle in their days. (One might note that even if the validity of this observation is admitted, the relativistic conclusion to which it allegedly leads does not directly follow. It only follows if it is presupposed that the criteria for progress in the social sciences are indeed identical to those in the natural sciences. Proponents of social relativism take this for granted, yet it is by no means obvious why this should be so. On the contrary, in the natural sciences the object of knowledge [nature] and the subject of this knowledge [an actor] are different separate entities. In the social sciences, on the other hand, the objects of knowledge and research are themselves knowers and researchers. In light of this categorical difference, it would seem anything but clear why the methodology appropriate for the natural and the social sciences could possibly be one and the same. In fact, it is entirely unsurprising that when it comes to predicting predictors, or instrumentally controlling instrumental controllers, there cannot be any systematic progress of the kind observed in the natural sciences! ⁷⁾

Moreover, proponents of relativism usually point out, apparently there is no analogue in the social sciences to the role played by logic and protophysics as the a prioristic foundations of the empirical natural sciences. The rationalist claim, associated in particular with the “natural law” tradition, that such an analogue is provided by economics and ethics, ⁸ has either been forgotten and disappeared from public consciousness or is dismissed out of hand: Economics, it is held, is an empirical science very much like physics, with the objective of producing predictive knowledge, but unlike physics it fails to deliver the promised goods. As regards the observation that prosperous as well as poor societies exist, which would seem to make room for economic explanations after all—though not for explanations of the kind offered by physics—the proponents of social relativism contend that such differences have no economic reasons but are due to different degrees of technological knowledge. Rich societies are rich because of their advanced state of technology; poverty is due to a lack of natural-scientific know-how. Two objections to this view appear obvious: (1) The description of the facts is false. Do not the underdeveloped societies send their future scientists and engineers in large numbers to the universities of the advanced countries, and do not these poor societies then have access to the same knowledge upon their return as the rich ones? (2) More important still, technological know-how can only have a material impact if it is utilized. However, in order to do this, there must be savings and investment. It is not the availability of technical or scientific knowledge that imposes limits on a society’s prosperity; rather, it is the amount of savings and investment that imposes limits on the exploitation of actually available knowledge and on scientific progress, insofar as research activities, too, must be supported by saved-up funds. Hence, contrary to relativistic views, economics seems to have something to do with prosperity and poverty after all! ⁹

Nor, it is claimed, does ethics offer support for anything but relativism, for does not the fact of continuous and, so it seems, ineradicable differences of opinion in the field of contemporary politics prove the case of ethical relativism conclusively? Does not social anthropology, the study of societies such as the Fidshi islanders, or the natives of New Guinea, for instance, add still more evidence in support of relativistic conclusions? There are institutions such as cannibalism or slavery which a relativist might be hard pressed to defend. However, according to ethical relativists, regarding these practices as counter-evidence is the result of a misconception. The problem with these institutions is not that they invalidate relativism but that societies adopting them are still under the spell of social rationalism. That is, they still falsely believe in an absolutely founded ethic. Ethical relativism, its proponents claim, rules out intolerant practices such as these and implies a pluralism of values. (But is it not obvious that this doctrine is entirely fallacious? Without an absolute, a priori foundation, a value pluralism is itself just another unfounded ideology, and there is no compelling reason to adopt it over any other one. Only if a priori valid reasons could be given for adopting pluralism could it claim to safeguard tolerance and could cannibalism or slavery then be ruled out as acceptable social practices. ¹⁰)

II. POSITIVISM AND THE RELATIVISTIC DESTRUCTION OF ETHICS AND ECONOMICS

No other philosophical doctrine in modern times has contributed more to the spread of relativism than positivism. Rooted in the tradition of the classical empiricism of Locke and Hume, it emerged first in Vienna around the turn of the century and then established itself, in particular in the wake of the emigration of its intellectual leaders to the U.S. during the 1930s, as the dominant philosophical creed of the Western world. ¹¹

While the basic tenets of positivism amount to a denial of the claims of rationalism as applied to the natural as well as the social sciences, its impact has been particularly strong in the latter. To be sure, there can be no doubt that even the natural sciences, and especially logic and protophysics, have suffered from the influence of positivism. ¹² However, for reasons already mentioned, to derail rationalism within this field would be extremely difficult. Adopting a relativist viewpoint would ultimately amount to forsaking the intellectual means for one’s own successful handling of nature, and no one capable of distinguishing between success and failure has a systematic interest in paying such a price. In the social sciences matters are different. While up to now the purely intellectual case for social relativism has hardly appeared better founded than the case for the natural sciences, and while I demonstrate it in the following to be entirely baseless, advocating and adopting relativism in the social sciences is not self-defeating in the same sense as it is in the sciences of nature. If one were to deny the existence of absolute laws of economics and/or ethics and the possibility of social progress, a price would have to be paid, too. However, the price would not necessarily have to be paid directly, and would not invariably be borne in full by whoever adopted and acted on this view. Rather, he who adopted it could externalize the costs of his views onto others; hence, insofar as relativism can serve as a means for increasing one’s own well-being at the expense of reducing that of others, individuals could have an interest in advocating social relativism. ¹³

