Menger sees the world, which includes both physical and mental aspects,
as existing independently of our reasoning and thinking activities and
as organized in an intelligible fashion. We can know what the world is
like due to its conformity to laws that are accessible to reason. Menger
is an immanent realist who says that we can know what the world is like
both via common sense and through the scientific method. Menger's Austrian
Aristotelianism is a doctrine of ontology that informs us what the world
is like and what its objects, processes, and states are. His commonsense
realism says that we have access to what is real through our everyday experiences.
Menger argues that there is one reality knowable by rational means and
that all things are subject to the laws of cause and effect. Laws of causality
have an ontological or metaphysical reality – how a thing acts is determined
by what a thing is. Entities in reality act according to their natures.
An object necessarily tends to behave in a particular way by virtue of
its real essence.
According to Menger, there are intelligible a priori essences or natures
existing autonomously in reality. Because these essences and essential
structures are knowable, corresponding laws of and connections between
these structures are able to be comprehended. These essences and the laws
governing them are manifested in the world and are strictly universal.
These tell us what kinds of relations can exist between various components
of reality. Menger sees intelligible law-governed change in the particulars
of the world. The essences or laws are precisely universal in that they
do not change and in that they are capable of being instantiated in all
cultures and at all times. The essences relevant to the various different
aspects or levels of reality make up a graphic representation of structural
parts. Reasoning using essences or universals as simple conceptual elements
will proceed according to the nature of objects and will deduce conceptual
systems of causality consonant with the causality of the real world.
Menger's essentialism holds that general essences do not exist in isolation
from what is individual. Universals are said to exist only as aspects of
specific objects and phenomena that are not directly observable in pure
form. Every experience of the world involves both an individual and a universal
or general aspect. According to Menger, we can know what the world is like
in both its individual and general features.
A realist about universals, Menger observes that they exist in reality
and that they are attributes shared by many particular objects. The particulars
are individual whereas the universals are general. In order for the universals
to be phenomena of conceptualization, they have to be abstracted from empirical
reality. Essential or necessary characteristics of an object are those
of its real essence. A depiction is concrete if it concerns particulars
and is abstract it is about universals. Only particulars have the capacity
to act. Universals not only do not possess the power to act, they cannot
exist without the particulars.
Menger believes in the knowability of general laws. However, he says that
our knowledge of the general aspect of experience is in no way infallible.
There may be difficulties in gaining knowledge of essential structures
and converting such knowledge into the form of a strict theory. Despite
the existence of problems and obstacles, he says it is possible for our
knowledge of essential structures and laws to be exact and that our knowledge
will in all probability exhibit a progressive improvement.
For Menger, these structures are a priori categories in reality that possess
an intrinsic simplicity and intelligibility that makes them capable of
being apprehended in a straightforward manner. The nature of objects in
the world can be read off directly through both external observation and
introspection. Menger acknowledges the existence of both intelligible (i.e.,
law-governed) structures and structures of accidental association that
can be comprehended.
Menger follows Aristotle in saying that all knowledge about the world begins
with induction. He reasons that we can actually detect essences in reality
through repeated observations of phenomena which reveal certain similarities
according to which objects would be grouped into types or classes via a
process of abstraction. Induction involves inference from experience and
going from the particular to the general. It follows that even deductions
are ontological since they are based on metaphysical reality. Deductions
are made from inductively known facts and premises. They are based on reality
and are not purely a priori mental categories. Introspection is an ingredient
in Menger's epistemology. He says that introspection gives people access
to some limited useful and reliable knowledge about other human persons
and their experiences such as the experience of making choices. Menger's
epistemology makes use of the internal perspective on human action that
people share because of their common humanity. He says that introspection
should be included in a legitimate epistemology because we live in a world
inhabited by other human minds as well as our own.
Menger's doctrine of ontological individualism states that there are no
"social organisms" or "social wholes." Explanations of such social phenomena
are traceable to the ideas and actions of individual persons. He explains
that the individual precedes the state and other collective bodies both
chronologically and metaphysically.
Menger's view is that man has no innate ideas but does have the ability
to reason. Man begins uninformed and becomes ever more knowledgeable about
the world. Although he espouses the notion that man has free will, he displays
what might be regarded as deterministic overtones in his belief in the
existence in human nature of fundamental common influences of, or motives
for, human behavior including: the economic, moral sentiments, altruism,
and justice. Menger observed that the impulse for one's economic self-interest
was man's primary and most common trait. He said that man is ingrained
with a drive for self-interest in a healthy sense, rather than in an Hobbesian
one. According to Menger, the individual, although desiring to satisfy
his needs, is not directly driven or determined by them.
Menger's rational egoism recognized that value was grounded in human needs
and their satisfaction. Man's physical and intellectual needs derive from
genuine needs of the species. Equating self-interested behavior with economic
behavior, Menger says that men do, and should, rationally seek to attain
economic advantages or gains for themselves. He is finding a basis for
economics in biology. Man's metaphysical and biological needs are not arbitrary
and must be met if he is to survive and prosper. Rational self-interested
behavior is thus viewed as good behavior.
