Economic Project (Thesis)

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The following is the full text of my Economic Project, which focused on attempting to synthesize Austrian School Economics with the Dopfer-Potts Evolutionary Economics framework, atop an Objectivist philosophical base.

This project was submitted to the University of Queensland (Faculty of Business, Economics and Law) in 2009. It is also being used as the basis for a forthcoming article (being co-written by myself and my Project Advisor, Jason Potts) that we plan to submit to the Journal of Ayn Rand Studies.

This is Part 1 of many parts!

ABSTRACT

This paper will argue that, as frameworks for the analysis of social-economic phenomena, Austrian and Evolutionary economics are compatible with each other and that their combined analytical approach can be justified by Objectivist (Randian) metaphysics and epistemology. Essentially this paper will discuss the possibility of synthesizing Austrian and Evolutionary economics atop an Objectivist philosophical base.

In the introduction, previous interactions between Austrian economics and Objectivism will be discussed, as well as aesthetic similarities between Objectivism and one of Evolutionary economics intellectual forerunners: Joseph Schumpeter. Similar projects aimed at integrating Austrian economics with Objectivism will also be discussed.

The second part of the project will provide a summary of the three intellectual frameworks involved: Objectivism (focusing on metaphysics and epistemology), Austrian economics (taking a "Misesian-Hayekian" approach), and Evolutionary economics (specifically, the Dopfer-Potts Evolutionary framework outlined in The General Theory of Economic Evolution).

The final portion of the project will be a presentation of a proposed synthesized Austrian-Evolutionary economic framework (admittedly a tentative one), and an attempt to justify it (or at least demonstrate compatibility) with Objectivist metaphysics and epistemology. Included in this section will be an argument that the Objectivist theory of history is essentially the same as the synthesized Austrian-Evolutionary framework (in terms of its propositions as to how individuals operate).

PART 1: INTRODUCTION

It is generally acknowledged that within the last sixty years, political sympathy within academic economics has somewhat shifted away from State-based solutions to the Economic Problem and towards a renewed appreciation for the indispensability of market-based solutions. In short, economists generally support more market-oriented solutions than their colleagues of the 1940's and 1950's did. There are a number of intellectual forces that can be said to have contributed to this shift; the Austrian School of economics is an obvious contributor. The Economic Calculation Argument, commenced in 1920 by Ludwig von Mises (who argued that in the absence of market prices for capital there was no way to determine the most economically efficient means of production), and extended in 1945 by Frederich von Hayek (who argued that the data from which prices are ultimately derived are necessarily subjective and held within the minds of individual market participants, thus making any attempt to 'replicate' market prices via a 'shadow market' impossible) is one of the most famous arguments in modern economics. Additionally, Hayek's The Road to Serfdom argued that not only economic efficiency, but freedom itself, would be destroyed under Socialism. Even John Maynard Keynes found himself "in deeply moved agreement" with Hayek's thesis.

Outside the academy, various cultural forces arose to challenge what was the popular enthusiasm for Socialism that existed at the same time. One of the most (in)famous anti-Socialist intellectuals was the Russian-American novelist and philosopher Ayn Rand, whose books still sell in impressive quantities, whose philosophical positions usually attract polarized responses, and who argued that utilitarian justifications for market economics offered by economists were insufficient in a culture where the most common moral beliefs were variants of (Comtean) Altruism. In spite of Rand's insistence on a non-utilitarian argument for Capitalism, she frequently endorsed the works of Austrian School economists (most notably Ludwig von Mises), appealing to both the Economic Calculation Argument as well as the Austrian Business Cycle Theory on various occasions. In spite of this, she disagreed with Mises on the epistemological justification Mises believed was necessary to justify his economic conclusions. Instead of Mises's neo-Kantian rationalism, Rand advocated a philosophy she called "Objectivism," a philosophy with a very different epistemology to Mises.

