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Sorens on Raico: Great minds think (mostly) alike

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(Read caption) A structure showing the Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt on July 11, 2012. A very thoughtful review of Ralph Raico’s outstanding recent book, "Classical Liberalism and the Austrian School" prompted a response from our blogger, David Gordon.

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Jason Sorens has posted a very thoughtful review of Ralph Raico’s outstanding recent book, Classical Liberalism and the Austrian School. 

I admire the post and learned from it, but I’d like to differ with Sorens on two points. He suggests that methodological individualism is vulnerable to criticism. “We 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. ” He appeals here to what Bob Nozick called a “filtering device.” 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’t.

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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 “the results of human action but not of human design” are quite common among Austrian methodological individualists.  In thinking that use of “filtering devices” in Nozick’s sense, irreducible to the psychological motives of individuals, conflicts with methodological individualism, Sorens has I think wrongly taken over Nozick’s unduly restrictive account of that doctrine, in his essay “On Austrian Methodology”

Sorens also remarks:  “However, 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to Popper-style falsificationism (i.e., that every element of a theory must be falsifiable), which has in any case been superseded in mainstream philosophy of science. ”

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 “contemporary Austrian economists”; and if one consults Mises, whether he was an apriorist is not a difficult question to answer.