Rationality does not imply omniscience. Menger explains that men are born
into ignorance and that their primary enterprise is to learn the causal
connections between objects and the satisfaction of their needs in order
to make rational decisions regarding their well-being. Economic life is
constructed around the acquiring of knowledge. Menger portrays rational
economic man as an uncertain being who gradually gains the knowledge and
resources necessary to attain his ends. He also explains that economic
progress is caused by the growth in knowledge.
Menger sought to develop a categorical ontology of economic reality in
an Aristotelian sense. His causal-genetic method is rooted in Aristotelian
metaphysics and epistemology. Menger thereby destroyed the existing structures
of economic thought and established economics' legitimacy as a theoretical
science. Menger advanced an ontology of economic objects by providing a
description of the exact laws of economic phenomena. In the absence of
exact laws, there could not be a science of economics and without empirical
realism, economics could not be termed a social science.
In his methodology, Menger stressed that economics is a science by demonstrating
that there are economic regularities and that the phenomena of economic
life are ordered strictly in accordance with definite laws. Insisting on
the exactness of economic theory, he used the language of the pure logician
when he analyzed relationships between variables. It is the knowledge of
exact laws (i.e., those subject to no exceptions) which comprises scientific
knowledge and scientific theory. Exact theory is developed by searching
for the simplest strictly typical elements of everything real.
Menger looked for the essence of economic relationships. He delved for
those features which must be present by the nature of the relationship
under study. He held that there are simple economic categories which are
universal and capable of being understood as such. Exact laws are propositions
expressing the relationships among such categories. There are certain elements,
natures, or essences in the world as well as connections, structures, and
laws regulating them, all of which are precisely universal. Menger's term,
exact laws, refers to propositions expressing universal connections among
essences. A scientific theory consists of exact laws. For Menger, the goal
of research in theoretical economics is the discovery of the essences and
connections of economic phenomena. The aim of the theoretical economist
is to recognize general recurring structures in reality. According to Menger,
the universals of economic reality are not imposed or created, but rather
are discovered through theoretical efforts. Economics, as an exact science,
is the theoretical study of universals apprehended in an immanent realist
manner. Theoretical economics understands economic universals as real objects
that the mind has abstracted from particulars and isolated from other universals
with which they co-exist. If a person has an idea of the essence of something,
he can explain its behavior as a manifestation of its essence. In other
words, the manner in which objects act depends upon what those objects
are. Menger's theoretical framework deals with the intensive study of individual
economic units and the observation of how they behave.
Menger distinguished between the empirical-realistic orientation to theory
and the exact orientation to theory. Whereas the realistic-empirical branch
of economics studies the regularities in the succession and coexistence
of real phenomena, the exact orientation studies the laws governing ideal
economic phenomena. He explains that realistic-empirical theory is concerned
with regularities in the coexistence and succession of phenomena discovered
by observing actual types and typical relationships of phenomena. Realistic-empirical
theory is subject to exceptions and to change over time. Theoretical economics
in its realistic orientation derives empirical laws that are valid only
for the spatial and temporal relationships from which they were observed.
Empirical laws can only be alleged to be true within a particular spatiotemporal
domain. The realistic orientation can only lead to real types and to the
particular. The study of individual or concrete phenomena in time and space
is the realm of the historical sciences. According to Menger, it is the
aim of the practical or historical sciences to discover the principles,
policies, and procedures that are needed in order to shape the phenomena
according to predetermined goals.
Menger's view implies that economic reality manifests certain simple and
intelligible structures. Economic reality is constituted in intelligible
ways out of structures depending upon human thought and action. The individual
and his behavior are the most basic elements by means of which Menger explains
economic phenomena and derives universal laws. Mengerian economics is built
on the basis of the idea that there are, in the realm of economic phenomena,
indispensable structures to every economic action that are manifested in
every economy. Economic universals involve economizing action on the part
of individuals. These universals of economic reality are discovered through
theoretical efforts and are not arbitrary creations of the economist.
Menger's understanding of economic theory is essentialist and grounded
in Aristotelian metaphysics. His causal-realistic economic method is a
search for laws about actual, observable events. It follows that Menger's
economics is actually a theory of reality. Menger is concerned with essences
and laws manifested in this world. For Menger, as well as Aristotle, what
is general does not exist in isolation from what is particular. Menger's
theoretical economics studies the universal aspects of particular phenomena.
These economic universals are said to exist only as instantiated in specific
economic actions and institutions. For Menger, the goal of theoretical
research is to discover the simplest elements of all things real which
must be apprehended as strictly typical merely because they are the simplest.
Of course, it is not an easy matter to discover those structures and to
construct workable theories about them. There may be huge difficulties
in gaining knowledge of essential structures and in converting such knowledge
into the organized system of a strict theory.
