The Ultimate Foundation of Economic Science

No sensible proposition concerning human action can be asserted without reference to what the acting individuals are aiming at and what they consider as success or failure, as profit or loss. If we study the actions of the individuals, we learn everything that can be learned about acting, as there are, as far as we can see, in the universe no other entities or beings that, dissatisfied with the state of affairs that would prevail in the absence of their interference, are intent upon improving conditions by action. In studying action, we become aware both of the powers of man and of the limits of his powers. Man lacks omnipotence and can never attain a state of full and lasting satisfaction. All he can do is to substitute, by resorting to appropriate means, a state of lesser dissatisfaction for a state of greater dissatisfaction.

In studying the actions of individuals, we learn also everything about the collectives and society. For the collective has no existence and reality but in the actions of individuals, It comes into existence by ideas that move individuals to behave as members of a definite group and goes out of existence when the persuasive power of these ideas subsides. The only way to a cognition of collectives is the analysis of the conduct of its members.

There is no need to add anything to what has already been said by praxeology and economics to justify methodological individualism and to reject the mythology of methodological collectivism.2  Even the most fanatical advocates of collectivism deal with the actions of individuals while they pretend to deal with the actions of collectives. Statistics does not register events that are happening in or to collectives. It records what happens with individuals forming definite groups. The criterion that determines the constitution of these groups is definite characteristics of the individuals. The first thing that has to be established in speaking of a social entity is the clear definition of what logically justifies counting or not counting an individual as a member of this group.

This is valid also with regard to those groups that are seemingly constituted by “material facts and realities” and not by “mere” ideological factors, e.g., the groups of people descended from the same ancestry or those of people living in the same geographical area. It is neither “natural” nor “necessary” that the members of the same race or the inhabitants of the same country cooperate with one another more closely than with members of other races or inhabitants of other countries. The ideas of race solidarity and racial hatred are no less ideas than any other ideas, and only where they are accepted by the individuals do they result in corresponding action. Also the primitive tribe of savages is kept together as an acting unit—a society—by the fact that its members are imbued with the idea that loyalty to the clan is the right way or even the only way open to them to take care of themselves. It is true that this primitive ideology was not seriously contested for thousands of years. But the fact that an ideology dominates people’s minds for a very long time does not alter its praxeological character. Other ideologies too enjoyed considerable longevity, e.g., the monarchical principle of government.

The rejection of methodological individualism implies the assumption that the behavior of men is directed by some mysterious forces that defy any analysis and description. For if one realizes that what sets action in motion is ideas, one cannot help admitting that these ideas originate in the minds of some individuals and are transmitted to other individuals. But then one has accepted the fundamental thesis of methodological individualism, viz., that it is the ideas held by individuals that determine their group allegiance, and a collective no longer appears as an entity acting of its own accord and on its own initiative.

All interhuman relations are the offshoot of ideas and the conduct of individuals directed by these ideas. The despot rules because his subjects chose rather to obey him than to resist him openly. The slaveholder is in a position to deal with his slaves as if they were chattels because the slaves are willy nilly prepared to yield to his pretensions. It is an ideological transformation that in our age weakens and threatens to dissolve entirely the authority of parents, teachers, and clergymen.

The meaning of philosophical individualism has been lamentably misinterpreted by the harbingers of collectivism. As they see it, the dilemma is whether the concerns—interests—of the individuals should rank before those of one of the—arbitrarily selected—collectives. However, the epistemological controversy between individualism and collectivism has no direct reference to this purely political issue. Individualism as a principle of the philosophical, praxeological, and historical analysis of human action means the establishment of the facts that all actions can be traced back to individuals and that no scientific method can succeed in determining how definite external events, liable to a description by the methods of the natural sciences, produce within the human mind definite ideas, value judgments, and volitions. In this sense the individual that cannot be dissolved into components is both the starting point and the ultimate given of all endeavors to deal with human action.

The collectivistic method is anthropomorphic, as it simply takes it for granted that all concepts of the action of individuals can be applied to those of the collectives. It does not see that all collectives are the product of a definite way in which individuals act; they are an offshoot of ideas determining the conduct of individuals.

• 2See especially Mises, Human Action, pp. 41-44 and Human Action 145-153, and Theory and History, pp. 250 ff.