I*

The foundations of the modern social sciences were laid in the eighteenth century. Up to this time we find history only. Of course, the writings of the historians are full of implications which purport to be valid for all human action irrespective of time and milieu, and even when they do not explicitly set forth such theses they necessarily base their grasp of the facts and their interpretation on assumptions of this type. But no attempt was made to clarify these tacit suppositions by special analysis.

On the other hand the belief prevailed that in the field of human action no other criterion could be used than that of good and bad. If a policy did not attain its end, its failure was ascribed to the moral insufficiency of man or to the weakness of the government. With good men and strong governments everything was considered feasible.

Then in the eighteenth century came a radical change. The founders of Political Economy discovered regularity in the operation of the market. They discovered that to every state of the market a certain state of prices corresponded and that a tendency to restore this state made itself manifest whenever anything tried to alter it. This insight opened a new chapter in science. People came to realize with astonishment that human actions were open to investigation from other points of view than that of moral judgment. They were compelled to recognize a regularity which they compared to that with which they were already familiar in the field of the natural sciences.

Since the days of Cantillon, Hume, the Physiocrats and Adam Smith, economic theory has made continuous—although not steady—progress. In the course of this development it has become much more than a theory of market operations within the frame of a society based on private ownership of the means of production. It has for some time been a general theory of human action, of human choice and preference.

II

The elements of social cognition are abstract and not reducible to any concrete images that might be apprehended by the senses. To make them easier to visualize one likes to have recourse to metaphorical language. For some time the biological metaphors were very popular. There were writers who overworked this metaphor to ridiculous extremes. It will suffice to cite the name of Lilienfeld.1

Today the mechanistic metaphor is much more in use. The theoretical basis for its application is to be found in the positivist view of social science. Positivism blithely waved aside everything which history and economics taught. History, in its eyes, is simply no science; economics a special kind of metaphysics. In place of both, Positivism postulates a social science which has to be built up by the experimental method as ideally applied in Newtonian physics. Economics has to be experimental, mathematical and quantitative. Its task is to measure, because science is measurement. Every statement must be open to verification by facts.

Every proposition of this positivist epistemology is wrong.

The social sciences in general and economics in particular cannot be based on experience in the sense in which this term is used by the natural sciences. Social experience is historical experience. Of course every experience is the experience of something passed. But what distinguishes social experience from that which forms the basis of the natural sciences is that it is always the experience of a complexity of phenomena. The experience to which the natural sciences owe all their success is the experience of the experiment. In the experiments the different elements of change are observed in isolation. The control of the conditions of change provides the experimenter with the means of assigning to each effect its sufficient cause. Without regard to the philosophical problem involved he proceeds to amass “facts.” These facts are the bricks which the scientist uses in constructing his theories. They constitute the only material at his disposal. His theory must not be in contradiction with these facts. They are the ultimate things.

The social sciences cannot make use of experiments. The experience with which they have to deal is the experience of complex phenomena. They are in the same position as acoustics would be if the only material of the scientist were the hearing of a concerto or the noise of a waterfall. It is nowadays fashionable to style the statistical bureaus laboratories. This is misleading. The material which statistics provides is historical, that means the outcome of a complexity of forces. The social sciences never enjoy the advantage of observing the consequences of a change in one element only, other conditions being equal.

It follows that the social sciences can never use experience to verify their statements. Every fact and every experience with which they have to deal is open to various interpretations. Of course, the experience of a complexity of phenomena can never prove or disprove a statement in the way in which an experiment proves or disproves. We do not have any historical experience whose import is judged identically by all people. There is no doubt that up to now in history only nations which have based their social order on private ownership of the means of production have reached a somewhat high stage of welfare and civilization. Nevertheless, nobody would consider this as an incontestable refutation of socialist theories. In the field of the natural sciences there are also differences of opinion concerning the interpretation of complex facts. But here freedom of explanation is limited by the necessity of not contradicting statements satisfactorily verified by experiments. In the interpretation of social facts no such limits exist. Everything could be asserted about them provided that we are not confined within the bounds of principles of whose logical nature we intend to speak later. Here however we already have to mention that every discussion concerning the meaning of historical experience imperceptibly passes over into a discussion of these principles without any further reference to experience. People may begin by discussing the lesson to be learnt from an import duty or from the Russian Soviet system; they will very quickly be discussing the general theory of interregional trade or the no less pure theory of socialism and capitalism.

The impossibility of experimenting means concomitantly the impossibility of measurement. The physicist has to deal with magnitudes and numerical relations, because he has the right to assume that certain invariable relations between physical properties subsist. The experiment provides him with the numerical value to be assigned to them. In human behavior there are no such constant relations, there is no standard which could be used as a measure and there are no experiments which could establish uniformities of this type.

What the statistician establishes in studying the relations between prices and supply or between supply and demand is of historical importance only. If he determines that a rise of 10 per cent in the supply of potatoes in Atlantis in the years between 1920 and 1930 was followed by a fall in the price of potatoes by 8 per cent, he does not say anything about what happened or may happen with a change in the supply of potatoes in another country or at another time. Such measurements as that of elasticity of demand cannot be compared with the physicist’s measurement, e.g., specific density or weight of atoms. Of course everybody realizes that the behavior of men concerning potatoes and every other commodity is variable. Different individuals value the same things in a different way, and the valuation changes even with the same individual with changing conditions. We cannot categorize individuals in classes which react in the same way, and we cannot determine the conditions which evoke the same reaction. Under these circumstances we have to realize that the statistical economist is an historian and not an experimenter. For the social sciences, statistics constitutes a method of historical research.

In every science the considerations which result in the formulation of an equation are of a non-mathematical character. The formulation of the equation has a practical importance because the constant relations which it includes are experimentally established and because it is possible to introduce specific known values in the function to determine those unknown. These equations thus lie at the basis of technological designing; they are not only the consummation of the theoretical analysis but also the starting point of practical work. But in economics, where there are no constant relations between magnitudes, the equations are void of practical application. Even if we could dispose of all qualms concerning their formulation we would still have to realize that they are without any practical use.

But the chief objection which must be raised to the mathematical treatment of economic problems comes from another ground: it really does not deal with the actual operations of human actions but with a fictitious concept that the economist builds up for instrumental purposes. This is the concept of static equilibrium.

For the sake of grasping the consequences of change and the nature of profit in a market economy the economist constructs a fictitious system in which there is no change. Today is like yesterday and tomorrow will be like today. There is no uncertainty about the future, and activity therefore does not involve risk. But for the allowance to be made of interest, the sum of the prices of the complementary factors of production exactly equals the price of the product, which means there is no room left for profit. But this fictitious concept is not only unrealizable in actual life; it cannot even be consistently carried to its ultimate conclusions. The individuals in this fictitious world would not act, they would not have to make choices, they would just vegetate. It is true that economics, exactly because it cannot make experiments, is bound to apply this and other fictitious concepts of a similar type. But its use should be restricted to the purposes which it is designed to serve. The purpose of the concept of static equilibrium is the study of the nature of the relations between costs and prices and thereby of profits. Outside of this it is inapplicable, and occupation with it vain.

Now all that mathematics can do in the field of economic studies is to describe static equilibrium. The equations and the indifference curves deal with a fictitious state of things, which never exists anywhere. What they afford is a mathematical expression of the definition of static equilibrium. Because mathematical economists start from the prejudice that economics has to be treated in mathematical terms they consider the study of static equilibrium as the whole of economics. The purely instrumental character of this concept has been overshadowed by this preoccupation.

Of course, mathematics cannot tell us anything about the way by which this static equilibrium could be reached. The mathematical determination of the difference between any actual state and the equilibrium state is not a substitute for the method by which the logical or non-mathematical economists let us conceive the nature of those human actions which necessarily would bring about equilibrium provided that no further change occurs in the data.

Occupation with static equilibrium is a misguided evasion of the study of the main economic problems. The pragmatic value of this equilibrium concept should not be underrated, but it is an instrument for the solution of one problem only. In any case the mathematical elaboration of static equilibrium is mere by-play in economics.

The case is similar with the use of curves. We may represent the price of a commodity as the point of intersection of two curves, the curve of demand and the curve of supply. But we have to realize that we do not know anything about the shape of these curves. We know a posteriori the prices, which we assume to be the points of intersection, but we do not know the form of the curve either in advance or for the past. The representation of the curves is therefore nothing more than a didactic means of rendering the theory graphic and hence more easily comprehensible.

The mathematical economist is prone to consider the price either as a measurement of value or as equivalent to the commodity. To this we have to say that prices are not measured in money but that they are the amount of money exchanged for a commodity. The price is not equivalent to the commodity. A purchase takes place only when the buyer values the commodity higher than the price, and the seller values it lower than the price. Nobody has the right to abstract from this fact and to assume an equivalence where there is a difference in valuation. When either one of the parties considers the price as the equivalent of the commodity no transaction takes place. In this sense we may say every transaction is for both parties a “bargain.”

III

Physicists consider the objects of their study from without. They have no knowledge of what is going on in the interior, in the “soul,” of a falling stone. But they have the opportunity to observe the falling of the stone in experiments and thereby to discover what they call the laws of falling. From the results of such experimental knowledge they build up their theories proceeding from the special to the more general, from the concrete to the more abstract.

Economics deals with human actions, not as it is sometimes said, with commodities, economic quantities or prices. We do not have the power to experiment with human actions. But we have, being human ourselves, a knowledge of what goes on within acting men. We know something about the meaning which acting men attach to their actions. We know why men wish to change the conditions of their lives. We know something about that uneasiness which is the ultimate incentive of the changes which they bring about. A perfectly satisfied man or a man who although unsatisfied did not see any means of improvement would not act at all.

Thus the economist is, as Cairnes says, at the outset of his researches already in possession of the ultimate principles governing the phenomena which form the subject of his study, whereas mankind has no direct knowledge of ultimate physical principles.2 Herein lies the radical difference between the social sciences (moral sciences, Geisteswissenschaften) and the natural sciences. What makes natural science possible is the power to experiment; what makes social science possible is the power to grasp or to comprehend the meaning of human action.

We have to distinguish two quite different kinds of this comprehension of the meaning of action: we conceive and we understand.

We conceive the meaning of an action, that is to say, we take an action to be such. We see in the action the endeavor to reach a goal by the use of means. In conceiving the meaning of an action we consider it as a purposeful endeavor to reach some goal, but we do not regard the quality of the ends proposed and of the means applied. We conceive activity as such, its logical (praxeological) qualities and categories. All that we do in this conceiving is by deductive analysis to bring to light everything which is contained in the first principle of action and to apply it to different kinds of thinkable conditions. This study is the object of the theoretical science of human action (praxeology) and in particular of its hitherto most developed branch, economics (economic theory).

Economics therefore is not based on or derived (abstracted) from experience. It is a deductive system, starting from the insight into the principles of human reason and conduct. As a matter of fact all our experience in the field of human action is based on and conditioned by the circumstance that we have this insight in our mind. Without this a priori knowledge and the theorems derived from it we could not at all realize what is going on in human activity. Our experience of human action and social life is predicated on praxeological and economic theory.

It is important to be aware of the fact that this procedure and method are not peculiar only to scientific investigation but are the mode of ordinary daily apprehension of social facts. These aprioristic principles and the deductions from them are applied not only by the professional economist but by everybody who deals with economic facts or problems. The layman does not proceed in a way significantly different from that of the scientist; only he sometimes is less critical, less scrupulous in examining every step in the chain of his deductions and therefore sometimes more subject to error. One need only observe any discussion on current economic problems to realize that its course turns very soon towards a consideration of abstract principles without any reference to experience. You cannot, for instance, discuss the Soviet system without falling back on the general principles both of capitalism and socialism. You cannot discuss a wage and hours bill without falling back on the theory of wages, profits, interests and prices, that means the general theory of a market society. The “pure fact”—let us set aside the epistemological question whether there is such a thing—is open to different interpretations. These interpretations require elucidation by theoretical insight.