It is this which explains why the influence of positivism has made itself felt in the social sciences in particular. Whether this had been intended by the positivists or not, their philosophical message was quickly recognized by the powers that be as a mighty ideological weapon in the pursuit of their own goal of increasing their control over others and of enriching themselves at the expense of others. Accordingly, lavish support was bestowed on the positivist movement, and this movement returned the favor by destroying economics and ethics in particular as the traditional bastions of social rationalism and eradicating from public consciousness a vast body of knowledge that had once constituted a seemingly permanent part of the heritage of Western thought and civilization. ¹⁴

The first and most fundamental tenet of positivism is this: Knowledge regarding reality, or empirical knowledge, must be verifiable or at least falsifiable by experience; that whatever is known by experience could have been otherwise, or, put differently, that nothing about reality can be known to be true a priori; that all a priori true propositions are analytical statements which have no factual content whatsoever but are true by convention, representing merely tautological information about the use of symbols and their transformation rules; that all statements are either empirical or analytical, but never both; and hence, that normative statements, because they are neither empirical nor analytical, cannot legitimately contain any claim to truth, but must be regarded as mere expressions of emotions, saying, in effect, no more than “wow” or “grrr.” ¹⁵

The second tenet of positivism formulates the extension or rather the application of the first one to the problem of scientific explanation. According to positivism, to explain a real phenomenon is to formulate a statement of either the type “if A, then B” or, should the variables allow quantitative measurement, “if an increase (or decrease) in A, then an increase (or decrease) in B.” As a statement referring to reality (with A and B being real phenomena, that is), its validity can never be established with certainty by examining the proposition alone or any other proposition from which the one in question could in turn be logically deduced, but will always remain hypothetical and dependent on the outcome of future experiences which cannot be known in advance. Should experience confirm a hypothetical explanation, i.e., should one observe an instance where B indeed followed A, as predicted, this would not prove that the hypothesis is true, since A and B are general, abstract terms (“universals, as opposed to proper names”) which refer to phenomena or events of which there are (or, at least might, in principle be) an indefinite number of instances, and hence later experiences could still possibly falsify it. And if an experience falsified a hypothesis, i.e., if one observed an instance of A that was not followed by B, this would not be decisive either, as it would still be possible that the hypothetically related phenomena were indeed connected and that some other previously neglected and uncontrolled circumstance or variable had simply prevented the hypothesized relationship from being actually observed. A falsification would only prove that the particular hypothesis under investigation was not completely correct as it stood and needed some refinement, some specification of additional variables which one would have to control in order to be able to observe the hypothesized relationship between A and B. However, a falsification would never prove once and for all that a relationship between some given phenomena did not exist. ¹⁶

Finally, positivism claims that these two related tenets apply universally, to all fields of knowledge (the thesis of “the unity of science”): No a priori knowledge of nature nor of the social reality of human actions and knowledge exists; and the structure of scientific explanations is the same regardless of the subject matter. ¹⁷

Assuming for the moment this doctrine to be correct, it is easy to recognize its relativistic implications. Ethics is not a cognitive discipline. Any normative statement is just as well-, or rather, ill-founded as any other one. But then, what is wrong with everyone trying to impose on others whatever one wishes? Surely nothing. Everything is allowed. Ethics is reduced to the question “what can I get away with?” What better message could there be for those in power: for the cannibal king, for the slave owner, or for the holders of government office! It is precisely what they want to hear: might is and makes right.

Similarly, they must be thrilled about the message of positivism as regards the positive sciences. In the natural sciences, the positivist doctrine is relatively harmless. Disciplines such as logic and protophysics, whose propositions are generally considered a priori true (nonfalsifiable by experience), are interpreted by positivists as containing no “real” knowledge at all, as empirically empty formalisms. This view has helped legitimize and further the degeneration of parts of logic and mathematics into meaningless symbolic games, of which the general public has remained largely ignorant due to the arcane nature of the subject. ¹⁸ But it has not, nor could it have, changed the fact that at least some propositions of logic and mathematics are employed as the very foundation of the empirical natural sciences, and hence are actually treated as containing empirical information, though of a nonhypothetical kind. ¹⁹ Nor is there much harm in the positivist view of the empirical natural sciences, such as physics. Its methodology, according to which one can never definitively establish whether a hypothesized relationship between two or more variables exists or not, offers the possibility that one might cling to one’s hypotheses regardless of all seemingly falsifying experiences, for one could always blame a previously neglected variable for one’s predictive failures. However, as explained above no one trying to produce some given physical event would systematically prefer finding excuses for not reaching this goal over actually reaching it because he alone would have to pay the price for such stubbornness.

In the realm of the social sciences, however, where the costs of one’s actions can be externalized onto others, this possibility of immunizing one’s hypotheses from falsification offers welcome opportunities to those in power.

