If you are ever puzzled by the phrases “a priori” or “a priorism”, in connection in particular with the writings of Ludwig von Mises, and would appreciate becoming less puzzled, then let me now recommend to you a recent essay by Detlev Schlichter entitled The a priori method in economics – In defence of Ludwig von Mises.
Perry Metzger’s recent demolition job, here at Samizdata, of Thomas Piketty, made me think of Schlichter’s essay. What Perry Metzger was giving us was surely a perfect example of the a priori way of thinking about economic events and economic evidence.
Economic events, even if alluded to with pertinent statistics, can only be said to make sense once you have made sense of the human judgements that gave rise to these events. Future events cannot be predicted merely by looking at numbers and at graphs and then guessing at where these numbers seem to be heading. The economic future is made of human judgements, and to get a handle on what that future will most probably be like, you have to interpret that future in terms of rational human judgements and reactions.
Piketty points towards what Metzger names and shames as an “Investment Event Horizon”, a world in which investment is done far too much, with all other economic activities being curtailed in the service of this one obsession. Piketty says there must be political action to impose rationality on such otherwise irrational events. Metzger says that it is Piketty who is being irrational. Piketty’s interpretation of his supposedly supportive statistics is a perfect example of the kind of thing that Detlev Schlichter is criticising.
In general, says Schichter:
… We can neither verify nor falsify the a priori laws of economics … Even more important (and potentially disappointing to those who derive their expectations as to what science is all about from the natural sciences) we cannot derive the laws of economics from mere observation, and that includes even the most extensive collection of data and the most elaborate and sophisticated analysis of it. The economists who claim to do this are either confused or simply play to the gallery (Piketty?) and are frequently not really proper economists, although some of them may even win Nobel Prizes. This may sound harsh but I believe it is true. The reasons for why we must fail to achieve these two things (test/verify/falsify economic laws and discover economic laws through statistics) are fundamental and I will give them below. Of course, if economics were a natural science, if it were an empirical science, these two things would not only be possible, they would be essential to its modus operandi as a science. Crucially, economics is not an empirical science in the sense that the natural sciences are.
This is in fact the reason why no amount of data mining and statistical analysis will ever settle disputes in the field of economics. Keynesian economists will forever quote historical data from around the Great Depression as evidence of their crisis theories and policy recommendations, just as those who subscribe to monetary explanations of the business cycle (as we “Austrians” do) will forever cite the same or similar data in support of their theories. It is a common complaint that anything can be proven with statistics, and in the field of economic debate this seems to be true to a large degree. (I subscribe to the “Austrian” explanation of economic crises not because it fits the data better but because it fits the principles of economics, the laws of economics that allow us to analyse the cycle in the first place. A detailed analysis of Keynesian theories leads to conflicts and mismatches with some key economic principles. This makes this theory much less convincing.)
I consider that last bit there in particular, the final three sentences in the brackets, to be SQotD-worthy.
In the first of the two paragraphs quoted above, Schlichter actually mentions Piketty, albeit with his name between brackets and with a tentative question mark attached, merely as a possible example of the kind of thinker he is criticising. But if Metzger is right about Piketty (and I would be amazed if anyone is able persuasively to show him not to be) then that question mark can be dispensed with.
The intellectually corrupt Karl Marx, having promised his publisher a proof of impending proletarian revolution caused in the meantime by proletarian immiseration, then felt obliged to fiddle his numbers to prove that things were going from bad to worse for the nineteenth century proletariat rather than from bad to better. (Metzger might describe Marx’s yearned-for revolution as something like a “Discontent Event Horizon”.) The Piketty story has the look to me of a farcical rerun of that intellectually sordid Marx episode. (On the subject of the bad faith of Karl Marx, I recommend the late and much missed Antony Flew’s 1991 Free Inquiry/Libertarian Alliance article entitled (by the LA) KARL MARX WAS NOT A SOCIAL SCIENTIST (the LA likewise subtracted a question mark). Scroll down to where it says “FALSEHOODS OF IMMISERATION”, on page 5.)
But it isn’t just that Piketty’s numbers are wrong, although it would seem certain that they are. It is, as Metzger points out, that even if Piketty’s numbers were correct, Piketty’s understanding of what he believes they must be pointing to is defective.
Which just goes to show that if you come to a big pile of economic statistics with some a priori principles that are wrong, because they don’t make sense, then you cannot hope to make any sense of the statistics.
Piketty would presumably say that he is not doing this, merely letting the statistics speak for themselves. But neither can you make any sense of a pile of economic statistics if you expect those statistics to tell you everything you want to learn.
I met Detlev Schlichter earlier this week, and he told me that he had not then read Perry Metzger’s posting. I recommended to him that he might particularly enjoy it.