Economics is not only not derived from experience, it is even impossible to verify its theorems by appeal to experience. Every experience of a complex phenomenon, we must repeat, can be and is explained in different ways. The same facts, the same statistical figures are claimed as confirmations of contradictory theories.

It is instructive to compare the technique of dealing with experience in the social sciences with that in the natural sciences. We have many books on economics which, after having developed a theory, annex chapters in which an attempt is made to verify the theory developed by an appeal to the facts. This is not the way which the natural scientist takes. He starts from facts experimentally established and builds up his theory in using them. If his theory allows a deduction that predicts a state of affairs not yet discovered in experiments he describes what kind of experiment would be crucial for his theory; the theory seems to be verified if the result conforms to the prediction. This is something radically and significantly different from the approach taken by the social sciences.

To confront economic theory with reality we do not have to try to explain in a superficial way facts interpreted differently by other people so that they seem to verify our theory. This dubious procedure is not the way in which reasonable discussion can take place. What we have to do is this: we have to inquire whether the special conditions of action which we have implied in our reasoning correspond to those we find in the segment of reality under consideration. A theory of money (or rather of indirect exchange) is correct or not without reference to the question of whether the actual economic system under examination employs indirect exchange or only barter.

The method applied in these theoretical aprioristic considerations is the method of speculative constructions. The economist—and likewise the layman in his economic reasoning—builds up an image of a non-existent state of things. The material for this construction is drawn from an insight into the conditions of human action. Whether the state of affairs which these speculative constructions depict corresponds or could correspond to reality is irrelevant for their instrumental efficiency. Even unrealizable constructions can render valuable service in giving us the opportunity to conceive what makes them unrealizable and in what respect they differ from reality. The speculative construction of a socialist community is indispensable for economic reasoning notwithstanding the question of whether such a society could or could not be realized.

One of the best known and most frequently applied speculative constructions is that of a state of static equilibrium mentioned above. We are fully aware that this state can never be realized. But we cannot study the implications of changes without considering a changeless world. No modern economist will deny that the application of this speculative concept has rendered invaluable service in elucidating the character of entrepreneur’s profits and losses and the relation between costs and prices.

All our economic reasoning operates with these speculative concepts. It is true that the method has its dangers; it easily lends itself to errors. But we have to use it because it is the only method available. Of course, we have to be very careful in using it.

To the obvious question, how a purely logical deduction from aprioristic principles can tell us anything about reality, we have to reply that both human thought and human action stem from the same root in that they are both products of the human mind. Correct results from our aprioristic reasoning are therefore not only logically irrefutable, but at the same time applicable with all their apodictic certainty to reality provided that the assumptions involved are given in reality. The only way to refuse a conclusion of economics is to demonstrate that it contains a logical fallacy. It is another question whether the results obtained apply to reality. This again can be decided only by the demonstration that the assumptions involved have or do not have any counterpart in the reality which we wish to explain.

The relation between historical experience—for every economic experience is historical in the sense that it is the experience of something past—and economic theory is therefore different from that generally assumed. Economic theory is not derived from experience. It is on the contrary the indispensable tool for the grasp of economic history. Economic history can neither prove nor disprove the teachings of economic theory. It is on the contrary economic theory which makes it possible for us to conceive the economic facts of the past.

IV

But to orient ourselves in the world of human actions we need to do more than merely conceive the meaning of human action. Both the acting man and the purely observing historian have not only to conceive the categories of action as economic theory does; they have besides to understand (verstehen) the meaning of human choice.

This understanding of the meaning of action is the specific method of historical research. The historian has to establish the facts as far as possible by the use of all the means provided both by the theoretical sciences of human action—praxeology and its hitherto most developed part, economics—and by the natural sciences. But then he has to go farther. He has to study the individual and unique conditions of the case in question. Individuum est ineffabile. Individuality is given to the historian, it is exactly that which cannot be exhaustively explained or traced back to other entities. In this sense individuality is irrational. The purpose of specific understanding as applied by the historical disciplines is to grasp the meaning of individuality by a psychological process. It establishes the fact that we face something individual. It fixes the valuations, the aims, the theories, the beliefs and the errors, in a word, the total philosophy of the acting individuals and the way in which they envisaged the conditions under which they had to act. It puts us into the milieu of the action. Of course this specific understanding cannot be separated from the philosophy of the interpreter. That degree of scientific objectivity which can be reached in the natural sciences and in the aprioristic sciences of logic and praxeology can never be attained by the moral or historical sciences (Geisteswissenschaften) in the field of the specific understanding. You can understand in different ways. History can be written from different points of view. The historians may agree in everything that can be established in a rational way and nevertheless widely disagree in their interpretations. History therefore has always to be rewritten. New philosophies demand a new representation of the past.

The specific understanding of the historical sciences is not an act of pure rationality. It is the recognition that reason has exhausted all its resources and that we can do nothing more than to try as well as we may to give an explanation of something irrational which is resistant to exhaustive and unique description. These are the tasks which the understanding has to fulfill. It is, notwithstanding, a logical tool and should be used as such. It should never be abused for the purpose of smuggling into the historical work obscuranticism, mysticism and similar elements. It is not a free charter for nonsense.

It is necessary to emphasize this point because it sometimes happens that the abuses of a certain type of historicism are justified by an appeal to a wrongly interpreted “understanding.” The reasoning of logic, praxeology and of the natural sciences can under no circumstances be invalidated by the understanding. However strong the evidence supplied by the historical sources may be, and however understandable a fact may be from the point of view of theories contemporaneous with it, if it does not fit into our rationale, we cannot accept it. The existence of witches and the practice of witchcraft are abundantly attested by legal proceedings; yet we will not accept it. Judgments of many tribunals are on record asserting that people have depreciated a country’s currency by upsetting the balance of payments; yet we will not believe that such actions have such effects.

It is not the task of history to reproduce the past. An attempt to do so would be vain and would require a duplication not humanly possible. History is a representation of the past in terms of concepts. The specific concepts of historical research are type concepts. These types of the historical method can be built up only by the use of the specific understanding and they are meaningful only in the frame of the understanding to which they owe their existence. Therefore not every type-concept which is logically valid can be considered as useful for the purpose of understanding. A classification is valid in a logical sense if all the elements united in one class are characterized by a common feature. Classes do not exist in actuality, they are always a product of the mind which in observing things discovers likenesses and differences. It is another question whether a classification which is logically valid and based on sound considerations can be used for the explanation of given data. There is for instance no doubt that a type or class “Fascism” which includes not only Italian Fascism but also German Nazism, the Spanish system of General Franco, the Hungarian system of Admiral Horthy and some other systems can be constructed in a logically valid way and that it can be contrasted to a type called “Bolshevism,” which includes the Russian Bolshevism and the system of Bela Kun in Hungary and of the short Soviet episode of Munich. But whether this classification and the inference from it which sees the world of the last twenty years divided into the two parties, Fascists and Bolsheviks, is the right way to understand present-day political conditions is open to question. You can understand this period of history in a quite different way by using other types. You may distinguish Democracy and Totalitarianism, and then let the type Democracy include the Western Capitalist system and the type Totalitarianism include both Bolshevism and what the other classification terms Fascism. Whether you apply the first or the second typification depends on the whole mode in which you see things. The understanding decides upon the classification to be used, and not the classification upon the understanding.

The type-concepts of the historical or moral sciences (Geisteswissenschaften) are not statistical averages. Most of the features used for classification are not subject to numerical determination, and this alone renders it impossible to construct them as statistical averages. These type-concepts (in German one uses the term Ideal-Typus in order to distinguish them from the type-concepts of other sciences, especially of the biological ones) ought not to be confused with the praxeological concepts used for the conceiving of the categories of human action. For instance: the concept “entrepreneur” is used in economic theory to signify a specific function, that is the provision for an uncertain future. In this respect everybody has to some extent to be considered as an entrepreneur. Of course, it is not the task of this classification in economic theory to distinguish men, but to distinguish functions and to explain sources of profit or loss. Entrepreneur in this sense is the personification of the function which results in profit or loss. In economic history and in dealing with current economic problems the term “entrepreneur” signifies a class of men who are engaged in business but who may in many other respects differ so much that the general term entrepreneur seems to be meaningless and is used only with a special qualification, for instance big (medium-sized, small) business, “Wall Street,” armaments business, German business, etc. The type entrepreneur as used in history and politics can never have the conceptual exactitude which the praxeological concept entrepreneur has. You never meet in life men who are nothing else than the personification of one function only.3

V

The preceding remarks justify the conclusion that there is a radical difference between the methods of the social sciences and those of the natural sciences. The social sciences owe their progress to the use of their particular methods and have to go further along the lines which the special character of their object require. They do not have to adopt the methods of the natural sciences.

It is a fallacy to recommend to the social sciences the use of mathematics and to believe that they could in this way be made more “exact.” The application of mathematics does not render physics more exact or more certain. Let us quote Einstein’s remark: “As far as mathematical propositions refer to reality they are not certain and as far as they are certain they do not refer to reality.” It is different with praxeological propositions. These refer with all their exactitude and certainty to the reality of human action. The explanation of this phenomenon lies in the fact that both—the science of human action and human action itself—have a common root, i.e., human reason. It would be a mistake to assume that the quantitative approach could render them more exact. Every numerical expression is inexact because of the inherent limitations of human powers of measurement. For the rest we have to refer to what has been said above on the purely historical character of quantitative expressions in the field of the social sciences.

The reformers who wish to improve the social sciences by adopting the methods of the natural sciences sometimes try to justify their efforts by pointing to the backward state of the former. Nobody will deny that the social sciences and especially economics are far from being perfect. Every economist knows how much remains to be done. But two considerations must be kept in mind. First, the present unsatisfactory state of social and economic conditions has nothing to do with an alleged inadequacy in economic theory. If people do not use the teachings of economics as a guide for their policies they cannot blame the discipline for their own failure. Second, if it may some day be necessary to reform economic theory radically this change will not take its direction along the lines suggested by the present critics. The objections of these are thoroughly refuted forever.

• *[Reprinted from Journal of Social Philosophy and Jurisprudence 7, no. 3 (April 1942)—Ed.]
• 1Cf. for instance Paul von Lilienfeld La Pathologie Sociale [Social Pathology] (Paris, 1896). [“When a government takes a loan from the House of Rothschild organic sociology conceives the process as follows: ... ‘The House of Rothschild’s operation, on such an occasion, is precisely similar to the action of a group of body cells which cooperate in the production of the blood necessary for nourishing the brain, in hope of being compensated by a reaction of the gray matter cells which they need to reactivate and to accumulate new energies,’ Ibid., p. 104,” in Ludwig von Mises, Socialism, J. Kahane, trans. (Indianapolis, Ind.: Liberty Classics, 1981), p. 257 n.—Ed.]
• 2[John E. Cairnes, The Character and Logical Method of Political Economics [1875] (New York: Augustus M. Kelley, 1965), pp. 89-97—Ed.]
• 3For the sake of completeness we have to remark that there is a third use of the term entrepreneur in law which has to be carefully distinguished from the two mentioned above.