Consider some typical economic propositions: Whenever an exchange is not voluntary but is coerced, such as highway robbery or taxation, one exchange party profits at the expense of the other. Or: Whenever minimum wage laws are enforced that require wage rates to be higher than existing market wages, involuntary unemployment will result. Or: Whenever the quantity of money is increased while the demand for money is unchanged, the purchasing power of money will fall. Or: Any supply of money is “optimal” such that no increase in the supply of money can raise the overall standard of living (while it can have redistributive effects). Or: Collective ownership of all factors of production makes cost-accounting impossible, and thus leads to a lower output in terms of consumer evaluations. Or: Taxation of income producers raises their effective time preference rate, and thus leads to a lower output of goods produced. Apparently, these propositions contain knowledge about reality, yet they do not seem to be falsifiable but are true by definition. ²⁰ However, according to positivism this cannot be so. Insofar as they claim to be empirically meaningful statements, they must be hypotheses subject to empirical confirmation or falsification. One can formulate the very opposite of the above propositions without thereby stating anything that could be recognized from the outset, a priori, as false (and nonsensical). Experience would have to decide the matter. Thus, in assuming the positivist doctrine, the highway robber, taxman, union official or the Federal Reserve Board would act legitimately, from a scientific point of view, in claiming that taxation benefits the taxed and increases productive output, minimum wage laws increase employment, and the creation of paper money generates all-around prosperity. As a good positivist, one would have to admit that these are merely hypotheses, too. With the predicted effects being benevolent, however, surely they should be put into effect and tried out. After all, one should not close one’s eyes to new experience, and one should always be willing to react flexibly and open-mindedly, depending on the outcome of such an experience. However, if the outcome is not as hypothesized, and the robbed or taxed do not appear to benefit, employment actually decreases, or economic cycles rather than all-around prosperity ensue, the possibility of immunizing one’s hypotheses becomes a real, almost irresistibly tempting option. For why would the robber, the taxman, or the Federal Reserve Board not want to continuously play down all apparently falsifying experiences as merely accidental, so long as he can personally profit from conducting their robbing-, taxing-, or money-creating experiment? Why would he not want to interpret all apparent falsifications as experiences that had been produced by some unfortunately neglected circumstance and that would disappear and turn into their very opposite, revealing the true relationship between taxes, minimum wage laws, the creation of money, and prosperity once these circumstances were controlled?

In fact, whatever empirical evidence one presents against these hypotheses, as soon as one adopts positivism and rejects the idea of formulating a principled case either for or against them as ill-conceived, the robber’s or the taxman’s case is safe from decisive criticism because any failure can be ascribed to an as yet uncontrolled intervening variable. Not even the most perfectly controlled experiment could change this situation. For it would never be possible to control all variables that might conceivably have an influence on the variable to be explained or the result to be produced. In practice, this would involve controlling literally all of the universe, and in theory no one even knows what all the variables which make up this universe are. No matter what the charges brought against the robber, the taxman, or the Federal Reserve Board, within the boundaries of the positivist methodology they will always be able to preserve and rescue the “hard-core” of their “research program” as the neo-Popperian positivist Lakatos would have called it. Experience only tells us that a particular experiment did not reach its goal, but it can never tell us if a slightly different one will produce any different results, or if it is possible to reach the goal of generating all-around prosperity by means of any form of robbery, taxation, or paper money creation.

The attitude toward positive economics that positivism fuels and that has indeed become characteristic of most contemporary power elites and their subsidized intellectual bodyguards is that of a relativist social engineer whose motto is “nothing can be known with certainty to be impossible in the realm of social phenomena and there is nothing that one might not want to try out on one’s fellowmen, so long as one keeps an open mind.” ²¹

The fact that positivism supports the mentality of social relativism does not prove it wrong. However, suspicion regarding its validity seems appropriate. It certainly is not obvious that there should be no rational ethical standard at all and that literally “anything goes.” Nor is it intuitively plausible that economics should be either an empirically meaningless symbolic game (a system of analytic propositions), or a set of hypothetical, empirically falsifiable predictions concerning the outcome of human actions and interactions. In the former case it would be nothing but a waste of time, and in the latter economics would obviously be impotent and hence irrelevant (if anything, the baker in ancient Athens could have predicted the behavior of his fellowmen better and with a higher degree of confidence than his modern counterpart!). However, economic propositions such as those mentioned above are apparently neither meaningless nor irrelevant. Indeed, in light of the self-serving implications of positivism for those in power, it may well be suspected that positivism might come to be accepted even if it were false, and that it might continue even if its falsehoods were exposed—as they surely have been.

