[From Mike Acree (2001.01.18.1551 PST)]
Nearly a year ago Fred Nickols suggested that Ludwig von Mises' _Human
Action: A Treatise on Economics_ might be worth looking at from a PCT point
of view. He was struck by statements in the opening pages about human
action as purposeful behavior, impelled by some sense of "uneasiness" (which
could be read as error). It has taken me this long to read the book and
write up a few impressions. I don't propose to discuss here Mises' theory
of economics per se, but rather his approach to economics--his
metaeconomics, as it were. There are several interrelated features of his
approach that set his theory sharply apart from prevailing approaches to
economics, in just the same ways that PCT is set apart from prevailing
theories of psychology. These include subjectivism, prescission from
measurement, and a dynamic analysis of individuals rather than a static
analysis of aggregates. They also include, notably, a pragmatic, value-free
approach to the subject. Mises contends that reasoning from natural law or
right is idle; the only question is what works for what ends.
Though Mises doesn't discuss the history of measurement theory, it is
interesting to note that the modern debate on measurement was instigated by
developments in economics. The rapid monetization of the economies of
Western Europe in the 11th and 12th centuries, as I discussed in my talk to
the 1994 conference in Durango, led to the emergence of the price system.
This appears to have been the origin of the idea that everything could be
measured, just because everything was found to have its price--even
salvation, through the sale of indulgences--without prices being determined
by anyone in particular. So far as I know, the psychologists and physicists
participating in the measurement debate in the early decades of the 20th
century were unaware that they were recapitulating the same debates at the
universities of Oxford and Paris 600 years earlier. The debate over the
meaningfulness of psychological measurement was never won. A new
technology--the Likert scale--simply allowed questions of meaning to be
swept under the carpet. Just ask people to assign a number to their
experience and most of them will comply. The rest is (supposedly
unassailable) mathematics. Questions of meaning arose only several decades
later, in relation to racial differences in intelligence. (Terman's group
at Stanford found they had to revise their original version to bring women's
IQs _down_ to the level of men's--everybody knew there couldn't be a gender
difference, at least in that direction. On the other hand, racial
differences, being in the expected direction, were allowed to stay.)
Mises and his younger brother Richard (who at least used to be better known)
stood on opposite sides of the measurement debate, most explicitly on the
measurement of probabilities. Richard famously tried to justify frequency
interpretations of probabilities like that of Al Gore's winning the White
House in 2004. Ludwig saw these as qualitative and subjective; there wasn't
any obvious class in which to embed them to derive a relative frequency,
Richard's strained attempts notwithstanding.
In economics, Mises (Ludwig, henceforth) argues that values, the basis of
human action, are intrinsically subjective and incapable of numerical
measurement. It is often supposed that prices measure values, but Mises
demurs. Exchanges, which determine prices, express preferences. If I pay
$30 for a truffle, it's because I _prefer_ the truffle to the $30, at this
moment, and the grocer _prefers_ the $30. The relation is not one, as is
commonly assumed, of indifference. The values in question are not
susceptible of more than ordinal measurement.
In addition to subjectivity, measurement is frustrated by heterogeneity and
change. Labor is obviously heterogeneous, but buyers and sellers, Mises
also points out, distinguish qualities and grades of peas, making index
number methods idle. Moreover, he argues, there are no constant relations
between economic elements to be expressed in equations. If a 10% rise in
the supply of potatoes in Colorado is followed by an 8% decrease in price,
we can't generalize this relation to other times and places. All prices we
know are past prices; statistics can deal only with historical data, not
understanding. Mathematical economists treat equilibrium as a real rather
than a limiting notion; equilibrium is in fact never reached--every change
brings new changes in its train. Their differential equations represent
only a superficial analogy to market process.
For all of these reasons the quantitative analysis of aggregate data is
specious. We actually know nothing of the shape of supply and demand
curves, only a temporary intersection point. Mises also argues that the
concept of national income or wealth is meaningless. The wealth of an
individual or group of individuals can be calculated in terms of how much
money their property would bring in sale on the market. But the whole
country (whatever exactly that would mean) can't be put on the market at
once. Rick (2000.03.06.1340) asserted, in response to my preliminary post
on Mises, that the analysis of aggregates was indeed the object of
economics, just as virtually all textbooks of psychological research assert
that the object of psychological inquiry is aggregates--populations. Mises
might say that starting with that assumption begs the question. Both Mises'
Austrian economics and PCT are capable of comprehending aggregates, but they
do so in terms of individual behavior. At least that is my impression of
PCT models of the movement of flocks and crowds.
I am not sure I have represented Mises fairly in this methodological
synopsis; there are some points, as I've expressed them here, that I would
have trouble defending. In his rejection of mathematical analysis, Mises
was nevertheless more extreme than many economists of his Austrian school.
PCT, so far as I know, has taken no correspondingly strong stand on the
meaningfulness of measuring psychological constructs like anxiety or
self-esteem or intelligence, presumably because there was no compelling need
to. The more important task was to build a positive theory.
Historically it looks to me as though philosophically skeptical approaches
like Mises' are strategically doomed. The technologies of psychological
measurement and statistical analysis have created a huge body of work which
serves powerfully as its own self-justification. Doubts about the
meaningfulness or utility of the whole enterprise simply will not be
entertained as reasonable questions. Similarly with the huge business of
mathematical economics. I think serious questions can indeed be raised
about what understanding has been achieved in either case. On the other
hand, there is also reason to believe that attacks on or criticisms of these
massive projects is a waste of time. They supply employment for a multitude
of academics (like myself), who constitute a powerfully vested interest
group. I don't believe most of this work, at least in psychology, would
ever have been supported by the private sector; but its continued funding by
government looks secure, barring a general economic collapse. Given the
relative inertia and monolithic quality of the science bureaucracy, I think
it will be awhile before most of us are doing more useful work.
Psychologists and economists have been so long accustomed to _playing
scientist_, as David Bakan put it--and getting away with it--that real
scientific work--for example, with PCT--will look unattractively difficult.
Mike