Can we capture the error of “scientism” in a single reminder? Let’s give it a try. Here’s the reminder: the error of “scientism” arises when a scientist practices “explanation” by the elimination or the forgetting of non-eliminable components of the problem which gave rise to the theoretical constructions of his discipline. Famous examples are: (1) in biology when population biologists mistake their mathematical constructions and circular definitions for physical systems in the real world — and eliminate or forget the humanly observed teleological forms that give rise to the problem of adapation in the context of the origin of species; (2) in economics when mathematical economists mistake their general equilibrium and “perfect competition” constructs for the market process in the real world — and eliminate or forget the imperfect re-ordering of plans and undesigned dove-tailing of purposes which give us the problem of the global division of labor; and (3) in philosophy when logicians mistake their conceptual constructs and logical models for language, the mind, science, morality, or the world itself — and eliminate or forget the shared goings on together and the world-self-community interactions that give rise to conceptual significance and the shared structures of language necessary to formally cast the most vexed puzzles of language and logic, mathematics and self — and every special domains of human inquiry.
My argument with Hulsmann concerns Ludwig Mises’ “greatest lifetime achievement”. I believe Mises’ greatest achievement is to help us overcome a ready bewitchment with our conceptual constructions. And Mises does this by following Menger back to thinking about how an individual ordering his affairs in a changing world can help us address real world problems of undesigned interpersonal coordination. An example is Mises’ work on money. Mises follows Menger back to the most basic problem in all of monetary economics — the problem of the origin of money itself. And what Mises essentially says is that it is a mistake to eliminate or forget this problem, and the relation of this problem to its solution.
More later.
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Great examples of scientism. The perfect competition/GE one is all too common amongst economics students.
Hayek’s attack on scientism is wonderfully rewritten (or Orwellized, taking note of Politics and the English Language) here.
Supply side is in the process of pulling Austrians back from their fling with scientism. Credit expansion and increases in the Ms are not in themselves problems if the underlying demand supports them. Austrian economics begans to step into the dark when it distances itself from the actions of people, especially as they are reflected in the price of gold. Spending hours and hours attempting to define money in terms of the Ms is foolish when the consumer and producer are forgotten.
(But DickF, actions of people do not erase underlying reality).
Professor Ransom, Mises seemed to love this book. Which essay in here best summarizes his perspective?
I just read, for the first time, page 94ff, “Engineers and Planners.” This is an amazing essay.
May I add one that really gets under my skin #(4) Global Warming. The scientific assumption that unless the government micro-regulates every last aspect of human energy consumption, the world will fry and turn into a toxic waste dump.
jeffery,
Actions of people are reality.
By reality, I mean underlying reality. People, for example, can’t make scarcity disappear or repeal economic law.
The Theory of Money and Credit
CHAPTER 23
The Return to Sound Money
3 Currency Reform in Ruritania
From the point of view of monetary technique the stabilization of a national currency’s exchange ratio as against foreign, less-inflated currencies or against gold is a simple matter. The preliminary step is to abstain from any further increase in the quantity of domestic currency. This will at the outset stop the further rise in foreign-exchange rates and the price of gold. After some oscillations a somewhat stable exchange rate will appear, the height of which depends on the purchasing-power parity. At this rate it no longer makes any difference whether one buys or sells against currency A or currency B.
But this stability cannot last indefinitely. While an increase in the production of gold or an increase in the issuance of dollars continues abroad, Ruritania now has a currency the quantity of which is rigidly limited. Under these conditions there can no longer prevail full correspondence between the movements of commodity prices on the Ruritanian markets and those on foreign markets. If prices in terms of gold or dollars are rising, those in terms of rurs will lag behind them or even drop. This means that the purchasing-power parity is changing. A tendency will emerge toward an enhancement of the price of the rur as expressed in gold or dollars. When this trend becomes manifest, the propitious moment for the completion of the monetary reform has arrived. The exchange rate that prevails on the market at this juncture is to be promulgated as the new legal parity between the rur and either gold or the dollar. Unconditional convertibility at this legal rate of every paper rur against gold or dollars and vice versa is henceforward to be the fundamental principle.
The reform thus consists of two measures. The first is to end inflation by setting an insurmountable barrier to any further increase in the supply of domestic money. The second is to prevent the relative deflation that the first measure will, after a certain time, bring about in terms of other currencies the supply of which is not rigidly limited in the same way. As soon as the second step has been taken, any amount of rurs can be converted into gold or dollars without any delay and any amount of gold or dollars into rurs. The agency, whatever its appellation may be, that the reform law entrusts with the performance of these exchange operations needs for technical reasons a certain small reserve of gold or dollars. But its main concern is, at least in the initial stage of its functioning, how to provide the rurs necessary for the exchange of gold or foreign currency against rurs. To enable the agency to perform this task, it has to be entitled to issue additional rurs against a full—100 percent—coverage by gold or foreign exchange bought from the public.
jeffery,
Notice that Mises believes that it is critical not to fix the currency but to allow the currency to adjust to the demand as indicated by its exchange against gold. This problem of fixing the currency is a mistake that monetarists and monetarist Austrians make when they attempt to define money in terms of the Ms. The currency will adjust its own supply if the currency gold ratio is maintained by adjusting the supply up or down.
With this simple system the FED could remove any monetary mistakes, but they enjoy playing with values too much and in the process ruining the lives of people.
I’m still wading through Callahan’s Economics… does Mises outline any of these views in HA?
I don’t know about Callahan’s Economics; I haven’t read it. Human Action has the same concept as The Theory of Money and Credit though it does not go into exactly the same detail. Take a look at Chapter XVII. INDIRECT EXCHANGE
8. The Anticipation of Expected Changes in Purchasing Power. Here Mises does discuss the power of expetations (anticipation).
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