Each of the three interrelated premises of positivism is demonstrably false. ²²

Regarding positivism’s supposedly exhaustive classification of analytic, empirical, and emotive propositions one must ask: What, then, is the status of this very axiom? It must be either an analytical or an empirical proposition, or it must be an expression of emotions. If it is taken to be analytical, then it is merely empty verbal quibble, saying nothing about anything real, but only defining one sound or symbol by another. Hence, one would simply have to shrug one’s shoulders and reply “so what?” The same response would be appropriate if the positivist argument were taken to be an empirical proposition. If this were the case, it would have to be admitted that the proposition might well be wrong and that one would be entitled to know the criterion on the basis of which one would have to decide whether or not it was. More decisively, as an empirical proposition it could merely state a historical fact and would thus be entirely irrelevant in determining whether or not it would be possible to ever produce propositions that were empirical and yet nonfalsifiable, or normative, yet nonemotive. Finally, if the positivist line of reasoning were assumed to be an emotive proposition, then according to its own doctrine it is cognitively meaningless and contains no claim to truth whatsoever, and one would not need to pay any more attention to it than to a barking dog.

Thus, one must conclude from the outset that positivism is an utter failure. It does not prove that there can be no rational ethic. Nor can it even be considered an epistemology, a justifiable theory of knowledge. For if it were, then positivism’s most basic premise would have to be a synthetic a priori statement (empirical, but unfalsifiable), whose existence positivism denies. Thus, one would have landed in the camp of social rationalism.

Similarly, positivism’s claim that all scientific explanations are hypothetical is self-defeating. (For what is the status of this explanation?) ²³ In order to see this, let it be assumed that an explanation relating two or more events has been found to fit one set of data, and that it is then applied to a second data set, presumably to undergo further empirical testing. Now one must ask: What is the presupposition which must be made in order to relate the second experience to the first one as either confirming or falsifying it? It might seem that if in the second instance of experience the observations of the first were repeated this would be a confirmation, and if not, a falsification. Clearly, the positivist methodology assumes this to be obvious. But this is not true. Experience only reveals that two or more observations regarding the temporal sequence of two or more types of events can be “neutrally” classified as “repetition” or “nonrepetition.” A neutral repetition only becomes a “positive” confirmation and a nonrepetition a “negative” falsification if independent of what can actually be discovered by experience, it is assumed that there are constant, time-invariantly operating causes. If, contrary to this, it is assumed that causes in the course of time might operate sometimes this way and sometimes that way, then these repetitive or nonrepetitive occurrences simply are and remain neutrally registered experiences, completely independent of one another. They are not in any way logically related to each other as confirming or falsifying one another. There is one experience and there is another, they are the same or they are different, but that is all there is to it; nothing else follows.

Thus, the presupposition of being able to say “falsify” or “confirm” is the constancy principle: the conviction that observable phenomena are in principle determined by causes that are constant and time-invariant in the way they operate. Only if the constancy principle is assumed to be valid does it follow from any failure to reproduce a result that there is something wrong with an original hypothesis; and only then can a successful reproduction indeed be interpreted as a confirmation. Obviously, this constancy principle is not itself based on or derived from experience. There is not only no observable link connecting events, but even if such a link existed, experience could not reveal whether or not it was time-invariant. The principle cannot be disproved by experience either, since any event which might appear to disprove it (such as a failure to duplicate some result) could be interpreted from the outset as if experience had shown here merely that one particular type of event was not the cause of another. However, to the extent that experience cannot exclude the possibility that another set of events might actually be found which would turn out to be time-invariant in its way of operating, the validity of the constancy principle cannot be disproved.

Nonetheless, although neither derived from nor disprovable by experience, the constancy principle is nothing less than the logically necessary presupposition for experiences which can be regarded as either confirming or falsifying each other (in contrast to isolated, logically unconnected experiences). Hence, since positivism assumes the existence of such logically related experiences, it must be concluded that it also assumes the existence of nonhypothetical knowledge about reality. It must assume that there are indeed time-invariantly operating causes, and it must assume this to be the case although experience could never possibly prove or disprove it. Once again, positivism turns out to be an inconsistent, contradictory philosophy. There exist nonhypothetical explanations of real things.

Finally (and by now not surprisingly), the positivist thesis of the unity of science turns out to be self-contradictory. Positivism claims that actions, just as any other phenomenon, can and must be explained by means of hypotheses which can be confirmed or refuted by experience. If this were the case, then—contrary to its own doctrine that there can be no a priori knowledge about reality—positivism would be forced to assume that with respect to actions time-invariantly operating causes exist. In order to proceed as positivism wants us to proceed—to relate different experiences regarding sequences of events as either confirming or falsifying each other—a constancy over time in the operation of causes must be presupposed (as has already been explained). However, if this were true and actions could indeed be conceived of as governed by time-invariantly operating causes, what about explaining the explainers, i.e., those who carry on the very process of hypothesis creation, of verification and falsification; all of us, that is, who act the way the positivists tell us to act? Evidently, to do all this—to assimilate confirming or falsifying experiences, to replace old hypotheses with new ones—one must assumedly be able to learn. However, if one can learn from experience, and the positivist is compelled to admit this, then one cannot know at any given time what one will know at later times and how one will act based on this knowledge. Rather, one can only reconstruct the causes of one’s actions after the event, since one can only explain one’s knowledge after one already possesses it. Thus, the positivist methodology applied to the field of knowledge and action, which contains knowledge as its necessary ingredient, is simply contradictory—a logical absurdity.