Menger finds it necessary to justify inductively the basic causal categories
that are arrived at by the analytic part of scientific method. The scientist
needs to learn to recognize the general recurring structures in constantly
changing reality. He says that theoretical knowledge is gained only by
apprehending the phenomenon in question as a special case of a particular
regularity in the succession or in the co-existence of phenomena. Economic
reality manifests specific simple intelligible structures which the economic
theorist is capable of grasping.
In explaining the transition from particulars (i.e., real types) to universals
(i.e., exact types), Menger contends that it is acceptable to omit principles
of individuation such as time and space. In order to derive exact laws
it was first necessary to identify the essential defining quality or essence
in individual phenomena that underpins their recognition as representations
of that type. Menger thus sought the simplest elements of everything real
(i.e., the typical phenomena) in solving the problem of universals or concepts.
To find the simplest elements, a person must abstract from all particular
Aristotelian philosophy was the root of Menger's framework. His biologistic
language goes well with his Aristotelian foundations in his philosophy
of science and economics. Menger demonstrated how Aristotelian induction
could be used in economics. In addition, he based his epistemology on Aristotelian
induction. Menger's Aristotelian inclinations can be observed in his desire
to uncover the essence of economic phenomena. He viewed the constituent
elements of economic phenomena as immanently ordered and emphasized the
primacy of exactitude and universality as preferable epistemological characteristics
Like Aristotle, Menger thought that the laws governing phenomena of thought
processes and the natural and social world were all related as parts of
the natural order. In other words, the knowability of the world is a natural
condition common to the various aspects of the external world and the human
Menger had contended that the purpose of economic theory is the elucidate
genetic-causal explanations of market phenomena. Mises was dissatisfied
with Menger's Aristotelian methodology which for him was too closely related
to reality. Menger had based his method on realism and had explained in
detail two orientations or ways to know reality – the empirical-realistic
orientation and the exact orientation. Mises argued that concepts can never
be found in reality. He wanted to study and develop pure theory and maintained
that "theory alone" could provide firm guidance. Mises wanted to construct
a purely deductive system and was searching for a foundation upon which
to build it.
Mises was searching for a theoretical foundation that could not be questioned
or doubted. He wanted to find knowledge of logical necessity. He also wanted
to escape from the concrete-based empiricism of historicism. His mission
became to look inward in order to deduce a system that was logically unobjectionable.
He wanted to find laws that could only be verified or refuted by means
of discursive reasoning.
Mises' axiom of action, the universal introspectively-known fact that men
act, was the foundation upon which Mises built his deductive system. Action,
for Mises, is the real thing. Mises said that action was a category of
the mind, in a Kantian sense, that was required in order to experience
phenomenal reality (i.e., reality as it appears to us). The unity found
in Mises' theorems of economics is rooted in the concept of human action.
Mises' economic science is deductive and based on laws of human action
that he contends are as real as the laws of nature. His praxeological laws
have no spatial, temporal, or cultural constraints. They are universal
and pertain to people everywhere, at every time, and in all cultures.
Mises' epistemological ideas are influenced by Immanuel Kant and by neo-Kantians,
Max Weber and Morris Cohen. Not a strict Kantian, Mises modifies and extends
Kant's epistemology. However, he does make use of Kant's main terminological
and conceptual distinctions and basic insights into the nature of human
Kant's philosophy constitutes an all-out attack on the mind's ability to
know reality. Man is denied access to the noumenal world. The mind is trapped
in its own logical way of thinking. Kant's impositionist view is that the
content of man's knowledge reflects certain structures or forms that have
been subscribed or imposed on the world by the mind of the knowing subject.
This knowledge is never directly of reality itself, but instead reflects
the logical structures of the mind and reflects reality only as shaped,
formed, or filtered by the human mind.
Like Kant, Mises believed that the human mind understood the world only
through its own categories. However, Mises is not a pure Kantian. Unlike
Kant, Mises does not attempt to make a transcendental argument to derive
the categories. He merely says that there is a group of common categories
lodged in men's minds through which they grasp that which exists. What
Mises considered as critical in Kant was his conviction that reason could
supply universal and necessary knowledge.
Mises also disagreed with Kant regarding freedom of the individual. Kant
conceived of the noumenal or real self as possessing free will and of the
phenomenal self as being determined by the rational desire for happiness.
Mises views freedom as the use of reason to attain one's goals. Assuming
as little as possible, Mises says that we should assume people to be free
and rational actors in the world as we perceive it since we have no certain
knowledge of any determinants of human action, Mises was a metaphysical
and cosmological agnostic regarding materialist or spiritual explanations
of mental events.
