The Logic of Human Action as a Foundation for Entrepreneurial Discovery

In a recent episode of The Human Action Podcast  by the Auburn. LA.-based Mises Institute, Dr. Joe Salerno is interviewed by host Jeff Deist about the proper methodology of economic science as put forth by such economics luminaries as Carl Menger and Ludwig von Mises. 

The reason the topic of valid methodology in economics and the pursuit of knowledge related to human action needs to be explained and reinforced is that many people dismiss the validity of any discipline rooted in human action as a science, and dismiss that there can be a valid methodology by which to gain knowledge in the social sciences, which includes valid knowledge in the disciplines of economics and business. 

This prejudiced view of what is legitimate science leads smart people to reject principled action and defer to pragmatism (or worse, embrace or default to the irrationalism and nihilism that seems to be flourishing in much of today’s popular culture).

On one level, it is the difference between choosing “ready, aim, fire” or choosing “ready, fire, aim” as the appropriate methodology to the utilization of the factors of production, knowledge, and time to improving our wellbeing and achieving our desired ends. On another, it amounts to a rejection of knowledge and a scientific perspective with regard to any and all purposeful human behaviour.

Here is a summary of some aspects of what Dr. Salerno shares in the podcast in which he explains and defends the methodology of economic science, and how knowledge in the social sciences is developed logically from irrefutable axioms and empirical insights: 

• People act with purpose. They have a motivation for acting.
• To act purposefully entails using means to achieve one’s ends – the ends one desires and sets out to achieve. This is true regardless of whether those ends are “responsible,” “moral,” or “self-destructive.” Such motives are beside the point for the economist. What matters is that the action is purposeful. That economic action begins with purposeful action is what Murray Rothbard calls the “action axiom.” Any action by a conscious actor can be explained by this “action axiom.”
• There are implications that immediately follow from the action axiom (that all purposeful action is chosen as a means to an end).
• Once you introduce means and ends and people are aiming at achieving ends, it means that they are not perfectly satisfied; that they prefer the pursued outcome above their current state.
• If people are not perfectly satisfied, then there is scarcity of means in the world that constrain the achievement of human desires and satisfaction.
• Once it is recognized that we live with a scarcity of means, one has to identify that validity of ‘cause and effect.’ If people really want to pursue and achieve ends, they have to know what particular phenomenon brings forth another phenomenon via cause and effect. The achievement of specific ends requires specific and purposeful causally connected action, not arbitrary actions.
• It also entails time preference: that people are acting today rather than tomorrow because they want to satisfy ends now rather than later. 
• That means are scarce also entails that people have to choose what ends to pursue, which implies that they have personal preferences that can be ranked by means of a value scale.

Pioneering economists like Menger and Mises demonstrated in much more detail how we can infer the logical truth and validity of these and other concepts of economics from the basic premise and singular concept of purposeful human action – named by some as the action axiom.

Mises called his system praxeology, and derived it logically from a few simple axiomatic concepts. Praxeology starts with fundamental axioms, and then derives economic theory deductively and inductively, always bounded by logic (non-contradiction) and rationality (best-evidence).

Because we all have the capacity for logic and reason, and are ourselves acting and purposeful beings, we are each of us capable to replicate and verify by our own thinking the truth of the axioms and their logical implications in setting out a proper and valid method for economics and other social sciences. 

And we must not overlook business practices and the role business plays in creating wealth, satisfying human needs and desires, and contributing to human welfare.

After all, isn’t that the overarching purpose of every business?

© 2019, Barry L. Linetsky. All Rights Reserved. 

Barry Linetsky is a senior-level strategic advisor and enabler, writer, researcher, and photographer. His thought-leadership and research has been published by Rotman Magazine and Ivey Business Journal. He is the author of the acclaimed and best-selling Walt Disney biography, The Business of Walt Disney and the Nine Principles of His Success (Theme Park Press), and an Honorary Disney History Institute historian. He blogs at www.barrylinetsky.com.