The constancy principle can and indeed must be assumed within the sphere of natural objects, i.e., for phenomena that are not constituted by one’s own knowledge or actions manifesting that knowledge (in this sphere the question of whether there are law-governed constants on the basis of which it becomes possible to make exante predictions is positively determined independent of experience, and empirical factors play a role only in determining which concrete variables are causally linked to which concrete effect variables, and which are not). With respect to knowledge and action, on the other hand, the constancy principle cannot be valid (in this sphere of phenomena, the question of whether or not there are constants is itself empirical in nature and can only be decided for a given variable on the basis of past experience, that is, ex post). And all this, which is definitely knowledge about something real, can be known apodictically. Hence, a methodological dualism rather than the positivist monism must be accepted and admitted as absolutely a priori true.

III. THE AUSTRIAN SCHOOL OF ECONOMICS AND THE PROSPECTS OF A RATIONALIST RECONSTRUCTION OF ETHICS AND ECONOMICS

The fact that positivism was quickly refuted as a self-contradictory philosophical system naturally did not help its cause. However, due to the self-serving nature of the positivist doctrine for those in positions of governmental power it also did little to reduce positivism’s popularity. Much more was needed to defeat positivism than to prove it logically false: It took decades of social experimentation, of trying on an ever-increasing scale to prove world-wide and within each nation state that there are no ethical and economic laws, that nothing is taboo, and that everything is possible. It took the economic stagnation of the Western welfare democracies beginning in the late 60’s and early 70’s; the enduring impoverishment of the Third World nations decades after their decolonization; and the gradual, and since the late 80’s—after more than 70 years of experimenting—the breathtakingly rapid economic collapse of the socialist East Bloc countries. ²⁴ Outside of the real world, in academia, that is, it took the temporary disappearance of ethics and political theory, and their substitution by linguistic analysis, operationally meaningless moonshine talk, or interest group politics and bargaining theories. ²⁵ It required the degeneration of economics into either empirically meaningless symbolic exercises, with no resemblance whatsoever to what had once been the subject matter of the classics of economic thought (except for some occasional, economically sounding term ²⁶ produced by, at best, second-rate mathematicians for no actual audience at all, but only to collect dust in the tax-supported libraries of this world); or it required its degeneration into a mighty econometric forecasting industry, whose futility was painfully obvious to everyone, including the politicians and government bureaucrats who subsidized it so as to employ it for purposes of “scientific legitimation.” ²⁷ It required the default of the Keynesian system, with the advent of the allegedly impossible phenomenon of stagflation in the mid-70’s; the breakdown of the monetarist paradigm, after a long series of patently false predictions from the late 70’s on through the 80’s; and the complete, worldwide bankruptcy of Marxist economics. ²⁸

Still positivism is not dead. However, since the mid-70’s the price of decades of social relativism and engineering has become too high to be ignored or simply explained away. Gradually, a philosophical crisis situation has emerged. Not surprisingly, with positivism finally losing ground other varieties of relativism, which had been submerged during the positivist reign, have resurfaced and are trying to fill the widening ideological vacuum. Associated with names such as hermeneutics, rhetoric, ultra-subjectivism, and deconstructionism, an academic movement of sorts is underway that is trying to revive the old message of nihilism—that there is no such thing as truth—and which ascribes the failure of positivism not to its relativism, but to the fact that it is not relativistic enough in continuing to allow for empirical (hypothetical) truths rather than for no truths at all. ²⁹

But the crisis has also brought back the philosophy of social rationalism that has long since demonstrated the falsity of positivism but fell into oblivion during the decades of positivist supremacy. Sparked by the Nobel-prize award in 1974 to Friedrich August von Hayek, the arch-rationalist Austrian School of economics, in the tradition of Carl Menger, Eugen von Böhm-Bawerk and, above all, Ludwig von Mises, Hayek’s teacher, and Murray N. Rothbard, has experienced a resounding revival. Removed for decades from the higher reaches of subsidized academia because of its unpalatable implications for those in power and relegated to an unobtrusive existence in the underworld of non-University, real-world intellectuals, the Austrian School has steadily gained momentum and grown into a genuine mass movement, with an increasing number of academic bastions as well as a continuously swelling grass roots support. In fact, spearheaded by the Ludwig von Mises Institute, founded in the mid-80’s, the movement has taken on an international dimension with a rapidly spreading Mises-renaissance among intellectual circles in the countries of Eastern Europe. Faced with the total collapse of socialism and the exhaustion of all governmental authority and legitimacy, and confronted with the task of the immediate and radical reconstruction of their countries, the advice that empirically meaningless mathematical economics, or econometrics, can give or that can be derived from Keynesianism, Monetarism, Rational Expectationism or, worse still, Hermeneuticism, can only appear to them as ridiculously inappropriate. In their emergency situation, only the Austrian School offers an unambiguous, radical, and constructive answer: Not only do truths exist in the social sciences, but there exist a priori, nonhypothetical truths which no one is capable of undoing. The truth is as simple as fundamental: that private property and private property rights is an indisputably valid, absolute principle of ethics and the basis for continuous “optimal” economic progress; and that in order to arise from the ruins of socialism, nothing will suffice but an uncompromising privatization of each and all property and the return to a contractual society based on the recognition of the absoluteness of private property rights. ³⁰