I*

One of the manifestations of the present-day “revolt against reason” is the tendency to find fault with the social sciences for being purely rational. Life and reality, say the critics, are irrational; it is quite wrong to deal with them as if they were rational and open to interpretation by reasoning. Rationalism fixes its eyes upon accessory matters only; its cognition is shallow and lacks profundity; it does not penetrate to the essence of things. It is an absurdity to press into dry rational schemes and into bloodless abstractions the finite variety of life’s phenomena. What is needed is a science of irrationality and an irrational science.

The main target of these attacks is the theoretical science of human action, praxeology, and especially its hitherto best-developed part, economics or catallactics. But their scope includes the historical discipline too.

It should be realized that political motives have prompted this storm. Political parties and pressure groups whose programs cannot stand criticism based on dispassionate reasoning grasp at the straw of such an evasion. But science does not have the right to dispose of any objection merely on account of the motives which instigated it; it is not entitled to assume beforehand that a disapprobation must needs be unfounded because some of its supporters are imbued by party bias. It is bound to reply to every censure without any regard to its underlying motives and its background.

The challenge to reason and rationality did not rise in Germany. Like all other social doctrines and philosophies it had its origin in Western Europe. But it has prospered better on German soil than anywhere else. It has for a long time been the official doctrine of the Prussian universities. It has fashioned present-day German mentality, and the Nazi philosophers proudly style it “German social philosophy.” German Staatswissenschaften have refuted economics wholesale as a spurious product of the British and the Austrian mind, and German historians have disparaged the achievements of Western historiography. However, we should not forget that a long line of German philosophers and historians have brilliantly succeeded in the elucidation of the epistemological problems of history.1 Of course, to the men to whom we are indebted for these contributions no place is assigned in present-day Germany’s Hall of Fame.

It would be logical to provide at the outset of a study devoted to the problems of “rationality” and “irrationality” a precise definition of the two terms. But it is impossible to conform to this legitimate requirement. It is precisely the characteristic feature of the objections with which we have to deal that they apply terms in a vague and ambiguous manner. They defy definiteness and logical strictness as inappropriate means for grasping of life and reality and cling to obscurity on purpose. They do not aim at clarity, but at depth (Tiefe). They are proud of being inexact and of talking in metaphors.

The problem which we have to investigate is this. Is it true or not that the social sciences lost the right way because they apply discursive reasoning? Do we have to look for other avenues of approach than those provided by ratiocination and historical experience?

II

The scope of the social sciences is human action. History deals with past events, representing them from the viewpoint of various aspects. It embraces history proper, philology, ethnology; anthropology is a branch of history as far as it is not a part of biology, and psychology as far as it is neither physiology nor epistemology or philosophy. Economic history, descriptive economics, and economic statistics are, of course, history. The term sociology is used in two different meanings. Descriptive sociology deals with those historical phenomena of human action which are not viewed in descriptive economics; it overlaps to some extent the field claimed by ethnology and anthropology. General sociology, on the other hand, approaches historical experience from a more nearly universal viewpoint than that of the other historical branches. History proper, for instance, deals with an individual town or with towns in a definite period or with an individual people or with a certain geographical area. Max Weber in his main treatise deals with the town in general, i.e., with the whole historical experience concerning towns without any limitation to historical periods, geographical areas, or individual peoples, nations, races, and civilizations.2 The subject-matter of all historical sciences is the past, they cannot teach us anything which would be valid for all human actions, that means for the future too.

The natural sciences too deal with past events. Of course, every experience is an experience of something passed away; there is no experience of future happenings. But the experience to which the natural sciences owe all their success is the experience of the experiment in which the various elements of change can be observed in isolation. The facts amassed in this way can be used for induction, a peculiar procedure of inference which has given evidence of its expediency, although its epistemological and logical qualification is still an unsolved problem.

The experience with which the social sciences have to deal is always the experience of complex phenomena. They are open to various interpretations. They do not provide us with facts which could be used in the manner in which the natural sciences use the results of their experiments for the forecast of future events. They cannot be used as building materials for the construction of theories.

Praxeology is a theoretical and systematic, not a historical science. Its scope is human action as such, irrespective of all environmental and incidental circumstances of the concrete acts. It aims at knowledge valid for all instances in which the conditions exactly correspond to those implied by its assumptions and inferences. Whether people exchange commodities and services directly by barter or indirectly by using a medium of exchange is a question of the particular institutional setting which can be answered by history only. But whenever and wherever a medium of exchange is in use, all the laws of monetary theory are valid with regard to the exchanges thus transacted.3

It is not the task of this article to enquire what makes such a science of praxeology possible, what its logical and epistemological character is and what methods it applies. The study of the epistemological problems of the social sciences has been neglected for a long time. Even those authors who like David Hume, Archbishop Whately, John Stuart Mill, and Stanley Jevons were themselves eminent economists, dealt in their logical and epistemological writings only with the natural sciences, and did not bother about the peculiar character of the sciences of human action. The epistemology of the social sciences is the youngest branch of knowledge. Moreover, most of its work refers only to history; the existence of a theoretical science was long entirely ignored. The pioneer work of Senior and of Cairnes has only lately borne fruit.4 The economists mostly lack philosophical training and the philosophers are not familiar with economics. The importance of phenomenology for the solution of the epistemological problems of praxeology has not been noticed at all.5

But this article is not concerned with these tasks. We have to deal with those critics who blame the economists and the historians for having neglected the fact of “irrationality.”

Action means conscious behavior or purposive activity. It differs as such from the biological, physiological, and instinctive processes going on within human beings. It is behavior open to the regulation and direction by volition and mind. Its field coincides with the sphere within which man is free to influence the course of events. As far as man has power to bring about an effect or a change, he necessarily acts, whether he does something or refrains from doing anything. Inactivity and passivity, letting things alone, are the outcome of a choice, are therefore action whenever a different form of behavior would be possible. He who endures what he could change acts no less than he who interferes in order to attain another result. A man who abstains from influencing the operation of physiological and instinctive factors which he could influence also acts. Action is not only doing but no less omitting to do what possibly could be done.

Most of a man’s daily behavior is simple routine. He performs certain acts without paying special attention to them. He does many things because he was trained in his childhood to do them, because other people behave in the same way and because it is customary in his environment. He acquires habits, he develops automatic reactions. But he indulges in these habits only because he welcomes their outcome. As soon as he discovers that the pursuit of the habitual way may hinder the attainment of ends considered as more desirable, he changes his attitude. A man brought up in an area in which the water is clean acquires the habit of heedlessly drinking, washing, and bathing. When he moves to a place in which the water is polluted by morbific germs, he will devote the most careful attention to procedures about which he never bothered before. He will watch himself permanently in order not to hurt himself by indulging unthinkingly in his automatic reactions and in his traditional routine. The abandonment of a settled practice into which a man has fallen is not an easy task. It is the main lesson to be learned by all those who aspire to achievements above the level of the masses. (To break off the consumption of habit-creating drugs often requires the employment of therapeutical procedures.) The fact that an act is in the regular course of affairs performed spontaneously, as it were, does not mean that it is not due to conscious volition. Indulgence in a routine which possibly could be changed is action.

Action is the mind’s response to stimuli, i.e., to the conditions in which nature and other people’s actions place a man. It differs as such from the functional reaction of the bodily organs. It is the outcome of a man’s will. Of course, we do not know what will is. We simply call will man’s faculty to choose between different states of affairs, to prefer one and to set aside the other, and we call action behavior aiming at one state and forsaking another. Action is the attitude of a human being aiming at some ends.

Praxeology is not concerned with the metaphysical problem of free will as opposed to determinism. Its fundamental insight is the incontestable fact that man is in a position to choose among different states of affairs with regard to which he is not neutral and which are incompatible with each other, i.e., which he can not enjoy together. It does not assert that a man’s choice is independent of antecedent conditions, physiological and psychological. It does not enter into a discussion of the motives determining the choice. It does not ask why a customer prefers one pattern of a necktie to another or a motorcar to a horse and buggy. It deals with the choosing as such, with the categorical elements of choice and action.

Neither does praxeology concern itself about the ultimate goals of human activity. We will have to deal with this problem too. For the moment we have only to emphasize that praxeology does not have to question ultimate ends, but only to study the means applied for the attainment of any ends. It is a science of means, not of ends.

The investigation of the fitness of concrete means to attain, by complying with the laws of nature, definite ends in the field of the practical arts, is the task of the various branches of technology. Praxeology does not deal with technological problems, but with the categorical essence of choice and action as such, with the pure elements of setting aims and applying means.

Praxeology is not based on psychology and is not a part of psychology. It was a bad mistake to call the modern theory of value a psychological theory and it was a confusion to link it up with the Weber-Fechner Law of Psychophysics.6 ,7

Praxeology deals with choice and action and with their outcome. Psychology deals with the internal processes determining the various choices in their concreteness. It may be left undecided whether psychology can succeed in explaining why a man in a concrete case preferred red to blue or bread to lyrics. At any rate such an explanation has nothing to do with a branch of knowledge for which the concrete choices are data not needing further explanation or analysis. Not what a man chooses, but that he chooses counts for praxeology.

The motives and springs of action are without concern for the praxeological investigation. It is immaterial for the formation of the price of silk whether people ask for silk because they want to be protected against cold weather or because they find it beautiful or because they want to get more sexual attractiveness. What matters is that there is a demand of a given intensity for silk.

Yet, modern psychology has brought about some results which may arouse the interest of praxeology. It was once usual to consider the behavior of lunatics and neurotics as quite nonsensical and “irrational.” It is the great merit of Breuer and Freud that they have disproved this opinion. Neurotics and lunatics differ from those whom we call sane and normal with regard to the means which they choose for the attainment of satisfaction and with regard to the means which they apply for the attainment of these means. Their “technology” is different from that of sane people, but they do not act in a categorically different way.8 They aim at ends and they apply means in order to attain their ends. A mentally troubled person with whom there is still left a trace of reason and who has not been literally reduced to the mental level of an animal, is still an acting being. Whoever has the remnants of a human mind cannot escape the necessity of acting.

III

Every human action aims at the substitution of more satisfactory conditions for less satisfactory. Man acts because he feels uneasy and believes that he has the power to relieve to some extent his uneasiness by influencing the course of events. A man perfectly content with the state of his affairs would not have any incentive to change things; he would have neither wishes nor desires, he would not act because he would be perfectly happy. Neither would a man act who, although not content with his condition, does not see any possibility of improving it.

Strictly speaking, only the increase of satisfaction (decrease of uneasiness) should be called end, and accordingly all states which bring about such an increase means. In daily speech people use a loose terminology. They call ends things which should be rather called means. They say: This man knows only one end, namely, to accumulate more wealth, instead of saying: He considers the accumulation of more wealth as the only means to get more satisfaction. If they were to apply this more adequate mode of expression, they would avoid some current mistakes. They would realize that nobody else than the individual himself can decide what satisfies him better and what less. They would conceive that judgments of value are purely subjective and that there is no such thing as an absolute state of satisfaction or happiness irrespective of the desires of the individual concerned. In fact, he who passes a judgment of an alleged end, reduces it from the rank of an end to that of a means. He values it from the viewpoint of an (higher) end and asks whether it is a suitable means to attain this (higher) end. But the highest end, the ultimate goal of human action, is always satisfaction of an individual’s desire. There is no other standard of greater or lesser satisfaction than the individual judgments of value, different with various people and with the same people at various times. What makes a man feel uneasy and less uneasy is established by every individual from the standard of his own will and judgment, from his personal valuation. Nobody is in a position to decree what could make a fellow man happier. The innate spirit of intolerance and the neurotic “dictatorship complex” instigate people to dispose blithely of other people’s will and aspirations. Yet, a man who passes a judgment on another man’s aims and volitions does not declare what would make this other man happier or less discontented; he only asserts what condition of this other man would better suit himself, the censor.

