Montreal, June 15, 2004  /  No 143  
<< INDEX NO 143 
Dr. Edward Younkins is a Professor of Accountancy and Business Administration at Wheeling Jesuit University in West Virginia. He is the author of Capitalism and Commerce.
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by Edward W.Younkins
          Ludwig von Mises (1881-1973) began his career as an economic historian in the German Historical School. His enthusiasm for the historical approach waned when, at age 22, he read Carl Menger’s great polemic against the German Historical School, Principles of Economics, and was convinced that although historical research was important and needed, there are factors which could not be grasped by the historicists’ empirical field studies and archival research. He soon realized that economic history could not produce economic laws or principles and that historicism simply supplied pure propaganda for the welfare state.
          Menger had contended that the purpose of economic theory is to elucidate genetic-causal explanations of market phenomena. Mises was dissatisfied with Menger’s Aristotelian methodology which for Mises 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. 
          The historical school could only offer limited help to Mises in his endeavor. The theory of understanding and the concept of ideal types developed by Max Weber, a prominent German historicist and sociologist, provided Mises with some useful instruction but Mises found his method to be insufficiently idealistic. Although he generally admired Weber’s work, Mises concluded that Weber’s interpretation of economics as involving historical ideal types was not acceptable. 
Max Weber’s Ideal Types 
          Weber explained that an ideal type is constructed by the one-sided accentuation of one or more points of view and by the synthesis of a great many different and distinct phenomena that are arranged according to these one-sidedly emphasized viewpoints into a unified analytical construct. There may be many ideal types because an entity has a variety of attributes or there are various viewpoints regarding the entity. For Weber, the ideal type is to be derived inductively from the real world of social history. Pure or ideal types are derived from historical reality and are one-sided exaggerations of the essence of what occurs in the world. The adjective “ideal” refers to an idea or concept and not to perfection. The delineation of the typical features of an historical period is what makes ideal types possible. 
          Weber’s ideal types are abstract arbitrary models of acting man with only the ideal type of rational action pertaining to Weber’s ideas on economics. Weber’s propositions in economic theory fall into the category of rationalizing reconstructions of certain types of behavior. This involves the study of the ways in which people would act if they were driven by purely economic motivations. Weber’s idea of economic man is a product of history. His views differ from Menger’s views in that Weber’s point of departure is a particular historical and actually existing national economy or a part thereof that is restricted to a specific geographical area. 
     “Mises was not against the use of understanding in history because, of course, history requires presuppositions in the form of the subjective perspective of the researcher. He saw that historical case studies do have some pedagogical value.”
          Mises observed that Weber erroneously saw only some human actions as being rational.  Weber differentiated “purposive-rational” action in which a person uses means to attain ends from “valuational actions” which he states do not possess a means-ends structure.  He asserts that valuational actions are guided by conscious belief in the intrinsic value of a mode of conduct. Weber contends that valuational actions are pursued purely for their own sake and independently of their consequences.  Mises refutes Weber by explaining that both rational and valuational behavior display a means-end structure.  In other words, all action involves the use of means to achieve ends. 
          Weber’s ideal type is a mental construct gained through abstraction. It is a conceptual tool that does not correspond to concrete reality and that is always one or more steps away from concrete reality. Weber’s theory is concerned with rational economic actions of a type that is hardly ever found to exist in empirical reality. Ideal types permit a researcher to construct hypotheses connecting them with the conditions that accompany the phenomenon into importance or with consequences that stem from its appearance. Weber developed his ideal-type methodology for use in interpretive sociology as a bridge between history and theory. 
          Weber’s interpretive sociology employed ideal types to understand events. Such understanding is historical because the interpretation of meanings is specific to time and place. Understanding requires a special subjective intuition on the part of the historian to apprehend the specifics of a situation. Mises observes that understanding can therefore never yield results that must be accepted by all people. He viewed Weber’s ideal types as conceptual tools of historical rather than of theoretical investigation. Weber’s interpretation of meanings was historical and not scientific. Mises was not against the use of understanding in history because, of course, history requires presuppositions in the form of the subjective perspective of the researcher. He saw that historical case studies do have some pedagogical value.  
For Mises Action is the Real Thing
          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 makes a distinction between understanding and conception. His description of understanding was based upon Henri Bergson’s idea of intuition. The understanding that Mises discussed was essentially that of Weber and of members of the German Historical School. Whereas understanding was intuition, conception for Mises was ratiocination. The substance of an action is disclosed by the a posteriori insights of understanding and the form of action is revealed via the a priori logic of what Mises called praxeology. Conception of a priori concepts of human action provides the framework for understanding specific actions. Conception involves knowledge understood prior to experience. To find such knowledge, Mises needed a Kantian base.  
          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.