Mises extends Kant by adding an important insight. Kantianism has been
viewed as a type of idealism due to its failure to connect the mind's categories
to the world. Mises further develops Kantian epistemology when he explains
that the laws of logic affect both thought and action. He says that we
must acknowledge that the human mind is a mind of acting persons and that
our mental categories have to be accepted as fundamentally grounded in
the category of action. Mises states that when this is realized, the notion
of the existence of true synthetic a priori categories and propositions
can be accepted as a realistic, rather than as an idealistic, philosophy
of knowledge. The mind and physical reality make contact via action. Mises
believes that this insight fills in the gap between the mental world and
the outside physical world. Mises thus contends that epistemology depends
on our reflective knowledge of action.
Mises considers the law of human action to be a law of thought and as a
categorical truth prior to all experience. Thinking is a mental action.
For Mises, a priori means independent of any particular time or place.
Denying the possibility of arriving at laws via induction, Mises argues
that evidence for the a priori is based on reflective universal inner experience.
Unlike Menger, the father of Austrian economics, Mises did not believe
the essential defining qualities or essences existed in individual phenomena
that made possible their recognition as representatives of that type. If
he had held to the notion that there are certain ontological, a priori,
and intelligible structures in the world, then he may have considered the
law of human action to be a law of reality rather than a law of thought.
An a priori in reality would not be the result of any forming or shaping
of reality on the part of the experiencing subject. Rather, essences or
universals would then be said to be discerned through a person's theoretical
It is hard to see how Mises could contend that a priori knowledge is gained
exclusively through non-inductive means. Perhaps it would have been better
if he had said that economic theory is based in part on introspection.
He could have argued that sense data alone could not reveal to a person
the essential purposefulness of human action. The action axiom could then
be depicted as derived form a combination of both external observation
Mises states that his action axiom, the proposition that men act, meets
the requirements for a true synthetic a priori proposition. This proposition
cannot be denied because the denial itself would necessarily be categorized
as an action. Mises defines action as purposeful behavior. He explains
that it cannot be denied that humans act in a purposeful manner because
the denial itself would be a purposeful act. All conscious human action
is directed toward goals because it is impossible to conceive of an individual
consciously acting without having a goal. Reason and action are congeneric.
For Mises, knowledge is a tool of action and action is reason applied to
purpose. When people look within, they see that all conscious actions are
purposeful and willful pursuits of selected ends or objectives. Reason
enables people to choose.
Human actions are engaged in to achieve goals that are part of the external
world. However, a person's understanding of the logical consequences of
human action does not stem from the specific details of these goals or
the means employed. Comprehension of these laws does not depend on a person's
specific knowledge of those features of the external world that are relevant
to the person's goals or to the methods used in his pursuit of these goals.
Praxeology's cognition is totally general and formal without reference
to the material content and particular features of an actual case. Praxeological
theorems are prior to empirical testing because they are logically deduced
from the central axiom of action. By understanding the logic of the reasoning
process, a person can comprehend the essentials of human actions. Mises
states that the entirety of praxeology can be built on the basis of premises
involving one single non-logical concept – the concept of human action.
From this concept all of praxeology's propositions can be derived.
Mises contends that the axiom of action is known by introspection to be
true. In the tradition of Kant, Mises argues that the category of action
is part of the structure of the human mind. It follows that the laws of
action can be studied introspectively because of aprioristic intersubjectivity
of human beings. Not derived from experience, the propositions of praxeology
are not subject to falsification or verification on the basis of experience.
Rather, these propositions are temporally and logically prior to any understanding
of historical facts.
For Mises, economic behavior is simply a special case of human action.
He contends that it is through the analysis of the idea of action that
the principles of economics can be deduced. Economic theorems are seen
as connected to the foundation of real human purposes. Economics is based
on true and evident axioms, arrived at by introspection, into the essence
of human action. From these axioms, Mises derives logical implications
or the truths of economics. Mises' methodology thus does not require controlled
experiments because he treats economics as a science of human action. By
their nature, economics acts are social acts. Economics is a formal science
whose theorems have no formal content and whose propositions do not derive
their validity from empirical observations. Economics is the branch of
praxeology that studies market exchange and alternative systems of market
« Mises defines action as purposeful behavior. He explains that it
cannot be denied that humans act in a purposeful manner because the denial
itself would be a purposeful act. All conscious human action is directed
toward goals because it is impossible to conceive of an individual consciously
acting without having a goal. »
According to Mises, all of the categories, theorems, or laws of economics
are implied in the action axiom. These include, but are not limited to:
subjective value, causality, ends, means, preference, cost, profit and
loss, opportunities, scarcity, choice, marginal utility, marginal costs,
opportunity cost, time preference, originary interest, association, and
Many believe that Mises is on questionable grounds with his extreme aprioristic
position with respect to epistemology. However, his praxeology does not
inevitably require a neo-Kantian epistemology. It is not inextricably tied
to an aprioristic foundation. Other epistemological frameworks may provide
a better underpinning for free will and rationality. For example, Misesian
praxeology could operate within an Aristotelian, Thomistic, Mengerian or
Randian philosophical structure. The concept of action could be formally
and inductively derived from perceptual data. Actions would be seen as
performed by entities who act in accordance with their nature. Man's distinctive
mode of action involves rationality and free will. Men are thus rational
beings with free will who have the ability to form their own purposes and
aims. Human action also assumes an uncoerced human will and limited knowledge.
