The Ultimate Foundation of Economic Science

Laboratory experiments and observation of external phenomena enable the natural sciences to proceed with measurement and the quantification of knowledge. Referring to this fact, one used to style these sciences as the exact sciences and to belittle the lack of exactitude in the sciences of human action.

Today nobody any longer denies that on account of the insufficiency of our senses measurement is never perfect and precise in the full sense of these terms. It is only more or less approximate. Besides, the Heisenberg principle shows that there are relations that man cannot measure at all. There is no such thing as quantitative exactitude in our description of natural phenomena. However, the approximations that measurement of physical and chemical objects can provide are by and large sufficient for practical purposes. The orbit of technology is an orbit of approximate measurement and approximate quantitative definiteness.

In the sphere of human action there are no constant relations between any factors. There is consequently no measurement and no quantification possible. All measurable magnitudes that the sciences of human action encounter are quantities of the environment in which man lives and acts. They are historical facts, e.g., facts of economic or of military history, and are to be clearly distinguished from the problems with which the theoretical science of action—praxeology and especially also its most developed part, economics—deals.

Deluded by the idea that the sciences of human action must ape the technique of the natural sciences, hosts of authors are intent upon a quantification of economics. They think that economics ought to imitate chemistry, which progressed from a qualitative to a quantitative state.1  Their motto is the positivistic maxim: Science is measurement. Supported by rich funds, they are busy reprinting and rearranging statistical data provided by governments, by trade associations, and by corporations and other enterprises. They try to compute the arithmetical relations among various of these data and thus to determine what they call, by analogy with the natural sciences, correlations and functions. They fail to realize that in the field of human action statistics is always history and that the alleged “correlations” and “functions” do not describe anything else than what happened at a definite instant of time in a definite geographical area as the outcome of the actions of a definite number of people.2  As a method of economic analysis econometrics is a childish play with figures that does not contribute anything to the elucidation of the problems of economic reality.

• 1J. Schumpeter, Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie (Leipzig, 1908), pp. 606 ff.; W. Mitchell, “Quantitative Analysis in Economic Theory,” American Economic Review, XV, I ff.; G. Cassel, On Quantitative Thinking in Economics (Oxford, 1935); and a daily increasing flood of books and articles.
• 2Mises, Human Action, pp. 347 ff.