From this point of view we have to appreciate the statements of eudaemonism, hedonism, and utilitarianism. All the objections raised against these schools are invalid, if one attaches to the terms happiness, pain, pleasure, and utility formal meaning. Happiness and pleasure are what people consider as such; useful are things which people consider as appropriate means for the attainment of aims sought. The concept of utility as developed by modern economics means suitability to render some services which are deemed as useful from any point of view. This is the meaning of the axiological subjectivism [subjectivism in value theory] of modern economics. It is at the same time the test of its impartiality and scientific objectivity. It does not deal with the ought, but with the is. Its subject matter is, e.g., the explanation of the formation of prices as they really are, not as they should be or would be if men were to act in a way different from what they really do.

IV

Praxeology does not employ the term rational. It deals with purposive behavior, i.e., human action. The opposite of action is not irrational behavior, but a reactive response to stimuli on the part of the bodily organs and of the instincts, which cannot be controlled by volition. If we were to assign a definite meaning to the term rationality as applied to behavior, we could not find another meaning than: the attitude of men intent on bringing about some effects.

The terms irrational and irrationality are mostly used for censuring concrete modes of action. An action is called irrational either because the censor disapproves of the end (i.e., of the way in which the acting individual wants to attain satisfaction) or because the censor believes that the means employed were not fit to produce the immediate effect aimed at. But often the qualification of an action as irrational involves praise; actions aiming at altruistic ends, inspired by noble motives and executed to the detriment of the acting man’s material well-being are considered as irrational.

We do not have to dwell upon the contradictions and logical inconsistencies involved in this use of words. The qualification of ends is without significance for praxeology, the science of means, not ends. That mortal men are not infallible and that they sometimes choose means which cannot bring about the ends sought is obvious.

It is the task of technology and of therapeutics to find the right means for the attainment of definite ends in the field of the practical arts. It is the task of applied economics to discover the appropriate methods for the attainment of definite ends in the realm of social cooperation. But if the scientists fail in these endeavors or if the acting men do not correctly apply the means recommended, the outcome falls short of the expectations of the acting individuals. Yet, an action unsuited to the end sought is still an action. If we call such an unsuitable and inexpedient action irrational, we do not deprive it of its qualification as purposive activity and we do not at all invalidate the assertion that the only way to conceive it essentially and categorically is provided by praxeology.

Economics does not deal with an imaginary homo oeconomicus as ineradicable fables reproach it with doing, but with homo agens as he really is, often weak, stupid, inconsiderate, and badly instructed. It does not matter whether his motives and emotions are to be qualified as noble or as mean. It does not contend that man strives only after more material wealth for himself and for his kin. Its theorems are neutral with regard to ultimate judgments of value, and are valid for all actions irrespective of their expediency.

It is the scope of history and not of praxeology to investigate what ends people aim at and what means they apply for the realization of their plans.

V

It is a frequent mistake to assume that the desire to procure the base necessities of life and health is more rational than the striving after other amenities. It is true that the appetite for food and warmth is common to men and other mammals and that as a rule a man who lacks food and shelter concentrates his efforts upon the satisfaction of these urgent needs and does not care for other things. The impulse to live, to preserve one’s own life and to take advantage of every opportunity of strengthening one’s vital force is a primal feature of life, present in every living being. However, to yield to this impulse is not—for man—an inextricable necessity.

All other animals are unconditionally driven by the impulse to preserve their own life and by the impulse of proliferation. They are, without a will of their own, bound to obey the impetus which at the instant prevails. It is different with man. Man has the faculty of mastering his instincts. He can rein both his sexual appetites and his will to live. He can give up his life when the conditions under which alone he could preserve it seem intolerable. Man is capable of dying for a cause or of committing suicide. To live is for man the outcome of a choice, of a judgment of value.

It is the same with the desire to live in affluence. The very fact of asceticism evidences that the striving after more amenities is not inextricable but rather the result of a choice. Of course, the immense majority prefer life to death and wealth to poverty.

On the other hand, it is arbitrary to consider only the satisfaction of the body’s physiological needs as “natural” and therefore as “rational” and everything else as “artificial” and therefore as “irrational.” It is the characteristic feature of human nature that man seeks not only food and shelter like all other animals, but that he aims also at other kinds of satisfaction, that he has specifically human needs too. It was the fundamental error of the iron law of wages that it ignored this fact.

VI

The concrete judgments of value are not open to further analysis. We may assume that they are absolutely dependent upon and conditioned by their causes. But as long as we do not know how external (physical and physiological) facts produce in a human “soul” definite thoughts and volitions resulting in concrete acts, we have to face an insurmountable dualism. In the present state of our knowledge, the fundamental statements of positivism and monism are mere metaphysical postulates devoid of any scientific foundation. Reason and experience show us two separate realms: the external world of physical and physiological events and the internal world of thought, feeling, and purposeful action. No bridge connects—as far as we can see today—these two spheres. Identical external events result sometimes in different human responses, and different external events produce sometimes the same human response. We do not know why.

We have not yet discovered other methods for dealing with human action than those provided by praxeology and by history. The suggestion of pan-physicalism that the methods of physics be applied to human actions is futile. The sterility of the pan-physicalist recipe is beyond doubt. In spite of the fanatical propaganda of its advocates nobody has ever made use of it. It is simply inapplicable. Positivism is the most conspicuous failure in the history of metaphysics.

The concrete judgments of value and the resulting acts are for history ultimate data. History tries to collect all relevant facts and it has, in this attempt, to make use of all knowledge provided by logic, mathematics, the natural sciences, and especially by praxeology. But it can never succeed in reducing all historical facts to external events open to an interpretation by physics and physiology. It must always reach a point beyond which all further analysis fails. Then it cannot establish anything else than that it is faced with an individual or unique case.

The mental act for dealing with such historical facts is, in the philosophy of Bergson, une intuition, namely la sympathie par laquelle on se transporte a l’intérieur d’un objet pour coincider avec ce qu’il a d’unique, et par conséquent d’inexprimable.9 German epistemology calls the act das spezifische Verstehen der Geisteswissenschaften, or simply Verstehen. I suggest it be translated into English as “specific understanding” or simply as “understanding.” The Verstehen is not a method or a mental process which the historians should apply or which epistemology advises them to apply. It is the method which all historians and all other people always apply in commenting upon social events of the past and in forecasting future events. The discovery and the delimitation of the Verstehen was one of the most important contributions of epistemology. It is not a blueprint for a science which does not yet exist and is to be founded.

The uniqueness and individuality which remains at the bottom of every historical fact when all the means for its interpretation provided by logic, praxeology, and the natural sciences have been exhausted is an ultimate datum. But, whereas the natural sciences cannot say anything else about their ultimate data than that they are such, history can try to make its data intelligible. Although it is impossible to reduce them to their causes—they would not be ultimate data, if such a reduction were possible—the observer can understand them because he is himself a human being. We may call this faculty to understand congeniality and sympathetic intelligence. But we have to guard against the error to confuse the understanding with approval, be it only conditional and circumstantial. The historian, the anthropologist, and the psychologist sometimes register actions which are for their feelings simply repulsive and disgusting; they understand them only as actions, i.e., in establishing the underlying aims and the technological and praxeological methods applied. To understand an individual case does not mean to explain, still less to excuse it.

Neither must understanding be confused with the act of aesthetic empathy by virtue of which an individual aims at an aesthetic enjoyment of a phenomenon. Einfühlung [empathy] and Verstehen are two radically different attitudes. It is a different thing, on the one hand, to understand historically a work of art, to determine its place, its meaning, and its importance in the chain of events and, on the other hand, to appreciate it emotionally as a work of art. One can look at a cathedral with the eyes of an historian. But one can look at the same cathedral either as an enthusiastic admirer or as an unaffected and indifferent tourist. One can look at a mountain range with the eyes of a naturalist—a geologist, a geographer, or a zoologist—or with the eye of a beauty-seeker—with disgust as the ancients used to do, or with the modern enthusiasm for the picturesque. The same individuals are capable of different modes of reaction, of the aesthetic appreciation and of the scientific grasp either of the Verstehen or of the natural sciences.

The understanding establishes the fact that an individual or a group of individuals have engaged in a definite action emanating from definite judgments of value and choices and aiming at definite ends. It further tries to appreciate the effects and the intensity of the effects brought about by an action. It tries to assign to every action its relevance, i.e., its bearing upon the course of events.

The historian gives us an account of all facts and events concerning the battle of Waterloo as complete and exact as the material available allows. As far as he deals with the forces engaged and with their equipment, with the tactical operations, with the figures of soldiers killed, wounded, and made prisoners, with the temporal sequence of the various happenings, with the plans of the commanders and with their execution, he is grounded on historical experience. What he asserts is either correct or contrary to fact, is either proved or disproved by the documents available or vague because the sources do not provide us with sufficient information. Other experts will either agree with him or will disagree, but they will agree or disagree on the ground of a reasonable interpretation of the evidence available. So far the whole discussion must be conducted with reasonable affirmations and negations. But that is not the total work to be achieved by the historian.

The battle resulted in a crushing defeat of the French army. There are many facts, indubitably established on the basis of documentary evidence, which could be taken to account for this outcome. Napoleon suffered from illness, he was nervous, he lacked self-confidence. His judgment and his comprehension of the situation were no longer what they used to be. His plans and orders were in many respects inappropriate. The French army was hastily organized, numerically too weak and its soldiers were partly veterans tired from the endless wars, partly inexperienced recruits. Its generals were not equal to their task, there was especially Grouchy’s serious blunder.10 On the other hand, the British and the Prussians fought under the imminent leadership of Wellington and of Gneisenau, their morale was excellent, they were well organized, richly equipped, and strong in number. To what extent did these various circumstances and many others contribute to the outcome? This question cannot be answered from the information derived from the data of the case, it is open to various interpretations. The historian’s opinions concerning them can neither be confirmed nor refuted in the same way in which we can confirm or refute his statement that the vanguard or Blücher’s11 army arrived at a certain hour on the battlefield.

Let us take another example. We have plenty of figures available concerning the German inflation of the years, 1914–1923. Economic theory provides us with all the knowledge needed for a perfect grasp of the causes of price changes. But this knowledge does not give us quantitative definiteness. Economics is, as people say, qualitative and not quantitative. This is not due to an alleged backwardness of economics. There are in the sphere of human action no constant relations between magnitudes. For a long time many economists believed that there exists one relation of this character. The thorough demolition of this unfounded assumption was one of the most important achievements of modern economic research. Monetary theory has proved in an irrefutable way that the rise of prices caused by an increase of the quantity of money can never be proportional to this increase. Thus it destroyed by its process analysis the only stronghold of an inveterate error. There cannot be any such thing as measurement in the field of economics. All statistical figures available have importance only for economic history; they are data of history like the figures concerning the battle of Waterloo; they tell us what happened in a unique and non-repeatable historical case. The only way to utilize them is to interpret them by Verstehen.