More recently, however, the influence of Joseph Schumpeter as well as Frederich von Hayek has resulted in the formation of a heterodox school of economics known as Evolutionary Economics. Whereas mainstream economics uses a mathematical-physical metaphor to describe social-economic phenomena, Evolutionary Economics sees the economy as a system undergoing a process of evolution (i.e. within an economy, there are processes of variation, replication and selection) of the intellectual units, or memes, that promote various courses of action. One proposed framework for the Evolutionary analysis of social-economic phenomena is the Dopfer-Potts framework, outlined in The General Theory of Economic Evolution (2008). The Dopfer-Potts framework fundamentally aims to explain two economic phenomena which mainstream, Walrasian economics gives no insight into, specifically the facts that;

"1) That the economy is largely self-coordinating; and 2) that the structure and content of the economic system is continually changing." (Dopfer, Potts (2008) p3)

The Dopfer-Potts framework is new and hence it does not have the same history of advocacy of market economics that Austrian economics or Objectivism do. Regardless of this, this paper wishes to argue that the Dopfer-Potts framework is not only consistent with Austrian economics (as frameworks for the analysis of social-economic phenomena), but that the hybridized Evolutionary-Austrian framework can be supported by an Objectivist metaphysical and epistemological base. Not only can it be supported by Objectivist metaphysics and epistemology, but there is at least one instance wherein which Rand has in fact used a similar approach in analyzing social-economic phenomena; specifically, the Objectivist theory of history.

The obvious question that arises is "why is this important?" To put it briefly, much mainstream economics claims to believe in the methodology of Positivism, which is essentially the proposition that the true test of an economic theory or model is whether or not it generates accurate empirical predictions (usually quantitative) (note that Backhouse (2000) believes this is an incorrect philosophical characterization of Positivism, but he does argue that mainstream economics actually does in fact work in the described way, even if it is wrong to call it "positivistic"). Even if every assumption of said model is empirically false, the model itself can still be considered valid if it generates empirically accurate results. So-called Positivism usually claims that it is in fact empiricist, and that frameworks which employ logical deductivism and shy away from extensive mathematicization are rationalistic and unempirical. Whilst this is by no means a simple charge to refute (and indeed, an Objectivist would argue that it is mainstream economics, with its unempirical assumptions and extensive mathematicization, that is fundamentally anti-empirical and is disconnected from reality (Indeed, Backhouse (2000) would say that much of mainstream economics is not empirical and that its models "are not grounded on empirical laws about the economy" ((2000)p36))), this paper will attempt to outline a framework that not only synthesizes Austrian and Evolutionary economics, but is defensible with Objectivism's explicitly empirical epistemology and realist metaphysics.

Before commencing this attempt, this paper will acknowledge some history that exists between the schools of thought involved, as well as a rather surprising omission in said history.

Long relationship between Objectivism and the Misesian Austrians

Whilst Ayn Rand was notorious for not being particularly friendly to people that did not share her philosophical views, she considered Ludwig von Mises her favorite economist. Ludwig von Mises, on his part, was a great admirer of Atlas Shrugged, to the point where he called Ayn Rand "the most courageous man in America" (Sciabarra, Sechrest (2005) p242). Whilst Rand rarely used economic analysis to defend markets (her case for market economic was not utilitarian even though she agreed that Capitalism did in fact produce the greatest good for the greatest number), when she (or other Objectivists) did, they used Austrian economic theory. Nathaniel Branden, at the time Rand's associate, extensively relied on the Misesian-Hayekian business cycle theory in his article "Common Fallacies About Capitalism" (see Rand (1967) p72).

Previous attempts to integrate Austrian and Objectivist insights

This is not the first attempt to discuss a potential fusion of Objectivist and Austrian positions as part of a comprehensive analytical framework. Whilst, as shown above, there has been a long tradition of interaction between Objectivists and the American Misesians, there have also been some attempts to justify Misesian economic conclusions without accepting Mises' neo-Kantian Rationalism. An obvious example of this is the Journal of Ayn Rand Studies special issue on Ayn Rand Amongst the Austrians ((2005) Vol. 6, No. 2). Another very significant example of this, however, is George Reisman's Capitalism: a Treatise on Economics (1996). Reisman's treatise is a parallel project to the project of this paper: where this paper is discussing a potential synthesis of Austrian Economics and Evolutionary Economics atop an Objectivist philosophical base, Reisman's treatise aims at synthesizing Austrian Economics with Classical Economics atop an Objectivist philosophical base. Whether or not Reisman's project was successful is a debated matter, and this debate will be addressed later in this paper (a clear discussion of the debate requires that Objectivist principles are detailed more thoroughly).