All of the above can be seen as consistent with Mises' praxeology. Once
we arrive at the concept of human action, Mises' deductive logical derivations
can come with play.
Murray Rothbard, student and follower of Mises, agrees that the action
axiom is universally true and self-evident but has argued that a person
becomes aware of that axiom and its subsidiary axioms through experience
in the world. A person begins with concrete human experience and then moves
toward reflection. Once a person forms the basic axioms and concepts from
experience with the world, he does not need to resort to experience to
validate an economic hypothesis. Instead, deductive reasoning from sound
basics will validate it. The later Aristotelian, neo-Thomistic and natural-law-oriented
Rothbard refers to laws of reality that the mind apprehends by examining
and adducing the facts of the real world. Conception is a way of comprehending
real things. It follows that perception and experience are not the products
of a synthetic a priori process but rather are apprehensions whose structured
unity is due to the nature of reality itself. In opposition to Mises, Rothbard
contends that the action axiom and its subsidiary axioms are derived from
the experience of reality and are therefore radically empirical. These
axioms are based on both external experience and universal inner experience.
Metaphysics is the first philosophical branch of knowledge. At the metaphysical
level, Rand's Objectivism begins with axioms – fundamental truths or irreducible
primaries that are self-evident by means of direct perception, the basis
for all further knowledge, and undeniable without self-contradiction. Axioms
cannot be reduced to other facts or broken down into component parts. They
require no proofs or explanations. Objectivism's three basic philosophical
axioms are existence, consciousness, and identity – presuppositions of
every concept and every statement.
Existence exists and encompasses everything including all states of consciousness.
The world exists independently of the mind and is there to be discovered
by the mind. In order to be conscious, we must be conscious of something.
There can be no consciousness if nothing exists. Consciousness, the faculty
of perceiving that which exists, is the ability to discover, rather than
to create, objects. Consciousness, a relational concept, presupposes the
existence of something external to consciousness, something to be aware
of. Initially, we become aware of something outside of our consciousness
and then we become aware of our consciousness by contemplating on the process
through which we became aware.
The axiom of identity says that to be is to be "something" in particular.
Identity means that a thing is "this" rather that "that." What exists are
entities and entities have identity. The identity of an entity is the sum
of its characteristics or attributes, including its potentialities for
change. To have identity, is to have specific characteristics and to act
in specific ways. What an entity can do depends on what it is. A thing
must be something and only what it is. In order for knowledge to exist,
there must be something to know (existence), someone to know it (consciousness),
and something to know about it (identity). That existence exists implies
that entities of a certain types exist and that a person is capable of
perceiving that entities of various types exist. Existence is identity
and consciousness is identification.
All actions are caused by entities. Rand connects causality to the law
of identity and finds necessity in the nature of the entity involved in
the causal process. She explains that the law of causality is the law of
identity applied to action and that the nature of an action is caused and
circumscribed by the natures of the entities that act – a thing cannot
act in contradiction to its nature.
The concept of entity is presupposed by all subsequent human thinking since
entities comprise the content of the world men perceive. Rand contends
that the universe is not caused, but simply is, and that cause and effect
is a universal law of reality. Knowledge of causality involves apprehending
the relationship between the nature of an entity and its method of action.
Rand explains that the metaphysically given (i.e., any fact inherent in
existence apart from the human action) is absolute and simply is. The metaphysically
given includes scientific laws and events taking place outside of the control
of men. The metaphysically given must be accepted and cannot be changed.
She explains, however, that man has the ability to adapt nature to meet
his requirements. Man can creatively rearrange the combination of nature's
elements by enacting the required cause, the one necessitated by the immutable
laws of existence. The man-made includes any object, institution, procedure,
or rule of conduct created by man. Man-made facts are products of choice
and can be evaluated, and judged and then accepted or rejected and changed
when necessary. Rand explains that the existence of consciousness is axiomatic,
that consciousness is an attribute of certain living organisms, that consciousness
has causal efficacy, and that there is a fundamental harmony between mind
and body. To deny consciousness is self-refuting. That consciousness can
direct action is evident through extrospection (i.e., observation) and
introspection. Consciousness is connected to the body of a living organism,
is non-deterministic, and is under direct volitional control. Rand contends
that there is only one reality (not two opposing ones), that consciousness
is awareness (rather than creation), and that the products of consciousness
are the caused results of interactions between conscious organisms and
Epistemology refers to the nature and starting point of knowledge, with
the nature and correct exercise of reason, with reason's connection to
the senses and perception, with the possibility of other sources of knowledge,
and with the nature and attainability of certainty. Rand explains that
reason is man's cognitive faculty for organizing perceptual data in conceptual
terms through the use of the principles of logic. Knowledge exists when
a person approaches the facts of reality through either perceptual observation
Sense perception is man's primary and direct form of what exists (i.e.,
of entities, including their characteristics, relations, and actions).