The rise of German prices in the years of the First World War was not only due to the increase of the quantity of bank notes. Other changes contributed too. The supply of commodities went down because many millions of workers were in the army and no longer worked in the plants, because government control of business reduced productivity, because the blockade prevented imports from abroad, and because the workers suffered from malnutrition. It is impossible to establish by other methods than by Verstehen how much each of these factors—and of some other relevant factors—contributed to the rise of prices. Quantitative problems are in the sphere of human action not open to another solution. The historian can enumerate all the factors which cooperated in bringing about a certain effect and all the factors which worked against them and may have resulted in delaying and mitigating the final outcome. But he can never coordinate the various causes in a quantitative way to the effects produced. The Verstehen is in the realm of history the substitute, as it were, for quantitative analysis and measurement which are unfeasible with regard to human actions outside the field of technology.

Technology can tell us how thick a steel plate must be in order not to be pierced by a bullet fired at a distance of 300 yards from a Mauser rifle. It thus can answer the question why a man who took shelter behind a steel plate of a known thickness was hurt or not hurt by a shot fired. History is at a loss to explain with the same assurance why Louis Philippe lost his crown in 1848 or why the Reformation succeeded better in the Scandinavian countries than in France. Such problems do not allow any other treatment than that of the specific understanding.

The understanding is not a method which could be used as a substitute for the aprioristic reasoning of logic, mathematics and praxeology or the experimental methods of the natural sciences. Its field lies where these other methods fail: in the description of a unique and individual case not open to further analysis—its qualitative service—and in the appraisal of the intensity, importance, and strength of the various factors which jointly produced an effect—its service as a substitute for the unfeasible quantitative analysis.

The subject of the historical understanding is the mental grasp of phenomena which cannot be totally elucidated by logic, mathematics, praxeology, and the natural sciences and as far as they cannot be elucidated by science and reason. It establishes the fact that scientific enquiry has reached a point beyond which it cannot go further, and tries to fill the gap by Verstehen.12 One may, if one likes, qualify the Verstehen as irrational because it involves individual judgments not amenable to criticism by purely rational methods. However, the method of understanding is not a free charter to deviate from the certified results obtained from the documentary evidence and from its interpretation through the teachings of the natural sciences and of praxeology. The Verstehen oversteps its due limits if it ventures to contradict physics, physiology, logic, mathematics, or economics. The abuses which many German scholars made of the geisteswissenschaftliche Methode and the spurious attempts of the German Historical School to substitute an imaginary verstehende Nationalökonomie for praxeological economics cannot be charged to the method itself.

German Geisteswissenschaften have preached the gospel of what should be an irrational science. They have substituted arbitrary judgments for reason and experience. They derive from intuition knowledge about historical events which the documents available do not provide or which are contrary to the facts as established by careful examination of the documents available. They do not refrain from drawing conclusions contradicting the statements of economic theory which they cannot refute on logical grounds. They are not afraid to produce absurdities. Their only justification is the reference to the irrationality of life.

Let us take an example from a serious and scholarly book available in English translation. Mr. Ernst Kantorowicz, an historian of the esoteric circle of the poet and visionary Stephen George, in his biography of the German Emperor Frederick II, gives a correct account of the constitutional changes which took place in the reign of this Hohenstaufen monarch. Frederick’s position in Germany was extremely precarious because his hereditary Norman kingdom of Sicily drew him into conflicts with the Pope and the Italian republican cities. He lacked the strength to preserve his royal authority in Germany and was forced to abandon most of the crown’s rights, and to grant ample privileges to the princes. What followed, says Kantorowicz quite correctly, “was the almost sovereign independence of each individual prince in his territory” which “definitely hindered the amalgamation of the German people into one German State.”13 So far, Kantorowicz is still on the basis of sound Verstehen and in perfect agreement will all other serious historians. But then comes the amazing interpretation of the visionary and mystic; he adds: “Yet in a higher sense Frederick II perfected and completed the unified German Empire. He strengthened the princes’ power ... with more exalted statesmanship believing that the power and the brilliance of his own imperial scepter would not pale in giving forth light but would gain radiance and would shine the brighter the more mighty and brilliant and majestic were the princes whom Caesar Imperator beheld as equals round his judgment seat. The princes are no longer columns bearing as a burden the weight of the throne. ... They become piers and pillars expressive of upward-soaring strength, preparing the glorious elevation of the prince of princes and king of kings who is born aloft on the shoulders of his peers, and who in turn exalts both kings and princes.”14 It is true that some phrases used by the princes at the Diet preceding the extortion of the privilege had a similar ring. The princes were polite, they did not want to fill the emperor with too much bitterness and were anxious to gild the pill which they forced him to swallow. When Hitler reduced Czechoslovakia to vassalage status he too sugared the pill by the establishment of the protectorate. Yet, hardly any historian would dare to say that “in a higher sense” Hitler “perfected and completed” the country’s independence by granting it the protection of the mighty Reich. Frederick II disintegrated the Holy Empire by the privileges granted to the princes. It is absurd to assert that “in a higher sense” he perfected and completed it. No metaphorical speech and no appeal to the irrational can render such a dictum any more tenable.

Understanding entitles the historian to determine the role played by the two privileges in question in the evolution of the Empire’s political structure, to determine, as it were, the quantity of their effect. He might, for instance, express the opinion that the role usually attributed to them has been exaggerated and that other events were more destructive than these privileges and he could try to prove his thesis, his mode of understanding. But it is inadmissable to say: yes, this happened, such were its consequences; yet “in a higher sense” it was just the contrary.

Human knowledge can never transcend the cognition conveyed by reason and experience. If there is any “higher sense” in the course of events, it is inaccessible to the human mind.

VII

A school of thought teaches that there is an eternal, irreconcilable antagonism between the interests of the individual and those of the collectivity. If the individual selfishly seeks after his own happiness, society comes to grief. Social cooperation and civilization are only possible at the cost of the individual’s well-being. The existence of society and its flowering require permanent sacrifices on the part of its members. Therefore, it is unthinkable to imagine a human and purely rational origin of moral law and social cooperation. Some supernatural being has blessed mankind with the revelation of the moral code and has entrusted great leaders with the mission of enforcing this law. History is not the interplay of natural factors and purposive human activity which, within certain limits, are open to an elucidation by reason, but the result of the interference of transcendental factors, repeated again and again. History is destiny, and reason can never fathom its depths.

The conflict between the good and the evil, between collectivism and individualism, is therefore eternal and insoluble. What separates social and moral philosophies and political parties is a divergence of world views, a disparity of ultimate judgments of value. This discord is rooted in the deepest recesses of a man’s soul and innate character; no ratiocination or discursive reasoning can brush it away or reconcile its contrasts. Some men are born with the divine call to leadership, others with the endowment to espouse spontaneously the cause of the great whole and to subordinate themselves of their own accord to the rule of its champions; but the many are incapable of finding the right way, they aim at the happiness of their own wretched selves and have to be tamed and subjugated by the conquering dictators. Social philosophy can consist in nothing else than in the cognition of the eternal truth of collectivism and in the unmasking of the spurious fallacies and pretensions of individualism. It is not the result of a rational process, but rather an illumination with which intuition blesses the elect. It is vain to strive after genuine social and moral truth by the application of the rational methods of logic. To the chosen, God or Weltgeist gives the right intuition; the rest of mankind has simply to forsake thinking and to obey blindly the God-given authority. True wisdom and the counterfeit doctrines of rationalistic economics and rationalistic history can never agree in the appreciation of historical and social facts, of political measures and of an individual’s actions. Human reason is not an appropriate tool to acquire true knowledge of the social totality; rationalism and its derivatives, economics and critical history, are fundamentally erroneous.15

The fundamental assumption of this doctrine, namely, that social cooperation is contrary to the interests of the individuals and can be achieved only at the expense of the individual’s welfare, has long since been exploded. It was one of the great achievements of British social philosophy and classical economics that they developed a theory of social evolution which does not need to refer to the miraculous appearance of leaders endowed with superhuman wisdom and powers. Social cooperation and its corollary, division of labor, serve better the selfish interests of all individuals concerned than isolation and conflict. Every step toward peaceful cooperation brings all concerned an immediate and discernible advantage. Men cooperate and are eager to intensify cooperation exactly because they are anxious to pursue their selfish interests. The sacrifices which the individual makes for the maintenance of social cooperation are only temporary; if he abstains from antisocial actions which could give him small immediate gains, he profits much more by the advantages which he derives from the higher productivity of work performed in the peaceful cooperation of the division of labor. Thus, the principle of association elucidates the forces which integrated the primitive hordes and tribes and step by step widened out the social units until finally the oecumenical Great Society came into being. There is in the long run no irreconcilable conflict between the rightly understood selfish interests of the individuals and those of society. Society is not a Moloch to whom man has to sacrifice his own personality. It is, on the contrary, for every individual the foremost tool for the attainment of well-bring and happiness. It is man’s most appropriate weapon in his struggle for survival and improvement. It is not an end, but a means, the most eminent means for the attainment of all human desires.

We do not have to enter into a detailed critique of the statements of the collectivist doctrine. We have only to establish the fact that the acts of the allegedly collectivist parties do not comply with the tenets of this philosophy. The political representatives of these parties occasionally in their speeches referred to collectivist slogans and connived at the propagation of party songs of the same tenor. But they do not ask their followers to sacrifice their own happiness and well-being at the altar of the Collectivity. They are anxious to demonstrate by ratiocination that the methods which they recommend will in the long run serve best the selfish interests of their followers. They do not ask any other sacrifices than temporary ones which, as they promise, will at a later time be rewarded by hundredfold booty. The Nazi professors and the Nazi rhymesters say: “Efface yourself for Germany’s splendor, give your wretched lives in order to make the German Nation live forever in glory and grandeur.” But the Nazi politicians use a different argument: “Fight for your own preservation and for your future well-being. The enemies are firmly resolved to exterminate the noble race of Aryan heroes. If you do not resist, you all are lost. But if you take up the challenge courageously, you have a chance of defeating the onslaught. Many will be killed in action, but they would not have survived if the devilish plans of our foes were not to meet any resistance. Much more will be saved if we fight. We have the choice between two alternatives only: certain extermination of us all, if the enemies conquer, on the one hand, and the survival of the great majority in case of our victory on the other hand.”

There is no appeal to the “irrational” in this purely rational—although not reasonable—reasoning. But even if the collectivist doctrine were correct, and people, in forsaking other advantages, aimed at the flowering of the Collective only under the persuasion or compulsion exercised on the part of the superhuman leaders, all the statements of praxeology would remain unshaken and history would not have any reason to change its methods of approach.

VIII

The real reason for the popular disparagement of the social sciences is reluctance to accept the restrictions imposed by nature on human endeavors. This reluctance is potentially present in everybody and is overwhelming with the neurotic. Men feel unhappy because they cannot have two incompatible things together, because they have to pay a price for everything and can never attain full satisfaction. They blame the social sciences for demonstrating the scarcity of the factors which preserve and strengthen the vital forces and remove uneasiness. They disparage them for describing the world as it really is and not as they would like to have it, i.e., as a cosmos of unlimited opportunities. They are not judicious enough to comprehend that life is exactly an active resistance against adverse conditions and manifests itself only in this struggle, and that the notion of a life free from any limitations and restrictions is even inconceivable for a human mind. Reason is man’s foremost equipment in the biological struggle for the preservation and expansion of his existence and survival. It would not have any function and would not have developed at all in a fool’s paradise.16

It is not the fault of the social sciences that they are not in a position to transform society into a utopia. Economics is not a “dismal science,” because it starts from the acknowledgment of the fact, that the means for the attainment of ends are scarce. (With regard to human concerns which can be fully satisfied because they do not depend on scarce factors, man does not act, and praxeology, the science of human action, does not have to deal with them.) As far as there is scarcity of means, man behaves rationally, i.e., he acts. So far there is no room left for “irrationality.”

