Economic Science and the Austrian Method_3

Hans-Hermann Hoppeof money and the demand for money stays constant, thenthe purchasing power of money will fall. Our a prioriknowledge about actions as such informs us that it is impossibleto predict scientifically whether or not the quantity ofmoney will be increased, decreased or left unchanged. Noris it possible to predict scientifically whether or not, regardlessof what happens to the quantity of mone~ the demand formoney to be held in cash balances will go up or down or staythe same. We cannot claim to be able to predict such thingsbecause we cannot predict future states of knowledge ofpeople. And yet these states evidently influence what happenswith respect to the quantity of money and the demand formone)!. Then, our theor~ our praxeological knowledge incorporatedin the quantity theor)!, has a rather limited usefulnessfor one's business ofpredicting the economic future.The theory would not allow one to predict future economicevents even if, sa); it is an established fact that thequantity of money had been expanded. One would still beunable to predict what would happen to the demand formonc)!. And though, ofcourse, concurrent events regardingthe demand for money do affect the shape ofthings to come(and cancel, increase, decrease, accelerate, or decelerate theeffects stemming from the source of an increased moneysupply), such concurrent changes cannot in principle bepredicted or experimentally held constant. It is an outrightabsurdity to conceive ofsubjective knowledge, whose everychange has an impact on actions, as predictable on the basisof antecedent variables and as capable of being held constant.The very experimenter who wanted to hold knowledgeconstant would, in fact, have to presuppose that hisknowledge, specifically his knowledge regarding the experiment'soutcome, could not be assumed to be constant overtime.The Ludwig von Mises Institute • 45