Near the beginning of Human Action, Mises makes a remarkable statement: “it is in this subjectivism that the objectivity of our science [economics] lies” (p. 21). What does he mean by this? How can a science be objective by being subjective.
Mises’s answer is that economics takes the ultimate preferences of people as given, not an occasion for further analysis by economics. This leads to another question. What is an “ultimate” preference? Mises’s answer starts from the fact that we want some things as means to achieve something else, e.g., we want food to satisfy hunger. Not everything that we want, though, is a means to some further end. Perhaps we satisfy our hunger not as an ultimate end but as a means to keep alive, but it does not seem plausible that “keeping alive” is a means to some further end. (There are exceptions to this claim that I’ll ignore here.) There has to be some ultimate end. There can’t be an endless series in which everything is a means to something else. It doesn’t follow from this, though, that there must be some one thing that is the ultimate end of all our actions. Rather, each chain of the form A is a means to B, B is a means to C,…etc., must finish with an ultimate end, but the ultimate end that is the termination point of each chain doesn’t have to be the same. To think otherwise would be to commit a logical fallacy, just as it does not follow from “Every man has a father” that “Some man is everybody’s father.” Some people think Aristotle made this mistake, but that is disputed.
With this understood, Mises’s argument becomes clearer. He says,
Because it is subjectivistic and takes the value judgments of acting man as ultimate data not open to any further critical examination, it is indifferent to the conflict of all schools of dogmatism and ethical doctrines, it is free from valuations and preconceived ideas and judgments, it is universally valid and absolutely and plainly human. (p. 21)
Mises takes ultimate ends as purely formal. The truths of praxeology apply to all human actions, regardless of their ultimate end. In particular, he stresses that economics doesn’t assume that people aim only at getting wealthy. He says,
Economics does not assume or postulate that men aim only or first of all at what is called material well-being. Economics, as a branch of the more general theory of human action, deals with all human action, i.e., with man’s purposive aiming at the attainment of ends chosen, whatever these ends may be. To apply the concept rational or irrational to the ultimate ends chosen is nonsensical. We may call irrational the ultimate given, viz., those things that our thinking can neither analyze nor reduce to other ultimately given things. Then every ultimate end chosen by any man is irrational. It is neither more nor less rational to aim at riches like Croesus than to aim at poverty like a Buddhist monk. (p. 880)
Mises’s fundamental point is that if you don’t question people’s ultimate value judgments, but confine yourself to a discussion of means, you can be strictly objective and value-free. If you say to someone that he won’t get what he is aiming for by using the means he has chosen, you aren’t making a value judgment yourself. You are making a strictly scientific statement.
Mises explains this essential issue in this way:
An economist investigates whether a measure a can bring about the result p for the attainment of which it is recommended, and finds that a does not result in p but in g, an effect which even the supporters of the measure a consider undesirable. If this economist states the outcome of his investigation by saying that a is a bad measure, he does not pronounce a judgment of value. He merely says that from the point of view of those aiming at the goal p, the measure a is inappropriate. In this sense the free-trade economists attacked protection. They demonstrated that protection does not, as its champions believe, increase but, on the contrary, decreases the total amount of products, and is therefore bad from the point of view of those who prefer an ampler supply of products to a smaller. It is in this sense that economists criticize policies from the point of view of the ends aimed at. If an economist calls minimum wage rates a bad policy, what he means is that its effects are contrary to the purpose of those who recommend their application.
I have so far just given an account of what Mises says. It seems to me exactly on target. But there is one area, though, in which he may be open to criticism. He rightly says that economists don’t tell people what they should do, where “should” implies an ethical judgment. Economists apply the purely scientific truths of praxeology to show whether means are suitable to attain ends. There is another area, though, where there is a contrast between “formal” and “material,” and that is within a type of ethical theory. Utilitarians in the nineteenth century often said that people ought to maximize “pleasure” or “utility,” where this meant a particular kind of felt experience. This has in more recent times largely though not entirely given way to what is called “preference utilitarianism,” where the aim is to maximize the realization of one’s preferences, whatever they turn out to be. Mises refers to this when he says, “If Eudaemonism says happiness, if Utilitarianism and economics say utility, we must interpret these terms in a subjectivistic way as that which acting man aims at because it is desirable in his eyes. It is in this formalism that the progress of the modern meaning of Eudaemonism, Hedonism, and Utilitarianism consists as opposed to the older material meaning” (p. 21, emphasis mine).
Where I think Mises goes astray is that he did not distinguish adequately between preference utilitarianism and economics. The former is not strictly scientific. It is an ethical theory, and someone who adopts it is engaged in philosophy and not praxeology. Mises is both a praxeologist and a preference utilitarian of a very distinctive sort, but you can be one without being the other. Murray Rothbard, for example, was a praxeologist but in ethical theory supported natural law, not preference utilitarianism. As Bishop Butler says, “Everything is what it is, and not another thing.”
