Economic Science and the Austrian Method_3

Hans-Hennann Hoppewas wrongly convinced that a rise in the quantity ofmoneyhad nothing to do with money's purchasing power. For itmay be that another concurrent change occurred (the demandfor money increased) which counteracted his wrongassessment of causes and consequences and accidentallyhappened to make his prediction right.However, and this brings me back to my point thatpraxeology logically constrains our predictions ofeconomicevents: What if we assume that all forecasters, includingthose with and without sound praxeological knowledge, areon the average equally well-equipped to anticipate otherconcurrent changes? What ifthey are on the average equallylucky guessers ofthe social and economic future? Evidentl)',we must conclude then that forecasters making predictionsin recognition ofand in accordance with praxeological lawslike the quantity theory of money will be more successfulthan that group offorecasters which is ignorant of praxeolog~It is impossible to build a prediction formula whichemploys the assumption of time-invariantly operatingcauses that would enable us to scientifically forecast changesin the demand for mone~ The demand for money is necessarilydependent on people's future states ofknowledge, andfuture knowledge is unpredictable. And thus praxeologicalknowledge has very limited predictive utili~39Yet ofall forecasters who correctly forecast that a changesuch as an increase in the demand for money will take placeand who equally correctly perceive that an increase in the39See also MurrayN. Rothbard,PowerandMarket (Kansas City, Kans.: SheedAndrews and McMeel, 1977), pp. 256-58, on the different function ofeconomictheorizing in a free market environment vs. an environment hampered by governmentintervention.The Ludwig von Mises Institute • 47