The Ultimate Foundation of Economic Science

The environment in which man acts is shaped by natural events on the one hand and by human action on the other. The future for which he plans will be codetermined by the actions of people who are planning and acting like himself. If he wants to succeed, he must anticipate their conduct.

The uncertainty of the future is caused not only by uncertainty concerning the future actions of other people, but also by insufficient knowledge concerning many natural events that are important for action. Meteorology provides some information about the factors that determine atmospheric conditions; but this knowledge at best enables the expert to predict the weather with some likelihood for a few days, never for longer periods. There are other fields in which man’s foresight is even more limited. All that man can do in dealing with such insufficiently known conditions is to use what the natural sciences give him, however scanty this may be.

Radically different from the methods applied in dealing with natural events are those resorted to by man in anticipating the conduct of his fellow men. Philosophy and science for a long time paid little attention to these methods. They were considered as unscientific and not worthy of notice on the part of serious thinkers. When philosophers began to deal with them, they called them psychological. But this term became inappropriate when the techniques of experimental psychology were developed and almost all that earlier generations had called psychology was either altogether rejected as unscientific or assigned to a class of pursuits contemptuously styled as “mere literature” or “literary psychology,” The champions of experimental psychology were confident that one day their laboratory experiments would provide a scientific solution of all the problems about which, as they said, the traditional sciences of human behavior babbled in childish or metaphysical talk.

In fact, experimental psychology has nothing to say and never did say anything about the problems that people have in mind when they refer to psychology in regard to the actions of their fellow men. The primary and central problem of “literary psychology” is meaning, something that is beyond the pale of any natural science and any laboratory activities. While experimental psychology is a branch of the natural sciences, “literary psychology” deals with human action, viz., with the ideas, judgments of value, and volitions that determine action. As the term “literary psychology” is rather cumbersome and does not permit one to form a corresponding adjective, I have suggested substituting for it the term thymology.8

Thymology is a branch of history or, as Collingwood formulated it, it belongs in “the sphere of history.”9  It deals with the mental activities of men that determine their actions. It deals with the mental processes that result in a definite kind of behavior, with the reactions of the mind to the conditions of the individual’s environment. It deals with something invisible and intangible that cannot be perceived by the methods of the natural sciences. But the natural sciences must admit that this factor must be considered as real also from their point of view, as it is a link in a chain of events that result in changes in the sphere the description of which they consider as the specific field of their studies.

In analyzing and demolishing the claims of Comte’s positivism, a group of philosophers and historians known as the südwestdeutsche Schule elaborated the category of understanding (Verstehen) that had already in a less explicit sense been familiar to older authors. This specific understanding of the sciences of human action aims at establishing the facts that men attach a definite meaning to the state of their environment, that they value this state and, motivated by these judgments of value, resort to definite means in order to preserve or to attain a definite state of affairs different from that which would prevail if they abstained from any purposeful reaction. Understanding deals with judgments of value, with the choice of ends and of the means resorted to for the attainment of these ends, and with the valuation of the outcome of actions performed.

The methods of scientific inquiry are categorially not different from the procedures applied by everybody in his daily mundane comportment. They are merely more refined and as far as possible purified of inconsistencies and contradictions. Understanding is not a method of procedure peculiar only to historians. It is practiced by infants as soon as they outgrow the merely vegetative stage of their first days and weeks. There is no conscious response of man to any stimuli that is not directed by understanding.

Understanding presupposes and implies the logical structure of the human mind with all the a priori categories. The biogenetic law represents the ontogeny of the individual as an abbreviated recapitulation of the phylogeny of the species. In an analogous way one may describe changes in the intellectual structure. The child recapitulates in his postnatal development the history of mankind’s intellectual evolution.10  The suckling becomes thymologically human when it begins faintly to dawn in his mind that a desired end can be attained by a definite mode of conduct. The nonhuman animals never proceed beyond instinctive urges and conditioned reflexes.