That man has to pay a price for the maintenance of social institutions enabling him to attain ends which he deems as more valuable than this price made, than these sacrifices brought for them, is obvious. It is futile to disguise the impotent dissatisfaction with this state of affairs as a revolt against an alleged dogmatic orthodoxy of the social sciences.

If the “rational” methods of economic theory demonstrate that an a results in a p, no appeal to irrationality can make a result in a q. If the theory was wrong, only a correct theory can refute it and substitute a correct solution for an incorrect one.

IX

The social sciences have not neglected to give full consideration to all those phenomena which people may have in mind in alluding to irrationality. History has developed a special method for dealing with them: understanding. Praxeology has built up its system in such a way that its theorems are valid for all human action without any regard to whether the ends aimed at are qualified, from whatever point of view, as rational or irrational. It is simply not true that the social sciences are guilty of having left untouched a part of the field which they have to elucidate. The suggestions for the construction of a new science whose subject matter has to be the irrational phenomena are of no account. There is no untilled soil left for such a new science.

The social sciences are, of course, rational. All sciences are. Science is the application of reason for a systematic description and interpretation of phenomena. There is no such thing as a science not based on reason. The longing for an irrational science is self-contradictory.

History will one day have to understand historically the “revolt against reason” as one of the factors of the history of the last generations. Some very remarkable contributions to this problem have already been published.

Economic theory is not perfect. No human work is built for eternity. New theorems may supplement or supplant the old ones. But what may be defective with present-day economics is certainly not that it failed to grasp the weight and significance of factors popularly qualified as irrational.

• *[Reprinted from Philosophy and Phenomenological Research 4, no. 4 (June 1944)—Ed.]
• 1For a critical presentation of these theories, cf. Talcott Parsons’ The Structure of Social Action (New York, Macmillan, 1937); Raymond Aron, German Sociology [1938] (Westport. CT.: Greenwood Press, 1954).
• 2[Max Weber, The City, Don Martindale and Gertrud Neuwirth, trans, and eds. (New York: The Free Press, 1958)—Ed.]
• 3The term “praxeology” was first used by Espinasin an essay published in the Revue Philosophique vol. 30, pp. 114ff., and in his book Les Origines de la Technologie (Paris: F. Alcon, 1897), pp. 7ff. It was later applied by Slutsky in his essay “Ein Beitrag zur formal-praxeologischen Grundlegung der Ökonomik,” Academie Oukräienne des Sciences, Annales de la Classe des Sciences Sociales-Economiques 4 (1926).
• 4Cf. Nassau W. Senior, Political Economy, 6th ed. (London: J. J. Griffen, 1872); John E. Cairnes, The Character and Logical Method of Political Economy, 2nd ed. (London: Macmillan, 1875); Lionel Robbins, An Essay on the Nature and Significance of Economic Science, 2nd ed. (London: Macmillan, 1935); Mises, Epistemological Problems of Economics [1933] (New York, 1981); Human Action, 3rd ed. (Chicago: Henry Regenry, 1966); Alfred Schutz, The Phenomenology of the Social World [1932] (Evanston, Ill.: Northwestern University Press, 1967); F. A. Hayek, The Counter-Revolution of Science ([1952]; Indianapolis, Ind.: Liberty Press, 1979).
• 5The book of Josef Back, Die Entwicklung der reinen Ökonomie zur nationalökonomischen Wesenswissenschaft (Jena: Gustav Fischer, 1929) is unsatisfactory because of the author’s poor knowledge of economics. All the same, this book would deserve a better appreciation than it received.
• 6Cf. Max Weber, “Marginal Utility Theory and the So-Called Fundamental Law of Psychophysics” [1905], Social Science Quarterly (1975): 21–36; Mises, Human Action, 3rd ed. (Chicago: Henry Regnery, 1966), pp. 125–27.
• 7[“Ernst H. Weber (1795–1878) proclaimed in his law of psyco-physics that the least noticeable increase in the intensity of a human sensation is always brought about by a constant proportional increase in the previous stimulus. Gustav T. Fechner (1801–1887) developed this into the Weber-Fechner Law that said to increase the intensity of a sensation in arithmetical progression, it is necessary to increase the intensity of the stimulus in geometric progression,” Mises Made Easier: A Glossary for Ludwig von Mises’ Human Action, Percy L. Greaves, Jr., comp. (Dobbs Ferry, N.Y.: Free Market Books, 1974), p. 147—Ed.]
• 8It may be of some interest for the history of ideas that young Sigmund Freud collaborated as a translator in the German edition of John Stuart Mill’s collected works edited by Theodor Gomperz, the Austrian historian of ancient Greek philosophy. Joseph Breuer too was, as the present writer can attest, well familiar with the standard works of utilitarian philosophy.
• 9Cf. Henri Bergson, La Pensée et le mouvant, 4th ed. (Paris: F. Alcan, 1934), p. 205. [Passage translated as “The sympathy with which one enters inside an object in order to identify thereby what it has that is unique and therefore inexpressible,” Mises Made Easier: A Glossary for Ludwig von Mises’ Human Action, Percy L. Greaves, Jr., comp. (Dobbs Ferry, N.Y.: Free Market Books, 1974), p. 76—Ed.]
• 10[Emmanuel Grouchy, one of Napoleon’s generals, through an error of judgment delayed notifying Napoleon of movements of the British forces in what would become the French army’s last attempt to stave off the defeat at Waterloo—Ed.]
• 11 [Gebhard von Blücher was commander of the Prussian forces that aided the German, British, and Dutch armies to defeat Napoleon at Waterloo in 1815—Ed.]
• 12The important problem of various conflicting modes of Verstehen (for instance: the Catholic and the Protestant interpretation of the Reformation, or the various interpretations of the rise of German Nazism) must by treated in a special essay.
• 13Cf. E. Kantorowicz, Frederick the Second, 1194–1250, E. O. Lorimer, trans. (London: Constable, 1931), pp. 381-82.
• 14C.F. Ibid., pp. 386–87.
• 15Such are the teachings of the German Historical School of the Social Sciences, whose latest exponents are Werner Sombart and Othmar Spann. It may be worthwhile to note that Catholic philosophy does not endorse the collectivist doctrine. According to the teachings of the Roman Church natural law is nothing but the dictates of reason properly exercised, and man is capable of acquiring its full knowledge even if unaided by supernatural revelation. “God so created man as to bestow on him endowments amply sufficient for him to attain his last end. Over and above this He decreed to make the attainment of beatitude yet easier for man by placing within his reach a far simpler and far more certain way of knowing the law on the observance of which his fate depended.” Cf. G. H. Joyce, article “Revelation” in The Catholic Encyclopedia vol. 13 (New York: Encyclopedia Press, 1913), pp. 1–5.
• 16Cf. Benedetto Croce, History as the Story of Liberty, S. Sprigge, trans. (New York: W. W. Norton, 1941), p. 33.

I*

Up to the eighteenth century, historians paid little or no attention to the epistemological problems of their craft. In dealing with the subject of their studies, they again and again referred to some regularities that—as they themselves and their public assumed—are valid for any kind of human action irrespective of the time and the geographical scene of the action as well as of the actors’ personal qualities and ideas. But they did not raise the question whether these regularities were of an extraneous character or inherent in the very nature of human action. They knew very well that man is not able to attain all that he wants to attain. But they did not ask whether the limits of a man’s power are completely described by reference to the laws of nature and to the Deity’s miraculous interference with them, on the one hand, and to the superior power of more puissant men, on the other hand.

Like all other people, the historians too distinguished between behavior complying with the moral law and behavior violating it. But, like all other people, they were fully aware of the fact that nonobservance of the laws of ethics did not necessarily—in this life—result in failure to attain the ends sought. Whatever may happen to the sinner in the life hereafter and on the day of the Last Judgment, the historian could not help realizing that on earth he could sometimes fare very well, much better than many pious fellow men.

Entirely new perspectives were opened when the economists discovered that there prevails a regularity in the sequence and interdependence of market phenomena. It was the first step to a general theory of human action, praxeology. For the first time people became aware of the fact that, in order to succeed, human action must comply not only with what are called the laws of nature, but also with specific laws of human action. There are things that even the most efficient constabulary of a formidable government cannot bring about, although they may not appear impossible from the point of view of the natural sciences.

It was obvious that the claims of this new science could not fail to give offense from three points of view. There were first of all the governments. Despots as well as democratic majorities are not pleased to learn that their might is not absolute. Again and again they embark upon policies that are doomed to failure and fail because they disregard the laws of economics. But they do not learn the lesson. Instead they employ hosts of pseudo economists to discredit the “abstract,” i.e., in their terminology, vain teachings of sound economics.

Then there are ethical doctrines that charge economics with ethical materialism. As they see it, economics teaches that man ought to aim exclusively or first of all at satisfying the appetites of the senses. They stubbornly refuse to learn that economics is neutral with regard to the choice of ultimate ends as it deals only with the methods for the attainment of ends chosen, whatever these ends may be.

There are, finally, authors who reject economics on account of its alleged “unhistorical approach.” The economists claim absolute validity for what they call the laws of economics; they assert that in the course of human affairs something is at work that remains unchanged in the flux of historical events. In the opinion of many authors this is an unwarranted thesis, the acceptance of which must hopelessly muddle the work of historians.

In dealing with this brand of relativism, we must take into account that its popularity was not due to epistemological, but to practical considerations. Economics pointed out that many cherished policies cannot result in the effects aimed at by the governments that resorted to them, but bring about other effects—from the point of view of those who advocated and applied those policies—were even more unsatisfactory than the conditions that they were designed to alter. No other conclusion could be inferred from these teachings than that these measures were contrary to purpose and that their repeal would benefit the rightly understood or long-run interests of all the people. This explains why all those whose short-run interests were favored by these measures bitterly criticized the “dismal science.” The epistemological qualms of some philosophers and historians met with an enthusiastic response on the part of aristocrats and landowners who wanted to preserve their old privileges and on the part of small business and employees who were intent upon acquiring new privileges. The European “historical schools” and American Institutionalism won political and popular support, which is, in general, denied to theoretical doctrines.

However, the establishment of this fact must not induce us to belittle the seriousness and importance of the problems involved. Epistemological relativism as expressed in the writings of some of the historicists, e.g., Karl Knies and Max Weber, was not motivated by political zeal. These two outstanding representatives of historicism were, as far as this was humanly possible in the milieu of the German universities of their age, free from an emotional predilection in favor of interventionist policies and from chauvinistic prejudice against the foreign, i.e., British, French, and Austrian science of economics. Besides, Knies1 wrote a remarkable book on money and credit, and Weber2 gave the deathblow to the methods applied by the schools of Schmoller and Brentano3 by demonstrating the unscientific character of judgments of value. There were certainly in the argumentation of the champions of historical relativism points that call for an elucidation.

II

Before entering into an analysis of the objections raised against the “absolutism” of economics, it is necessary to point out that the rejection of economics by epistemological relativism has nothing to do with the positivist rejection of the methods actually used by historians.

In the opinion of positivism, the work of the historians is mere gossip or, at best, the accumulation of a vast amount of material that they do not know how to use. What is needed is a science of the laws that determine what happens in history. Such a science has to be developed by the same methods of research that made it possible to develop out of experience the science of physics.

The refutation of the positivistic doctrine concerning history is an achievement of several German philosophers, first of all of Wilhelm Windelband and of Heinrich Rickert. They pointed out in what the fundamental difference between history, the record of human action, and the natural sciences consists. Human action is purposive, it aims at the attainment of definite ends chosen, it cannot be treated without reference to these ends, and history is in this sense—we must emphasize, only in this sense—finalistic. But to the natural sciences the concept of ends and final causes is foreign.