Indeed, the Austrian School represents the most ambitious of all forms of social rationalism with its unyielding contention that nonhypothetical a priori empirical knowledge within the field of the social sciences exists, and that it is ethics and economics (which contain this knowledge) which are analogous to logic and protophysics as the absolutely indispensable foundation of all empirical social research. Furthermore, the Austrian School alone has substantiated this contention by offering a completely developed, consistent, and all-comprehensive positive theory of ethics and economics. ³¹

Indirectly, the basic claim of Austrianism has already been established. During the above refutation of positivism it was demonstrated that while knowledge and actions cannot be conceived of as caused (i.e., predictable on the basis of time-invariantly operating effect variables), any action, by virtue of trying to bring about some given goal, presupposes a causally structured physical reality. Obviously, this insight itself represents a perfect example of the possibility of nonhypothetical social knowledge: it formulates knowledge about actions which no actor could possibly discover to be false, because any such discovery would actually presuppose its validity. Austrianism in fact merely claims that there is much more implied in our reflectively gained knowledge of what it is to act than this, which no actor can thus possibly falsify.

The Austrian theory sets out from two systematically interrelated axioms, both of which are nonhypothetically true. The first is the “axiom of action”: the proposition that humans act, or more precisely, that I am acting now. It cannot be denied that this proposition is true, since the denial would itself be an action. Nor can anyone intentionally not act, because this, too, would be an action. Thus the truth of the axiom literally cannot be undone. ³²

The second axiom is the “a priori of argumentation.” What we have done here all along—I in writing this study and the reader in reading it—is engaged in argumentation. If it were not for argumentation there would be no debate about the truth or falsity of social relativism or rationalism and the status of ethics and economics. There would only be silence or meaningless noise. Only with argumentation does the idea of validity and truth emerge. Whether or not something is true, false, or undecidable; whether or not it has been justified; what is required in order to justify it; whether I, someone else, or no one is right—all of this must be decided in the course of argumentation and propositional exchanges. This proposition is a priori true, too, because it cannot be denied without affirming it in the act of denying it. One cannot argue that one cannot argue, and one cannot dispute knowing what it means to raise a validity claim without implicitly claiming at least the negation of this proposition to be true. This is the a priori of argumentation, ³³ and both axioms are related as logically necessary interwoven strands of a priori knowledge. On the one hand, actions are more fundamental than argumentation because argumentation is only a subclass of action. On the other hand, to state what has just been stated about action and argumentation and their relationship to each other already requires argumentation, so epistemologically argumentation must be considered to be more fundamental than nonargumentative action.

Ethics, or more specifically, the Austrian private property ethic, is derived from the a priori of argumentation, and it is from its nature as a nonhypothetically true axiom that ethics derives its own status as absolutely true. ³⁴

With the a priori of argumentation established as an axiomatic starting point of epistemology, it follows that anything that must be presupposed in the act of proposition-making cannot be propositionally disputed again. It would be meaningless to ask for a justification of presuppositions which make the production of meaningful propositions possible in the first place. Instead, they must be regarded as ultimately justified by every proposition maker. Any specific propositional content that disputed their validity must be understood as implying a performative or practical contradiction.

Further, in the same way as it is undeniably true that one cannot argue that one cannot argue, and that it must be assumed that everyone engaging in argumentation must know what it means to claim something to be true, it is also true that any argument requires an arguing person, an actor. Arguing never just consists of free-floating propositions but is always an activity, too. Given that truth claims must be raised and decided upon in the course of argumentation, and that argumentation, aside from whatever is said in its course is also a practical affair, it follows that intersubjectively meaningful norms must exist. These norms are precisely those which make an action argumentation, and they have a special cognitive status in that they are the practical preconditions of truth. In fact, neither the empiricalfact/emotive-value dichotomy so dear to the positivists, nor their distinction between empirical and analytical statements, could be claimed to be valid unless the norms underlying argumentation (in the course of which these distinctions are made) were themselves regarded as valid. It is simply impossible to argue otherwise because in doing so one would in fact presuppose their validity.

Now, as a necessarily practical affair, any propositional exchange requires a proposition-maker’s exclusive control (property) over some scarce means. No one could possibly propose anything, and no one could possibly become convinced of any proposition, if one’s right to make exclusive use of one’s physical body were not already presupposed. It is one’s recognition of another’s mutually exclusive control over his body which explains the distinctive characteristic of propositional exchanges: that while one may disagree about what has been said, it is still possible to agree at least on the fact that there is disagreement. It is obvious, too, that such a property right in one’s own body must be said to be justified a priori, for anyone who would try to justify any norm whatsoever must already presuppose an exclusive right of control over his body simply to say, “I propose such and such.” Anyone disputing such a right would become caught up in a practical contradiction, since in arguing so one would already implicitly have accepted the very norm that one was disputing.

