Sorens on Raico: Great minds think (mostly) alike
Jason Sorens has posted a very thoughtful review of Ralph Raico鈥檚 outstanding recent book, Classical Liberalism and the Austrian School.聽
I admire the post and learned from it, but I鈥檇 like to differ with Sorens on two points. He suggests that methodological individualism is vulnerable to criticism. 鈥淲e can know that firms try to maximize profit even if we do not have a good explanation for why each individual firm tries to maximize profit, or why individuals have chosen so to organize themselves. 鈥� He appeals here to what Bob Nozick called a 鈥渇iltering device.鈥� The explanation, I take it, is roughly this: to the extent that firms engage in profit maximization, they will tend to supplant firms that don鈥檛.
But this explanation is entirely consistent with methodological individualism. This doctrine does not require that social outcomes be reducible to the motives of individuals. To the contrary, appeals to 鈥渢he results of human action but not of human design鈥� are quite common among Austrian methodological individualists.聽 In thinking that use of 鈥渇iltering devices鈥� in Nozick鈥檚 sense, irreducible to the psychological motives of individuals, conflicts with methodological individualism, Sorens has I think wrongly taken over Nozick鈥檚 unduly restrictive account of that doctrine, in his essay 鈥淥n Austrian Methodology鈥�
Sorens also remarks:聽 鈥淗owever, what I have heard from contemporary Austrian economists such as Peter Leeson is that Mises himself was not opposed to hypothesis testing, even using statistical methods. He was merely opposed to Popper-style falsificationism (i.e., that every element of a theory must be falsifiable), which has in any case been superseded in mainstream philosophy of science. 鈥�
Certainly, Mises did not oppose hypothesis testing in applying economics to historical issues; but in economic theory itself he was very much an apriorist. Mises himself is a much better guide to his views on method than 鈥渃ontemporary Austrian economists鈥�; and if one consults Mises, whether he was an apriorist is not a difficult question to answer.
