Mainstream economics is crude psychology masquerading as a rigorous mathematical science
I know that this post may seem just another post by a dogmatic Austrian thrashing the intellectual opponents for the sake of glorifying Mises or Rothbard. But it is not.
Often times the discussions between mainstream economists and the Austrians create an impression that the chief difference between the schools comes down to the question whether it is possible to justify the use of mathematical models. But the division actually runs far deeper than that. It starts at the point of ontology, not methodology.
However strange it may sound, mainstream economists do not really incorporate into their ontology the key fact about human beings, the fact that have free will. I am aware that there is a controversy as to whether free will actually exists but I think that this controversy is misplaced and that there are few things of which we can be as sure as the fact that human beings have free will. Anyway, the point of this post is not to marshal the arguments in favor the existence of human of free will but to trace out the implications of acknowledging it which most of the Austrians explicitly or implicitly do.
The corollary of free will is that particular choices are not either strictly or loosely determined by the preexisting phenomena, be they microphysical, biochemical or psychological. In other words, no remotely precise mapping is possible from any preexisting phenomena to particular choices.
This crucial point also applies to the phenomenon of preferences. For mainstream economists there is only one thing called preferences, the psychological preferences. The tacit assumption is that relatively systematic preferences exist in the minds of human beings all the time which preferences are from time to time revealed in choices. It is this very important but tacit psychological assumption that allows mainstream economists to apply the mathematical models borrowed from thermodynamics to human behavior.
The problem with this assumption, however, is that it implicitly denies the existence of free will and free choices. If choices are just external revelations of the underlying structure of preferences then particular choices are more or less determined by it. Thus, there is no room for free will.
Praxeology treats the issue of preferences differently. It strictly distinguishes between psychological phenomena and praxeological ones. Praxeological phenomena are nothing but constituent elements of free choices. In the modern philosophical language, choices do not logically or causally follow from psychological phenomena but supervene on them. It is, in other words, impossible to deduce praxeological phenomena from the psychological ones. In the words of Roderick Long, “praxeology leaves psychology as it finds it”, meaning that the truth of praxeological conclusions does not at all depend on the psychological phenomena. The latter are only important for ascertaining whether praxeological categories apply to particular situations. For example, before applying the praxeological category of money, it is important to ascertain whether the humans under consideration do in fact use the relevant objects as a means of exchange.
Returning to the subject of preference, although praxeology does not deny the existence of psychological preferences (conceptualized desires) what it denies is that they determine choices in the causal or even loose sense. The word ‘preferences’ that praxeologists use does not mean ‘revealed psychological preferences’. It refers to a constituent element of choice. Preference is just that element of the desirable future that the choosing agent is aiming at, not something pre-existing the choice.
This difference between the two approaches to analyzing human behavior (the mainstream and the praxeological one) has momentous implications. It is no exaggeration to say that these approaches are not just two schools of thought within one science. They are two different avenues of inquiry. Praxeologists take the existence of choice as a fact and, without trying to explain choices (!) look at the logical implications of the fact that human beings choose. Mainstream economists essentially deny the existence of choice portraying choices as mere revelations of preexisting preferences in particular situations. It is from this crucial difference that all the other differences between praxeology and mainstream economics follow.
And since mainstream economics grossly distorts the reality that it is supposed to analyze, it is the opposite to a rigorous mathematical science that it aspires to be. It is a relatively crude psychology masquerading as a social physics.