How Economic Thinking Can Benefit Consumers, Managers, and Entrepreneurs (Part 7)
Barry L. Linetsky
The term praxeology is used to convey the general scientific study of human behaviour as differentiated from the study of the clockwork deterministic physical scientific world of natural stuff void of consciousness.
Praxeology is the study of purposeful human behaviour in its widest context, of which economics remains its most developed discipline. In general, praxeology attempts to deal with the study of purposeful human action through observation and logic (deductive and inductive) to discover and derive general principles and rules of action in human production and consumption, and more generally. Praxeology as such provides practical guidance in the human pursuit of values. Economist Ludwig von Mises titled his great treatise on economics Human Action, which begins with a discussion of praxeology and its central importance to a proper methodology of economics.
In a related matter, it is a popular idea of our times that the study of the social behaviour of beings possessing freewill is not “scientific” because such studies don’t conform to applying the methodologies of the hard sciences under a strict paradigm of causal determinism appropriate in the study of physics. This idea that only the study of materialism using the scientific method appropriate to physics, thereby excluding the validity and value of social sciences and the study of purposeful behaviour, was referred to by Nobel economist Friedrich Hayek (1899-1992) as the “fallacy of scientism.” He wrote extensively about this in his important treatise The Counter-Revolution of Science.
The general principles of praxeology and the avoidance of scientism are applicable to all aspects of the study of human action, including, of course, business management. The appropriate principles and methodologies to study human action aren’t well developed and applied in the area of business because business leaders find more value in spending their time pursuing wealth-generating endeavours that ultimately consumers desire and deem valuable, than they do organizing and funding social science research projects. For the most part, prime-movers and entrepreneurial leaders avoid spending their time researching and writing about what they perceive to be “non-practical” and “theoretical” topics and related philosophical and methodological issues that are actually of vital importance with profound implications to running a successful business.
A valid methodology and “theory of human behaviour,” especially that which can be found in economics and is associated with the methodology of praxeology, is essential for improving the odds of successful human action because it provides us with guidance about the proper way to think about connecting our ideas to our actions as we strive to achieve the outcomes we desire. Economist and venture capitalist Hunter Hastings has been investigating the connection between praxeological methodology and entrepreneurship in his popular podcast “Economics for Entrepreneurs.”
A general foundation in valid philosophic thinking is also essential to understanding and validating connections between thought, values, actions, and desired outcomes.
The HBR article “Management is Much More than a Science” by Roger L. Martin and Tony Golsby-Smith touches on these points and reminds us of an important distinction between data as the cornerstone of scientific investigation, and applied logic, imagination and discovery as the foundation of problem-solving. Both together are required to serve human well-being. They write, “Natural science explains the world as it is, but a story can describe a world that does not yet exist.”
© 2019, Barry L. Linetsky. All Rights Reserved.
Barry Linetsky is a Partner with The Strategic Planning Group in Toronto, Canada, where he and his colleagues have been helping executives and owners align their business purpose with customer values since 1994. Barry is the author of the acclaimed book The Business of Walt Disney and the Nine Principles of His Success (Theme Park Press), and an Honorary Disney History Institute Historian. Barry is also a writer, photographer, researcher, and business strategy enabler. Read his blog and learn more at barrylinetsky.com.