Senses provide man with the start of the cognitive process. The senses
neither err nor deceive a man. The senses do not judge, identify, or interpret,
but simply respond to stimuli and report or present a "something" to one's
consciousness. The evidence provided by the senses is an absolute, but
a man must learn to use his mind to properly understand it. The task of
identification belongs to reason operating with concepts. Man's senses
only inform him that something is, but what it is must be learned by the
mind which must discover the nature, the causes, the full context of his
sensory material, and so on. It is only at the conceptual level, with respect
to the "what," that the possibility or error arises. On the conceptual
level, awareness can lead to mistaken judgments about what we perceive.
Conceptualization entails an interpretation that may differ from reality.
However, man's reason can be used to correct wrong judgments and expand
one's knowledge of the world.
A man's senses react to the full context of the facts. Sense perceptions
are valid in that they are perceptions of entities which exist. Sensations
are caused by objects in reality and by a person's organs of perception.
It is the purpose of the mind to analyze the perceptual evidence and to
identify the nature of what is and the causes in effect.
A difference in sensory form among various perceivers is merely a difference
in the form of perceiving the same object in reality. As long as a person
perceives the underlying objects and relationships in reality in some form,
the rest is the mind's work, not the work of the senses.
Any perceptual mechanism is limited. It follows that the object as perceived
is the result of an interaction between external entities and a person's
limited perceptual apparatus. Forms of perceptions are circumscribed by
a person's physical abilities to receive information interacting with external
objects in connection with the laws of causality. In other words, perceptual
awareness is the product of a causal interaction between physical entities
and physical sense organs.
Perceptual awareness marks the beginning of human knowledge. In order to
understand the world in conceptual form, man must integrate his percepts
into concepts. A concept integrates and condenses a number of percepts
into a single mental whole. Although based on sensory percepts, human knowledge,
being conceptual in nature, can depart from reality. The mind is not infallible
nor automatic and can distort and be mistaken. A man can only obtain knowledge
if he adheres to certain methods of cognition. The validity of man's knowledge
depends upon the validity of his concepts.
Whereas concepts are abstractions (i.e., universals), everything that man
apprehends is specific and concrete. Concept-formation is based on the
recognition of similarity among the existents being conceptualized. Rand
explains that an individual perceptually discriminates and distinguishes
specific entities from their background and from one another. A person
then groups objects according to their similarities regarding each of them
as a unit. He then integrates a grouping of units into a single mental
entity called a concept. The ability to perceive entities or units is man's
distinctive method of cognition and the gateway to the conceptual level
of man's consciousness. According to Rand, a concept is a mental integration
of two or more units which are isolated according to one or more characteristics
and united by a specific definition. A definition is the condensation of
a large body of observations.
Whereas a concept is assigned precise identity through the use of a definition,
the integration (i.e., the concept) itself is kept in mind by referring
to it by a perceptual concrete (i.e., a word). Words are concrete audiovisual
representations of abstractions called concepts. Words transfer concepts
into mental entities whenever definitions give them identity. Language
makes this type of integration possible.
Concept formation is largely a mathematical process. There is a connection
between measurement and conceptualization. Similarity, an implicit form
of measurement, is the relationship between two or more existents which
possess the same attributes but in different measures or degrees. The mental
process of concept formation consists in retaining the characteristics
but omitting their measurements. The relevant measurement of a particular
attribute must exist in some quantity, but may exist in any quantity. The
measurements exist, but they are not specified. A concept is a mental integration
of units possessing the same differentiating characteristics with their
particular measurements omitted.
Rand states that a conceptual common denominator is made up of the characteristic(s)
reducible to a unit of measurement by which a person distinguishes two
or more existents from other existents possessing the characteristic(s).
In other words, the comprehension of similarity is necessary for conceptualization.
Perceptual data lead to first level concepts. In turn, higher level concepts
are formed as abstractions from abstractions (i.e., from abstractions and
subclassifications of previously formed concepts). Concepts differ from
each other not only with respect to their referents but also in their distances
from the perceptual level. Knowledge is hierarchical with respect to the
order of concept formation. It consists of a set of concepts and conclusions
ranked in order of logical dependence upon one another.
The last step in concept formation is definition. A definition identifies
a concept's units by particularizing their fundamental attributes. A definition
identifies the nature of the units subsumed under a concept. A definition
differentiates a given concept from all others and keeps its units distinguished
in a person's mind from all other existents. The differentiation must be
limited to the essential characteristics. Rand employs Aristotle's "rule
of fundamentality" when she states that the essential characteristic is
the one that is responsible for, and therefore can explain, the greatest
number of the unit's other distinguishing characteristics.