Then there is a second fundamental difference. In the natural sciences man is able to observe in the laboratory experiment the effects brought about by a change in one factor only, all other factors the alteration of which could possibly produce effects remaining unchanged. This makes it possible to find what the natural sciences call experimentally established facts of experience. No such technique of research is available in the field of human action. Every experience concerning human action is historical, i.e., an experience of complex phenomena, of changes produced by the joint operation of a multitude of factors. Such an experience cannot produce “facts” in the sense in which this term is employed in the natural sciences. It can neither verify nor falsify any theorem. It would remain an inexplicable puzzle if it could not be interpreted by dint of a theory that had been derived from other sources than historical experience.

Now, of course, neither Rickert and the other authors of the group to which he belonged, the “Southwestern German philosophers,” not the historians who shared their conception went as far as this last conclusion. To them, professors of German universities at the end of the nineteenth and the beginning of the twentieth century, the very idea that there could be any science claiming for its theses universal validity for all human action irrespective of time, geography, and the racial and national characteristics of people remained unknown. For men living in the spiritual climate of the second German Reich, it was an understood thing that the pretensions of “abstract” economic theory were vain and that German wirtschaftliche Staatswissenschaften (the economic aspects of political science), an entirely historical discipline, had replaced the inane generalization of the school of Hume, Adam Smith, and Ricardo. As they saw it, human action—apart from theology, ethics, and jurisprudence—could be dealt with scientifically only by history. Their radical empiricism prevented them from paying any attention to the possibility of an a priori science of human action.

The positivist dogma that Dilthey, Windelband, Rickert, and their followers demolished was not relativistic. It postulated a science—sociology—that would derive from the treatment of the empirical data provided by history a body of knowledge that would render to the mind the same services with regard to human action that physics renders with regard to events in the sphere of nature. These German philosophers demonstrated that such a general science of action could not be elaborated by a posteriori reasoning. The idea that it could be the product of a priori reasoning did not occur to them.

III

The deficiency of the work of the classical economists consisted in their attempt to draw a sharp line of demarcation between “purely economic activities” and all other human concerns and actions. Their great feat was the discovery that there prevails in the concatenation and sequence of market phenomena a regularity that can be compared to the regularity in the concatenation and sequence of natural events. Yet, in dealing with the market and its exchange ratios, they were baffled by their failure to solve the problem of valuation. In interpersonal exchange transactions objects are not valued according to their utility, they thought, because otherwise “iron” would be valued more highly than “gold.” They did not see that the apparent paradox was due only to the vicious way they formulated the question. Value judgments of acting men do not refer to “iron” or to “gold” as such, but always to definite quantities of each of these metals between which the actor is forced to choose because he cannot have both of them. The classical economists failed to find the law of marginal utility. This shortcoming prevented them from tracing market phenomena back to the decisions of the consumers. They could deal only with the actions of the businessmen, for whom the valuations of the consumers are merely data. The famous formula “to buy on the cheapest and to sell on the dearest market” makes sense only for the businessman. It is meaningless for the consumer.

Thus forced to restrict their analysis to business activities, the classical economists constructed the concept of a science of wealth or the production and distribution of wealth. Wealth, according to this definition meant all that could be bought or sold. The endeavors to get wealth were seen as a separate sphere of activities. All other human concerns appeared from the vantage point of this science merely as disturbing elements.

Actually, few classical economists were content with this circumscription of the scope of economics. But their search for a more satisfactory concept could not succeed before the marginalists substituted the theory of subjective value from the various abortive attempts of the classical economists and their epigones. As long as the study of the production and distribution of wealth was considered as the subject matter of economic analysis, one had to distinguish between the economic and the noneconomic actions of men. Then economics appeared as a branch of knowledge that dealt with only one segment of human action. There were, outside of this field, actions about which the economists had nothing to say. It was precisely the fact that the adepts of the new science did not deal with all those concerns of man which in their eyes were qualified as extraeconomic that appeared to many outsiders as a depreciation of these matters dictated by an insolent materialistic bias.

Things are different for modern economics, with its doctrine of the subjective interpretation of valuation. In its context the distinction between economics and allegedly noneconomic ends becomes meaningless. The value judgments of the ultimate consumers express not only the striving after more tangible material goods, but no less the striving after all other human concerns. The narrow viewpoint of a science of—material—wealth is surpassed. Out of the discipline of wealth evolves a general theory of all choices made by acting men, a general theory of every kind of human action, praxeology. In their behavior on the market people evidence not only their wishes to acquire more material goods, but no less all their other preferences. Market prices reflect not only the “materialistic side” of man, but his philosophical, ethical, and religious ideas as well. The observance of religious commandments—to build and maintain houses of worship, to cease working on holidays, to avoid certain foods either always or on specific days and weeks, to abstain from intoxicating beverages and tobacco, to assist those in need, and many others—is one of the factors that determines the supply of and the demand for consumers’ goods and thereby the conduct of business. Praxeology is neutral with regard to the ultimate ends that the individuals want to attain. It does not deal with ultimate ends, but with the means chosen for their attainment. It is merely interested in the question whether or not the means resorted to are fitted to attain the ends sought.

The enormous quantity of antieconomic literature published in the last hundred and fifty years turns around one argument only. Its authors repeat again and again that man as he really is and acts strives not only after more material amenities, but also after some other—higher or loftier or ideal—aims. From this point of view the self-styled Historical School attacked what they called the absolutism of the economic doctrine and advocated a relativistic approach. It is not the theme of this paper to investigate whether the economists of the classical school and their epigones were really guilty of having neglected to pay due attention to the nonmaterialistic concerns of man. But it is to be emphasized that all the objections raised by the Historical School, e.g., by Knies in his famous book,4 are futile and invalid with regard to the teachings of modern economics.

It is customary in German political literature to distinguish between an older and a later Historical School.5 As the champions of the older school, Roscher, Bruno Hildebrand, and Knies are named. The younger school consists of the followers of Schmoller who after the establishment of the Reich in 1870 held the chairs of economics at the German universities. This way of subdividing into periods the history of ideas is an outcome of the parochialism that induced German authors to slight all that was accomplished abroad. They failed to realize that the “historical” opposition against what was called the absolutism of economics was inaugurated outside of Germany. Its outstanding representative was Sismondi6 rather than Roscher and Hildebrand. But it is much more important to realize the fact that all those who in Germany as well as in other countries after the publication of the books of Jevons, Menger, and Walras criticized economic doctrine on account of its alleged materialism were fighting against windmills.

IV

Max Weber’s concept of a general science of human action—to which he applied the name sociology—no longer refers to the distinction between economic action and other activities. But Weber virtually endorsed the objections raised by historicism against economics by distinguishing between genuinely rational action, on the one hand, and other kinds of action. His doctrine is so closely connected with some untranslatable peculiarities of the German language that it is rather difficult to expound it in English.

The distinction that Weber makes between “social action” and other action is, from the point of view of our problem, of little importance. The main thing is that Weber quite correctly distinguishes between sinnhaftes Handeln and the merely physiologically determined reactions of the human body. Sinnhaftes Handeln is directed by the Sinn the acting individual attaches to it; we would have to translate: by the meaning the actor attaches to it and by the end he wants to attain by it. This definition would appear as a clear distinction between human action, the striving after a definite end, on the one hand, and the physiological—quasi-automatic—reactions of the nerves and cells of the human body, on the other hand. But then Weber goes on to distinguish within the class of sinnhaftes Handeln four different subclasses. The first of these subclasses is called zwechrationales Handeln and is defined as action aiming at a definite end. The second subclass is called wertrationales Handeln and is defined as action determined by the belief in the unconditional intrinsic value (unbedingter Eigenwert) of a certain way of conduct as such, without regard to its success, from the point of view of ethics, aesthetics, religion, or other principles. What Weber failed to see is the fact that also the striving after compliance with definite ethical, aesthetical, and religious ideas is no less an end than any other end that men may try to attain. A Catholic who crosses himself, a Jew who abstains from food and drink on the Day of Atonement, a lover of music who forgoes dinner in order to listen to a Beethoven symphony, all aim at ends that from their point of view are more desirable than what they have to renounce in order to get what they want. Only a personal judgment of value can deny to their actions the qualification zweckrational, i.e., aiming at a definite end. And what in Weber’s definition do the words “without regard to its success” mean? The Catholic crosses himself because he considers such behavior as one link in a chain of conduct that will lead him to what for him is the most important success of man’s earthly pilgrimage. It is tragic that Max Weber, the eminent historian of religion, the man who tried to free German sociological thought from its naive commitment to judgments of value, failed to see the contradictions of his doctrine.7

Other attempts to distinguish between rational action and nonrational or irrational action were likewise based on crass misconstructions and failed. Most of them called “irrational” conduct directed by mistaken ideas and expectations concerning the effects of definite methods of procedure. Thus, magic practices are today styled as irrational. They were certainly not fitted to attain the ends sought. However, the people who resorted to them believed that they were the right technique in the same way in which physicians up to the middle of the past century believed that bleeding is a method of preventing and curing various diseases. In speaking of human action, we have in mind conduct that, in the opinion of the actor, is best fitted to attain an end he wants to attain, whether or not this opinion is also held by a better informed spectator or historian. The way in which contemporary physicians deal with cancer is not irrational, although we hope that one day more efficacious therapeutic and prophylactic methods will be discovered. A report concerning other people’s actions is confusing if it applies the term irrational to the activities of people whose knowledge was less perfect than that of the reporter. As no reporter can claim for himself omniscience, he would at least have to add to his qualification of an action as irrational the proviso “from my personal point of view.”

Another way in which the epithet “irrational” is often employed refers, not to the means, but to the ends of definite modes of conduct. Thus, some authors call, either approvingly or disapprovingly, “irrational” the behavior of people who prefer religious concerns, national independence, or other goals commonly called noneconomic to a more abundant supply of material satisfactions. Against this highly inexpedient and confusing terminology there is need to emphasize again and again the fact that no man is called to sit in judgment on other people’s judgments of value concerning ultimate ends. When the Huguenots preferred the loss of all their earthly possessions, the most cruel punishments, and exile to the adoption of a creed that in their opinion was idolatrous, their behavior was not “irrational.” Neither was Louis XIV “irrational” when he deprived his realm of many of its most worthy citizens in order to comply with the precepts of his conscience. The historian may disagree with the ultimate ends that the persecutors and their victims were aiming at. But this does not entitle him to call the means to which they resorted in order to attain their ends irrational. The terms “rational” and “irrational” are just as much out of place when applied to ends as when applied to means. With regard to ultimate ends, all that a mortal man can assert is approval or disapproval from the point of view of his own judgments of value. With regard to means there is only one question, viz., whether or not they are fitted to attain the ends sought.

Most of our contemporaries are guided by the idea that it is the worst of all crimes to force a man, by recourse to violence, to behave according to the commandments of a religious or political doctrine that he despises. But the historian has to record the fact that there were ages in which only a minority shared this conviction, and unspeakable horrors were committed by fanatical princes and majorities. He is right in pointing out that Louis XIV, in outlawing Protestantism, inflicted irreparable evils on the French nation. But he must not forget to add that the King was not aware of these consequences of his policy and that, even if he had anticipated them, he would perhaps nonetheless have considered the attainment of religious uniformity as a good for which the price paid was not too high.