The concept of understanding was first elaborated by philosophers and historians who wanted to refute the positivists’ disparagement of the methods of history. This explains why it was originally dealt with only as the mental tool of the study of the past. But the services understanding renders to man in throwing light on the past are only a preliminary stage in the endeavors to anticipate what may happen in the future. Seen from the practical point of view, man appears to be interested in the past only in order to be able to provide for the future. The natural sciences deal with experience—which necessarily is always the record of what happened in the past—because the categories of regularity and causality render such studies useful for the guidance of technological action, which inevitably always aims at an arrangement of future conditions. The understanding of the past performs a similar service in making action as successful as possible. Understanding aims at anticipating future conditions as far as they depend on human ideas, valuations, and actions. There is, but for Robinson Crusoe before he met his man Friday, no action that could be planned or executed without paying full attention to what the actor’s fellow men will do. Action implies understanding other men’s reactions,

The anticipation of events in the sphere explored by the natural sciences is based upon the categories of regularity and causality. There are in some byroads bridges that would collapse if a truck loaded with ten tons passed over them. We do not expect that such a load would make the George Washington bridge tumble. We firmly trust in the categories that are the foundations of our physical and chemical knowledge.

In dealing with the reactions of our fellow men we cannot rely upon such a regularity. We assume that, by and large, the future conduct of people will, other things being equal, not deviate without special reason from their past conduct, because we assume that what determined their past conduct will also determine their future conduct. However different we may know ourselves to be from other people, we try to guess how they will react to changes in their environment. Out of what we know about a man’s past behavior, we construct a scheme about what we call his character. We assume that this character will not change if no special reasons interfere, and, going a step farther, we even try to foretell how definite changes in conditions will affect his reactions. Compared with the seemingly absolute certainty provided by some of the natural sciences, these assumptions and all the conclusions derived from them appear as rather shaky; the positivists may ridicule them as unscientific. Yet they are the only available approach to the problems concerned and indispensable for any action to be accomplished in a social environment.

Understanding does not deal with the praxeological side of human action. It refers to value judgments and the choice of ends and of means on the part of our fellow men. It refers not to the field of praxeology and economics, but to the field of history. It is a thymological category. The concept of a human character is a thymological concept. Its concrete content in each instance is derived from historical experience.

No action can be planned and executed without understanding of the future. Even an action of an isolated individual is guided by definite assumptions about the actor’s future value judgments and is so far determined by the actor’s image of his own character.

The term “speculate” was originally employed to signify any kind of meditation and forming of an opinion. Today it is employed with an opprobrious connotation to disparage those men who, in the capitalistic market economy, excel in better anticipating the future reactions of their fellow men than the average man does. The rationale of this semantic usage is to be seen in the inability of shortsighted people to notice the uncertainty of the future. These people fail to realize that all production activities aim at satisfying the most urgent future wants and that today no certainty about future conditions is available. They are not aware of the fact that there is a qualitative problem in providing for the future. In all the writings of the socialist authors there is not the slightest allusion to be found to the fact that one of the main problems of the conduct of production activities is to anticipate the future demands of the consumers.11

Every action is a speculation, i.e., guided by a definite opinion concerning the uncertain conditions of the future. Even in short run activities this uncertainty prevails. Nobody can know whether some unexpected fact will not render vain all that he has provided for the next day or the next hour.

• 8Mises, Theory and History, pp. 264 ff.
• 9When H. Taine in 1863 wrote, “L’histoire au fond est un problème de psychologie” (Histoire de la litérature anglaise [10th ed.; Paris, 1899], Vol. I, Introduction, p. xlv), he did not realize that the kind of psychology he had in mind was not the natural science called experimental psychology, but that kind of psychology we call thymology and that thymology is in itself a historical discipline, a Geisteswissenschaft in the terminology of W. Dilthey (Einleitung in die Geisteswissenschaften [Leipzig, 1883]). R. G. Collingwood (The Idea of History [Oxford, 1946], p. 221) distinguishes between “historical thought” that “studies mind as acting in certain determinate ways in certain determinate situations” and a problematic other way of studying mind, viz., by “investigating its general characteristics in abstraction from any particular situation or particular action.” The latter would be “not history, but mental science, psychology, or the philosophy of mind.” Such “a positive mental science as rising above the sphere of history, and establishing the permanent and unchanging laws of human nature,” he points out (p. 224), is “possible only to a person who mistakes the transient conditions of a certain historical age for the permanent conditions of human life.”
• 10Language, Thought and Culture, ed. by Paul Henle (University of Michigan Press, 1958), p. 48. Of course, the analogy is not complete, as the immense majority stop in their cultural evolution long before they reach the thymological heights of their age.
• 11Mises, Theory and History, pp. 140 ff.