Review of Austrian Economics - The Ludwig von Mises Institute

Herbener: Mises and the Austrian School 35
In contrast, most other schools of economic thought deny, because
of their methodological positions, the existence of universal laws of
economics. Most prevalent are empirically based schools such as the
German historical school that Menger fought. Menger was quite clear
on this:
If, therefore, exact laws are at all attainable, it is clear that these
cannot be obtained from the point of view of empirical realism, but
only in this way, with theoretical research satisfying the presuppositions
of the above rule of cognition.
But the way by which theoretical research arrived at the above goal,
a way essentially different from Bacon's empirical-realistic induction,
is the following: it seeks to ascertain the simplest elements of
everything real, elements which must be thought of as strictly typical
just because they are the simplest.
The specific goal of this orientation of theoretical research is the
determination of regularities in the relationships of phenomena
which are guaranteed to be absolute and as such to be complete.
It examines, rather, how more complicated phenomena develop from
the simplest, in part even unempirical elements of the real world in
their (likewise unempirical) isolation from all other influences . . .
Science starts out, however, with these assumptions, since it would
never be able otherwise to reach the goal of exact research, the
determination of strict laws. On the other hand, with the assumption
of strictly typical elements, of their exact measure, and of their
complete isolation from all other causative factors, it does to be sure,
and indeed on the basis of the rules of cognition characterized by us
above, arrive at laws of phenomena which are not only absolute, but
according to our laws of thinking simply cannot be thought of in any
other way but as absolute (Menger 1985, pp. 60-61).
Menger, like Mises, leaves no doubt regarding his view of the
efficacy of empirically testing economic theory; providing a refutation
of positivism and falsification in economics almost a century before
Milton Friedman and F. A. Hayek espoused them.
Among economists the opinion often prevails that the empirical laws,
"because they are based on experience," offer better guarantees of
truth than those results of exact research which are obtained, as is
assumed, only deductively from a priori axioms.
The error at the basis of this view is caused by the failure to recognize
the nature of the exact orientation of theoretical research, of its
relationship to the realistic, and by applying the points of view of the
latter to the former.
Nothing is so certain as that the results of the exact orientation of