She explains that concepts are instruments to save space and time and to
attain unit-economy through the condensation of data. Concepts have a metaphysical
basis since consciousness is the ability of comprehending that which exists.
Concepts result from a particular type of relationship between consciousness
Definitions are statements of factual data as compressed by a human consciousness.
Definitions, as factual statements, involve the condensation of a multitude
of observations of similarity and difference relationships. They are also
contextual since they depend, in part, on the definer's context of knowledge.
A new or revised definition does not invalidate the objective context of
the old definition. It simply encompasses the requirements of an expanding
cognitive context – the sum of cognitive elements conditioning an item
to knowledge. Full context is the sum of available knowledge.
The essential characteristics of a concept are epistemological rather than
metaphysical. Rand explains that concepts are neither intrinsic abstract
entities existing independently of a person's mind nor are they nominal
products of a person's consciousness, unrelated to reality. Concepts are
epistemologically objective in that they are produced by man's consciousness
in accordance with the facts of reality. Concepts are mental integrations
of factual data. They are the products of a cognitive method of classification
whose processes must be performed by a human being, but whose content is
determined by reality. For Rand, essences are epistemological rather than
Rand contends that, although concepts and definitions are in one's mind,
they are not arbitrary because they reflect reality, which is objective.
Both consciousness in metaphysics and concepts in epistemology are real
and part of ordinary existence – the mind is part of reality. She views
concepts as open-ended constructs which subsume all information about their
referents, including the information not yet discerned. New facts and discoveries
expand or extend a person's concepts, but they do not overthrow or invalidate
them. Concepts must conform to the facts of reality.
In order to be objective in one's conceptual endeavors, a human being must
fully adhere to reality by applying certain methodological rules based
on facts and proper for man's form of cognition. For man, a being with
rational consciousness, the appropriate method for conforming to objective
reality is reason and logic. In order to survive man needs knowledge and
reason is his tool of knowledge.
For Rand, the designation, objective, refers to both the functioning of
the concept-formation process and to the output of that process when it
is properly performed. A man's consciousness can acquire objective knowledge
of reality by employing the proper means of reason in accordance with the
rules of logic. When a correct cognitive process has been followed it can
be said that the output of that process is objective. In turn, when the
mind conforms to mind-independent reality, the theory of conceptual functioning
being followed can be termed objective.
According to Rand, all concepts are derived from facts including the concept
"value." All concepts, including the concept of value, are aspects of reality
in relationship to individual men. Values are epistemologically objective
when they are discovered through objective conceptual processes and are
metaphysically objective when their achievement requires conformity to
Rand asks what fact or facts of reality give rise to the concept of value.
She reasons that there must be something in perceptual reality that results
in the concept value. She argues that it is only from observing other living
things (and oneself introspectively) in the pursuit of their own lives
that a person can perceive the referents of the term value. For example,
people act to attain various material and other goods and determine their
choices by reference to various goals, ends, standards, or principles.
For Rand, the concept of value depends upon and is derived from the antecedent
concept of life. It is life that entails the possibility of something being
good or bad for it. The normative aspect of reality arises with the appearance
The fundamental fact of reality that gives rise to the concept of value
is that living beings have to attain certain ends in order to sustain their
lives. The facts regarding what enhances or hinders life are objective,
founded on the facts of reality, and grounded in cognition. The act of
valuation is a type of abstraction. It is a product of the process of concept-formation
and use. Objective values are identified by a process of rational cognition.
This should not be surprising because people do think, argue, and act as
if normative issues can be decided by considering the facts of a situation.
Rand explains that the key to understanding ethics is found in the concept
of value – it thus located in epistemology. Her revolutionary theory of
concepts is what directly led her to innovations in the fields of value
theory and ethics and moral philosophy.
Synthesis of Philosophical Traditions
The Aristotelian, Mengerian, and Randian perspective is that reality is
objective. There is a world of objective reality that exists independent
of human beings and that has a determinate nature that is knowable. It
follows that natural law is objective because it is inherent in the nature
of the entity to which it relates. The content of natural law which derives
from the nature of man and the world is accessible to human reason. Principles
that supply a systematic level of understanding must be based on the facts
of reality. In other words, the principles of a true conceptual framework
must connect with reality. The only way to successfully defend principles
and propositions is to show that they have a firm base or foundation.
Menger, like Aristotle, claimed that essences exist within entities themselves.
For naïve realists such as Menger and Aristotle, essences are embedded
in concretes and are assumed to be self-evident. In other words, the mind
would tend to be epistemologically passive in arriving at essences, universals,
or concepts. Menger speaks in an Aristotelian sense when he explains his
exact theory. Although Menger's value theory was sound, the epistemology
on which it rests is not as convincing as it could have been if he had
recognized, as does Rand, that concepts or universals are epistemological
rather than metaphysical. If an essence is metaphysical, a person would
just look at an object and abstract or intuit the essence. Although most
people would "get it" some would not and this would lead to skepticism.