The surgeons who accompanied the armies of ages past did their best to save the lives of the wounded warriors. But their therapeutic knowledge was pitifully inadequate. They bled the injured man whom only a transfusion of blood could have saved and thus virtually killed him. Because of their ignorance, their treatment was contrary to purpose. It would be misleading and inexpedient to call it irrational. Present-day doctors are not irrational, although probably better informed physicians of the future will qualify some of their therapeutical techniques as detrimental and contrary to purpose.

V

Whenever the distinction between rational and irrational is applied to ultimate ends, the meaning is that the judgments of value underlying the choice of the end in question meet with approval or disapproval on the part of the speaker or writer. Now the promulgation of judgments of value is not the business of a man in his capacity as a praxeologist, economist, or historian. It is rather the task of religion, metaphysics, or ethics. History of religion is not theology, and theology is not history of religion.

When the distinction between rational and irrational is applied to means, the meaning is that the speaker or writer asserts that the means in question are not serving their purpose, i.e., that they are not fit to attain the ends sought by the people who resort to such means. It is certainly one of the main tasks of history to deal with the serviceableness of the means people employed in their endeavors to attain the ends sought. It is also certain that the main practical goal of praxeology and its hitherto best developed part, economics, is to distinguish between means that are fit to attain the ends sought and those that are not. But it is, as has been pointed out, not expedient and rather confusing to use for this distinction the terms “rational” and “irrational.” It is more appropriate to speak of means answering the intended purpose and those not answering it.

This holds true also with regard to the way in which the terms “rational” and “irrational” are employed by psychoanalysts. They “call behavior irrational that is predominately emotional or instinctual,” and furthermore “all unconscious functions” and in this sense distinguish between “irrational (instinctual or emotional) action as opposed to rational action, and irrational as opposed to rational thinking.”8 Whether this terminology is expedient for the treatment of the therapeutic problems of psychoanalysis may be left to the psychoanalysts. From the praxeological point of view, the spontaneous reactions of the human body’s organs and the activity of instinctual drives are not action. On the other hand, it is manifestly the outcome of a personal judgment of value to call emotional actions—e.g., the action with which a man may react to the awareness of his fellowmen’s distress—irrational. It is further obvious that no other meaning can be ascribed to the term “irrational thinking” than that it is logically invalid thinking and leads to erroneous conclusions.

VI

The philosophy of historical relativism—historicism—fails to see the fact that there is something unchanging that, on the one hand, constitutes the sphere of history or historical events as distinct from the spheres of other events and, on the other hand, enables man to deal with these events, i.e., to record their succession and to try to find out their concatenation, in other words, to understand them. This unchanging phenomenon is the fact that man is not indifferent to the state of his environment (including the conditions of his own body) and that he tries, as far as it is possible for him to do so, to substitute by purposive action a state that he likes better for a state he likes less. In a word: man acts. This alone distinguishes human history from the history of changes going on outside the field of human action, from the study of “natural history” and its various subdivisions as, e.g., geology or the evolution of various species of living beings. In human history we are dealing with the ends aimed at by the actors, that is, with final causes.9 In natural history, as in the other branches of the natural sciences, we do not know anything about final causes.

All human wisdom, science, and knowledge deal only with the segment of the universe that can be perceived and studied by the human mind. In speaking of human action as something unchanging, we refer to the conditions of this segment only. There are authors who assume that the state of the universe—the cosmos—could change in a way about which we simply do not know anything and that all that our natural sciences say about the behavior of sodium and levers, for example, may be invalid under this new state. In this sense they deny “any kind of universality to chemical and mechanical statements” and suggest that they be treated “as historical ones.”10 With this brand of agnostic hyperhistoricism that deals in its statements with visionary conditions about which—as they freely admit—we do not know and cannot know anything, reason and science have no quarrel.

Thinking man does not look upon the world with a mind that is, as it were, a Lockian paper upon which reality writes its own story. The paper of his mind is of a special quality that enables man to transform the raw material of sensation into perception and the perceptual data into an image of reality. It is precisely this specific quality or power of his intellect—the logical structure of his mind—that provides man with the faculty of seeing more in the world than nonhuman beings see. This power is instrumental in the development of the natural sciences. But it alone would not enable man to discover in the behavior of his fellow men more than he can see in the behavior of stars or of stones, in that of amoebae or in that of elephants.

In dealing with his fellow men, the individual resorts not only to the a priori of logic, but besides to the praxeological a priori. Himself an acting being, he knows what it means to strive after ends chosen. He see more in the agitation and the stir of his fellow men than in the changes occurring in his nonhuman environment. He can search for the ends their conduct is aiming at. There is something that distinguishes in his eyes the movements of germs in a liquid as observed in the microscope from the movements of the individuals in the crowd he may observe in the rush hour at New York’s Grand Central Terminal. He knows that there is some “sense” in a man’s running around or sitting still. He looks upon his human environment with a mental equipment that is not required or, to say it more precisely, is downright obstructive in endeavors to explore the state of his nonhuman environment. This specific mental equipment is the praxeological a priori.

The radical empiricism of the historicists went astray in ignoring this fact. No report about any man’s conduct can do without reference to the praxeological a priori. There is something that is absolutely valid for all human action irrespective of time, geography, and the racial, national, and cultural characteristics of the actors. There is no human action that can be dealt with without reference to the categorical concepts of ends and means, of success and failure, of costs, of profit or loss. What the Ricardian law of association, better known as the law of comparative cost, describes is absolutely valid for any kind of voluntary human cooperation under the division of labor. What the much derided economic laws describe is precisely what must always and everywhere happen provided the special conditions presupposed by them are present.

Willy nilly, people realize that there are things they cannot achieve because they are contrary to the laws of nature. But they are loath to admit that there are things that even the most powerful government cannot achieve because they are contrary to praxeological law.

VII

Different from the case of the historians who are loath to take cognizance of the praxeological a priori is the case of the authors who belong to the various historical, “realistic,” and institutional schools of economics. If these scholars were consistent, they would limit their studies to what is called economic history; they would deal exclusively with the past and would carefully abstain from asserting anything about the future. Prediction about events to come can be made only on the ground of knowledge of a regularity in the succession of events that is valid for every action irrespective of the time and the geographical and cultural conditions of its occurrence. Whatever economists committed to historicism or institutionalism do, whether they advise their own governments or those backward foreign countries, is self-contradictory. If there is no universal law that describes the necessary effects of definite ways of acting, nothing can be predicted and no measure to bring about any definite results can be recommended or rejected.

It is the same with those authors who, while rejecting the idea that there are economic laws valid for all times, everywhere, and for all people, assume that every period of history has its own economic laws that have to be found a posteriori by studying the history of the period concerned. These authors may tell us that they have succeeded in discovering the laws governing events up to yesterday. But—from the point of view of their own epistemological doctrine—they are not free to assume that the same laws will also determine what will happen tomorrow. All that they are entitled to affirm is: experience of the past shows that A brought about B; but we do not know whether tomorrow A will not bring about some other effects than B.

Another variety of the denial of economics is the trend doctrine. Its supporters blithely assume that trends of evolution as manifested in the past will go on. However, they cannot deny that in the past trends did change and that there is no reason whatever to assume that present trends will not one day change too. Thus, this becomes especially manifest when businessmen, concerned about the continuation of prevailing trends, consult economists and statisticians. The answer they get is invariably this: statistics show us that the trend you are interested in was still continuing on the day to which our most recent statistical data refer; if no disturbing factors turn up, there is no reason why the trend should change; however, we do not know anything about the question whether or not such new factors will present themselves.

VIII

Epistemological relativism, the essential doctrine of historicism, must be clearly distinguished from the ethical relativism of other schools of thought. There are authors who combine praxeological relativism with ethical relativism. But there are also authors who display ethical absolutism while rejecting the concept of universally valid praxeological laws. Thus, many adepts of the Historical School of economics and of institutionalism judge the historical past from the point of view of what they consider as indisputable, never-changing moral precepts, e.g., equality of wealth and incomes. In the eyes of some of them private property is as such morally objectionable. They blame the economists for an alleged praise of material wealth and disparagement of more noble concerns. They condemn the system of private enterprise as immoral and advocate socialism on account of its presumed higher moral worth. As they see it, Soviet Russia complies better with the immutable principles of ethics than the nations of the West committed to the cult of Mammon.

As against all this emotional talk there is need to point out again: praxeology and economics, its up to now best developed branch, are neutral with regard to any moral precepts. They deal with the striving after ends chosen by acting men without any regard whether these ends are approved or disapproved from any point of view. The fact that the immense majority of men prefer a richer supply of material goods to a less ample supply is a datum of history; it does not have any place in economic theory. Economics neither advocates capitalism nor rejects socialism. It merely tries to show what the necessary effects of each of these two systems are. He who disagrees with the teachings of economics ought to try to refute them by discursive reasoning, not by abuse, insinuations, and the appeal to arbitrary, allegedly ethical standards.

• *[Reprinted from Relativism and the Study of Man, Helmut Schoeck and James W. Wiggins, eds. (Princeton, N.J.: D. Van Nostrand, 1962)—Ed.]
• 1[Karl Knies, Geld und Kredit, 3 vols. (Berlin: Weidmann, 1873-79)—Ed.]
• 2[Max Weber, Wirtschaft und Gesellschaft vol. 1 of Grundriss der Sozialökonomik (Tübingen, 1922). English language edition The Theory of Social and Economic Organization, A. M. Henderson and Talcott Parsons, trans. (Glencoe, Ill.: Free Press, 1947)—Ed.]
• 3[Gustav Schmoller was the founder of the “Younger” German Historical or “Historicoethical” School. Its program combined an historical approach to economic phenomena with the pursuit of economic and social politics grounded in “moral principles.” Lujo Brentano was a prominent proponent and follower of Schmoller but disagreed on matters of methodology—Ed.]
• 4The first edition was published in 1853 under the title Die politische Ökonomie vom Standpunkte der geschichtlichen Methode. The second edition was published in 1883 under the title Die politische Ökonomie vom geschichtlichen Standpunkte. It is by and large a reprint of the earlier edition enlarged by many additions.
• 5[The “older” Historical School proponents did not advocate politics as a means of intervention, nor a basis for economic reasoning as did the “younger” Historical School advocates—Ed.]
• 6[Jean Charles Leonard Sismondi was a Swiss economist and historian. He thought that the focus of economics should be man and social reform not wealth and laissez faire. Sismondi was the first to practice modern period analysis in 1819—Ed.]
• 7There is no need to enter into an analysis of the two other subclasses enumerated by Weber. For a detailed critique of Weber’s doctrine, see my essay “Sociologie und Geschichte,” in Archiv für Sozialwissenschaft vol. 61 [1929], reprinted in my book Grundprobleme der Nationalökonomie (Jena: Gustav Fischer, 1933), pp. 64–121. In the English-language translation of this book, Epistemological Problems of Economics, George Reisman, trans, and Arthur Goddard, ed. (Princeton: D. Van Nostrand, 1960), this essay appears on pp. 68–129.
• 8H. Hartmann, “On Rational and Irrational Action,” in Psychoanalysis and the Social Sciences, vol. 1 (1947), p. 371.
• 9When the sciences of human action refer to ends, they always mean the ends that acting men are aiming at. This distinguishes these sciences from the metaphysical doctrines known under the name of “philosophy of history” that pretend to know the ends toward which a superhuman entity—for instance, in the context of Marxism, the “material productive forces”—directs the course of affairs independently of the ends the acting men want to attain.
• 10Otto Neurath, “Foundations of the Social Sciences,” International Encyclopedia of Unified Science, vol. 2, no. 1 (Chicago: University of Chicago Press, 1956), p. 9.