Finally, it would be equally impossible to engage in argumentation, if one were not allowed to appropriate in addition to one’s body other scarce means through homesteading, i.e., by putting them to use before someone else does, or if such means were not defined in objective, physical terms.

For if no one had the right to control anything at all, except his own body, then we would all cease to exist and the problem of justifying norms—as well as all other human problems—simply would not exist. The fact that one is alive presupposes the validity of property rights to other things. No one who is alive could argue otherwise.

And if a person did not acquire the right of exclusive control over such goods by homesteading, by establishing some objective link between a particular person and a particular physical resource before anyone else had done so, but instead late-comers were assumed to have ownership claims to things, then literally no one would be allowed to do anything with anything at any time unless he had the prior consent of all late-comers. Neither we nor our forefathers nor our progeny could survive or will survive if we were to follow this rule. Yet in order for any person—past, present or future—to argue anything it must evidently be possible to survive. And in order for us to do this, property rights cannot be conceived of as timeless and nonspecific regarding the number of people concerned. Rather, property rights must necessarily originate through action at definite places and times for specific acting individuals. Otherwise, it would be impossible for anyone to say anything at a definite tine and place and for someone else to reply. To assert that the first-user-first-owner rule of private property can be ignored or is unjustified implies a contradiction. One’s assertion of this proposition presupposes one’s existence as a physically independent decision-making unit at a given point in time, and the validity of the homesteading principle as an absolute principle of property acquisition.

Economics, or in Mises’s terminology praxeology, and its status as a nonhypothetical, a priori true social science is derived from the axiom of action. ³⁵

With every action an actor pursues a goal, and whatever his goal may be, the fact that it is pursued by an actor reveals that he places a relatively higher value on it than on any other goal of action he could conceive of at the start of his action.

In order to achieve this goal an actor must interfere or decide not to interfere (which is also an interference) at an earlier point in time to produce a later result, and this interference implies the use of some scarce means (at least those of the actor’s body, its standing room, and the time used by the interference).

These means must also have value for an actor—a value derived from that of the goal—because the actor must regard their employment as necessary in order to achieve the goal effectively. Further, actions can only be performed sequentially and always involve making a choice, i.e., taking up one course of action which at some given point in time promises the most highly valued result to the actor and excluding at the same time the pursuit of other, less valued goals.

In addition, when acting an actor not only invariably aims to substitute a more for a less satisfactory state of affairs and demonstrates a preference for higher over lower values; he also invariably considers when in the future his goals will be reached and demonstrates a universal preference for earlier over later results. Since every action requires time and man must occasionally consume something, time is always scarce. Hence, present or earlier results are, and invariably must be, valued more highly than future or later ones, and man will only exchange a present value against a future one if he thereby anticipates increasing his future well-being.

Furthermore, as a consequence of having to choose and give preference to one goal over another, of not being able to realize all goals simultaneously, and of being constrained by time preference, each and every action implies the incurrence of costs, i.e., the forsaking of the value attached to the most highly valued alternative goal that cannot be realized or whose realization must be postponed because the means necessary to effect it are bound up in the production of another, even more highly valued goal.

Finally, it is implied in our knowledge of what it is to act, that at its starting point every goal of action must be considered worth more to the actor than its cost and capable of yielding a profit, i.e., a result whose value is ranked higher than that of the foregone opportunities. However, every action is also invariably threatened by the possibility of a loss if in retrospect an actor finds that contrary to expectations the result actually achieved has a lower value than the relinquished alternative would have had.

All of these categories which we know to be the very heart of economics—values, means, choice, preference, time preference, cost, profit and loss—are implied in the axiom of action. Like the axiom itself, they incorporate nonhypothetically true knowledge. Any attempt to disprove this knowledge would itself have to be an action, aimed at a goal, requiring means, excluding other courses of action, incurring costs, subjecting the actor to the possibility of achieving or not achieving the desired goal, and thus leading to a profit or a loss.

All true economic propositions, and this is what the Austrian conception of economics is all about, can be deduced by means of formal logic from this incontestably true material knowledge regarding the meaning of action and its categories. More precisely, all true economic theorems consist of: (a) an understanding of the meaning of action; (b) a situation or situational change—assumed to be given or identified as being given—and described in terms of action-categories; and (c) a logical deduction of the consequences—again in terms of such categories—which result for an actor from this situation or situational change. For instance, the law of marginal utility, one of the most basic laws of economics, follows from our indisputable knowledge of the fact that every actor always prefers what satisfies him more over what satisfies him less, plus the assumption that he is faced with an increase in the supply of a good (a scarce means) whose units he regards as of equal serviceability by one additional unit. From this it follows with logical necessity that this additional unit can only be employed as a means for the removal of an uneasiness that is deemed less urgent than the least valuable goal previously satisfied by a unit of such a good.

