Handbook on Contemporary Austrian Economics

Austrian economics in the twenty-first century 161
that basic same tradition even if they did not always understand that - the
way they did their economics was the same way Mises did his. This is an
approach that puts the choosing actor (with his/her purposes and plans)
at the center of the analysis, and builds out from that to understand the
complex social structures of an economy. Fourth, while economics, or
catallactics, was the best developed branch of praxeology, further developments
of praxeology in fields outside the realm of economics proper
should be expected.
The common parlance in modem academia for praxeology is "rational
actor" approach. Now praxeology does not reduce the means-ends calculation
of individuals to the machine-like behavior of automata. Many
rational choice models do in fact commit the fallacy of treating the
choosing agent like a robot. Mises, instead, emphasized rational choice
theorizing with human choosers. This led him in his day to reject ideas of
Homo economicus, as did Hayek. But this did not mean in their work that
the "rational actor" is not at the center of all analysis. Anyway, where
one reads "rational actor" or "rational choice" in the contemporary
Austrian literature, understand it as praxeology and the methodological
individualist approach to social science.
The epistemological issue Mises sought to address with his insistence
on apriorism, while more exotic in its philosophic treatment than his predecessors,
boils down to the claim that theory comes prior to observation.
We use theory to make sense of the economic world around us. The choice
for the analyst is never theory or no theory, but instead always theory
that has been articulated and defended or theory that remains inarticulate
and hidden from critical examination. The analyst does not confront the
"data" pure and simple. Stated this way, nothing in Mises' claim for the
aprioristic nature of economic reasoning is new and startling. Menger, of
course, made this argument against the claims of historicism, but one can
also read them throughout the classical period of political economy in
various authors. But it is a mistake to believe that these arguments either
claimed that the entire field of economics was a priori or that economics is
completely insulated from criticism of an empirical nature.
Economics as a field of inquiry can be divided into (1) pure theory, (2)
applied theory, and (3) economic history and/or contemporary history
(i.e. , public policy). The realm of pure theory is an essential element of
economics, but it is limited in range. It is often referred to as the pure logic
of choice. Mises' first 100 pages of Human Action (1949) are the essential
reading on this point for Austrians, but one can also get systematic statements
of this position in Menger, B6hm-Bawerk, and of course Mises'
Epistemological Problems ([1933] 1960).4 Lionel Robbins' Nature and
Significance of Economic Science (1932) could also be usefully consulted,