Theme: Causality

Jared,

The problem is that while all economic phenomenon must be *explainable* as a sequence rational operations (actions), we do not possess sufficient information to explain group phenomenon, or individual cases without empirical observations (doing inquiry or research).

So, I think you just don’t understand this pair of statements:

– I can identify **all** economic phenomenon from observation.

– I cannot identify **all** economic phenomenon independent of experience.

and this term:

– limits

For example, one can identify that supply/demand, neutrality of money, or minimum wages will increase unemployment, but one cannot identify why they fail (limits) without empirical analysis because of high causal density.

The stickiness of prices is the most common example of a phenomenon that was counter-intuitive to operational reasoning. In fact, economics is, among all the social sciences, most exemplary of counter-intuition. Because asking economists to answer even the most general of questions results in a wide distribution of answers, the reason being that while very general knowledge of general rules is transferrable, general knowledge of particular subsystems is not. Largely because the incentives of actors is not deducible without inquiry.

However, if we cannot explain their behavior operationally (as a reaction to rational incentives) it cannot be a true economic proposition.

It’s not very complicated.

There are three dimensions to claims of a priori truth:

1) Aprioricity vs A posteriori,

2) Analyticity vs Syntheticity, and

3) Necessity vs Contingency

In other words,

– we can make necessary a priori analytic truth claims (3 + 5 = 8, all bachelors are unmarried)

– we can make necessary a priori synthetic truth claims (increasing the supply of dollars will result in an an increase in prices.)

– we can make contingent a priori synthetic truth claims ( a human will act in his rational self interest *assuming*…, )

The problem is, because of causal density, innovation, substitutability, informational asymmetry, and the inflexibility of agreements, all economic phenomenon are contingent.

In other words we can deduce both general rules of economic systems but not consequences. We can state rules of general trends and explain individual cases.

Or stated more obviously: “There are no non-trivial statements of economics identifiable without empirical inquiry.”

In the case of the Neutrality of Money, or targeted inflation, or any other of the conservative vs progressive debates in economics, the question is whether temporal costs (largely to holders of assets) necessary to assist consumption (demand ‘holders’), are offset by intertemporal gains. And this is not logically deducible and is currently beyond our information recording capacity.

All economics is practiced empirically because we cannot deduce operationally in high causal density. With or without keynesian interference in the money supply, or state interference in prices, taxes, and regulations.

There is nothing special about economics. There exists only one epistemological method, and that is the *theoretical* cycle:

observation > free association > criticism > contingent hypothesis > criticism > contingent theory > criticism > contingent law.

Which then is separated from the *axiomatic* that depends upon the *necessary* propositions in logic and mathematics. Declare Axioms then Deduce Conclusions.

So it’s not a question of truth or fiction, but one of MORALITY. Is it moral to impose costs on asset holders for the benefit of consumer demand when the production of some multiplier is in question?

Mises, exacerbated by rothbard, attempted to cast the moral and contingent as the true and necessary. He conflated axiomatic/necessary/low density, with theoretic/contingent/high density. He conflated the moral and the true. He conflated the necessity of operational testing with the utility of operational investigation. That is the failure of Misesian (not mengerian-austrian) economics.

“Thou Shalt Not Conflate.”