The combination of ethics as implied in the axiom of argumentation and of economics as implied in that of action yields what might be called Austrian welfare economics. ³⁶

If and insofar as actors choose to act in accordance with the indisputably valid principle of the private property ethic, social welfare—defined in terms of Pareto-optimality—will invariably be optimized: A person’s original appropriation of unowned resources, as demonstrated by this very action, increases his utility or welfare (at least ex ante). At the same time, it makes no one worse off because in appropriating them he takes nothing away from others. Obviously, others could have homesteaded these resources, too, if only they had perceived them as scarce, and hence, valuable. However, they did not do so, which demonstrates that they attached no value to them whatsoever, and thus they cannot be said to have lost any utility on account of this act. Proceeding from this basis, any further act of production utilizing homesteaded resources is equally Pareto-optimal on demonstrated preference grounds, provided only that it does not uninvitedly impair the physical integrity of the resources homesteaded or produced with homesteaded means by others. Finally, every voluntary exchange starting from this basis must also be regarded as a Paretooptimal change because it can only take place if both parties expect to benefit from it.

Operating according to the rules just described always, and invariably so, leads to the greatest possible production of wealth, for any deviation from this set of rules implies, by definition, a redistribution of property titles, and hence of income, away from user-producers and contractors of goods onto non-users-producers and noncontractors. Consequently, any such deviation implies that there will be relatively less original appropriation of resources whose scarcity is recognized, there will be less production of new goods, less maintenance of existing goods, and less mutually beneficial contracting and trading. This in turn implies a lower standard of living in terms of exchangeable goods and services. Furthermore, the provision that only the first user of a good acquires ownership assures that productive efforts will be as high as possible at all times. The provision that only the physical integrity of property (not property values) is protected guarantees that every owner will undertake the greatest possible value-productive efforts to promote favorable changes in property values and to prevent or counter any unfavorable changes in property values (as they might result from another person’s actions regarding his property). Thus, any deviation from these rules also implies reduced levels of value productive efforts at all times.

The radical simplicity of this Austrian theory of ethics and economics, indeed the fact that it has been fully elaborated—foremost in Ludwig von Mises’s epochal Human Action, and in Murray N. Rothbard’s Man, Economy, and State and The Ethics of Liberty—to a rigorously consistent as well as architectonically beautiful edifice of ethical and economic thought explains why the social rationalism of the Austrian School could be driven underground during the heyday of positivism but could never be entirely uprooted and eradicated. Its truth is too obvious to be consistently ignored among men of intellectual curiosity and common sense, for is it not natural that every person should own his own body as well as all scarce goods which he puts to use with the help of this body before anyone else does? Is it not obvious that every owner should have the right to employ these goods as he sees fit so long as in so doing he does not uninvitedly change the physical integrity of another’s property? Is it not obvious that once a good has first been homesteaded or produced with homesteaded means, then ownership of it can only be acquired by means of a contractual, voluntary transfer of a property title from a previous to a later owner? And is it not intuitively clear that only if, and insofar as, these rules are in effect, the greatest possible production of social wealth and welfare will ensue? ³⁷

This so obviously true theory has the most radical practical-political implications. It refutes as ethically unjustifiable and economically counterproductive actions such as taxation, the legislative redistribution of private property rights, the creation of fiat money, fractional reserve banking, and ultimately, the very institution of state government. It demands instead a pure private property society, an anarchy of private property owners, regulated exclusively by private property law. ³⁸ By virtue of this, the Austrian School is brought into fundamental opposition to any exercise of governmental power. Recognizing it as their natural and most dangerous intellectual enemy, those in power have done everything possible to stamp out its memory and substitute statolatry for ethics and economics. As Mises writes:

Despots and democratic majorities are drunk with power. They must reluctantly admit that they are subject to the laws of nature. But they reject the very notion of economic law. Are they not the supreme legislator? ...It is impossible to understand the history of economic thought if one does not pay attention to the fact that economics as such is a challenge to the conceit of those in power. An economist can never be a favorite of autocrats and demagogues. With them he is always the mischief-maker, and the more they are inwardly convinced that his objections are well founded, the more they hate him. ³⁹

In the present situation of a worldwide crisis of governmental legitimacy, of the collapse of East Bloc Socialism, and of the enduring stagnation of the Western Welfare States, the chance for Austrian rationalism to fill the philosophical vacuum that has appeared with the retreat of positivism and to become the paradigm of the future is as good or better than ever. ⁴⁰ Now as before it requires moral courage as much as intellectual integrity to propound the Austrian social theory—the opposing statist battalions still represent a formidable majority and are in control of a far larger share of resources. Nonetheless, with the total breakdown of socialism and the concept of social ownership staring everyone in the face, the antithetical Austrian theory of private property, free markets and laissez faire cannot but gain attractiveness and win support. Austrians have reason to believe that the time has come when they may succeed in bringing about a fundamental change in public opinion, by reclaiming ethics and economics from the hands of the positivists and the engineering powerful and by restoring public recognition of private property rights and free markets based on such rights as ultimate, absolute principles of ethics and economics.