What Menger needed was to be able to validate his theory of concepts. To
do this he would have had to view essences as epistemological and the mind
as epistemologically active, but as metaphysically passive. Mental effort
is required to form abstractions and to discover the nature of actualities
that exist in the world. Remember, one's theory of value is underpinned
by his theory of concepts and if the latter is flawed then one can question
Mises treated the concept of action as a priori and self-evident and deduced
all other concepts from it through logic alone. Epistemologically, the
dependence on the a priori evidences the effort to avoid the induction
of concepts from empirical observation. Mises' declaration of the a priori
negates the functions of a person's cognition and evaluation of external
reality. Mises failed to recognize that to defend concepts such as human
nature, individual rights, and value requires the defense of abstractions
which are products of a relation between a subject and an object. Concepts
enable a person to organize his understanding of the world.
Rand's theories of concepts, values, and ethics accurately reflect a man's
epistemic nature. Objectivism endorses a theory of objective value and
an ethics that reflects the primacy of existence. Because Rand identified
and comprehended the epistemological nature of concepts and the nature
of the concept of value itself, it is possible for us to understand them
and to explain to others the logical steps that were included in their
Ayn Rand's conception of universals (or essences) as epistemological, is
arguably superior to the traditional interpretation given to the Aristotelian
or Mengerian idea of universals as being metaphysical. Rand explains that
knowledge is acquired by an active, conscious agent through the processes
of induction and deduction. In order to deduce from axioms and general
statements, we must first have inductive inferences. We can know via the
senses, inferences from data supplied by the senses, and introspective
understanding. Once it is acknowledged that Mises' action axiom could be
derived through an inductive process, it will then be legitimate to follow
and adopt his logical arguments that all the core principles and relationships
of economics can be deduced from that axiom. After the free market has
been accepted as moral and politically legitimate, it is then appropriate
for economists to derive praxeological laws.
Mises explains that a man's introspective knowledge that he is conscious
and acts is a fact of reality and is independent of external experience.
Mises deduced the principles of economics and the complete structure of
economic theory entirely through the analysis of the introspectively-derived
a priori idea of human action. While it is certainly important to understand
and acknowledge the useful role of introspection in one's life, it is also
necessary to realize that its role is limited, secondary, and adjunct to
the empirical observation and logical analysis of empirical reality. It
would have been better if Mises had said that external observation and
introspection combine to reveal that people act and employ means to achieve
ends. Introspection aids or supplements external observation and induction
in disclosing to a man the fundamental purposefulness of human action.
Austrian Economics and Objectivism can benefit from each other's insights.
These two schools have more in common than heretofore has been appreciated.
Austrian Economics and Objectivism have more in common than they have in
conflict. It is acceptable to mix and match components from different paradigms
in our efforts to achieve a deeper understanding of the nature of man and
the world. By extracting information from existing paradigms it is possible
to create a paradigm that is more reflective of reality. Specifically,
it may be desirable to refine and fuse together the following components:
(1) an objective, realistic, natural-law-oriented metaphysics as amplified
in the work of Aristotle, Carl Menger, Ayn Rand, and in the more recent
works of Murray Rothbard; (2) Ayn Rand's epistemology which describes essences
or concepts as epistemological rather than as metaphysical; (3) a biocentric
theory of value as appears in the writings of Menger and Rand; (4) Misesian
praxeology as a tool for understanding how people cooperate and compete
and for deducing universal principles of economics; and (5) an ethic of
human flourishing based on reason, free will, and individuality as suggested
in the contemporary works of Tibor R. Machan, Douglas B. Rasmussen, Douglas
J. Den Uyl, and others, who have built on the teachings of Aristotle and
Mises' theoretical system deals with uncertainty that is due to the passage
of time and the implications of human ignorance. These are natural dimensions
of human existence. There are natural phenomena that act in certain ways
under certain conditions. It follows that we can properly relocate Austrian
Economics in general and Mises' praxeological axioms in particular into
the great coherent natural law traditions of realist analysis and rational
epistemology. In fact, the natural law tradition is not only capable of
assimilating and synthesizing the Misesian logic of human action, it is
also able to serve as a metatheoretical underpinning for the merger of
Austrian thought with Objectivism.
Objectivism's Aristotelian perspective on the nature of man and the world
and on the need to exercise one's virtues can be viewed as synergic with
the economic coordination and praxeology of Austrian Economics. Placing
the economic realm within the general process of human action, which itself
is part of human nature, enables theoretical progress in our search for
the truth and in the construction of a systematic, logical, and consistent
conceptual framework. The Objectivist worldview can provide a context to
the economic insights of the Austrian economists. Of course, any paradigm
should be open to further intellectual interaction which may enrich it.
There is always more to be learned about reality.
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