Aesthetic similarities between Rand and Schumpeter

One obvious similarity does exist between Ayn Rand's novels and also the work of Joseph Schumpeter; one of the intellectual ancestors of Evolutionary Economics. Schumpeter is well known for his portrayal of entrepreneurship as a heroic activity, describing entrepreneurship as ushering in a "perennial gale" of "creative destruction." The entrepreneur is seen as a radical force, upsetting convention, destroying equilibriums, and indeed being the soul of Capitalism itself. As Schumpeter ((1942, 1950) p83) wrote, the entrepreneur "incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism."

Whilst Ayn Rand alleged that it was not entrepreneurship but rather individual rights that constituted the essential characteristic of Capitalism, she depicted entrepreneurship in similarly heroic terms. Indeed, in a literary context where most businessperson characters are rarely beyond Ebenezer Scrooge, Rand's heroic entrepreneurs come as quite a surprise. As David Kelley explains, the heroism of entrepreneurship is rooted deeply in Randian ethics and it's virtue of productivity. "Our ability to reshape the world in the image of our values, in a world open to our achievement, is the essence of her view of man as a heroic being" (Kelley (1990) p83).

Whilst this similarity is admittedly rather superficial, it makes it rather surprising that Ayn Rand herself never mentioned Schumpeter. Not only that, but very little scholarly engagement has taken place between Randians and Schumpeterians. Indeed, a search of the Journal of Ayn Rand Studies website (http://www.aynrandst.../freesearch.asp) for "Schumpeter" finds no references. Upon double-checking by going through the table of contents of every issue JARS from Volume 1, Number 1 (1999) to Volume 10, Number 1 (Fall 2008), it can be confirmed that there is not one article explicitly on Schumpeter and his concept of Entrepreneurship. Given how relatively rare heroic portrayals of Entrepreneurship are, and how markedly pronounced the similarity between the portrayals that Rand and Schumpeter made, this is at least somewhat surprising. However, given that Objectivism's engagement with economics has mostly been with Misesian Austrians, it is at least understandable that this omission exists.

Connections between Austrianism and Evolutionary Economics

As Runde (2009, line 41/42) states, Evolutionary economics is fundamentally "in the tradition of Hayek and Schumpeter." Whilst Schumpeter was not an Austrian School economist (in spite of him being from Austria, as well as being taught by the Austrians initially), Hayek most certainly was. As will be discussed later, Evolutionary economics focuses on the role of human ideas in human actions and social outcomes. Hayek regularly focused on these concerns. Quoting Caldwell ((2000) p6),"The term "cultural evolution" refers to the evolution of a tradition of learnt rules, norms, ethical precepts, and practices." These are tested empirically, for efficacy. As will be discussed later, the Potts-Dopfer framework agrees entirely with this. As Hayek (quoted in Caldwell ((2000) p8)) argued in The Constitution of Liberty (p36), "Which individuals and which groups succeed and continue to exist depends as much on the goals that they pursue, the values that govern their action, as on the tools and capacities at their command." The key point to note about Hayek's quote is that, as Dopfer and Potts ((2008) p9) argue, "The human mind is, therefore, the seat of economic evolution." In both Hayekian and Evolutionary pictures, ideas inside the mind are given the key role.

[End of Part 1. To Be Contd.]

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PART 2: SUMMARY STATEMENTS

A NOTE ABOUT CONTEXT

One of the more challenging aspects of outlining the positions of Austrian Economics, Evolutionary Economics and Objectivism is that certain alleged contradictions are immediately apparent. For example, the axioms of all three systems differ. This could potentially be cited as preventing any possible synthesis of the systems of ideas. However, this issue arises not due to actual contradictions but due to the fact that these systems of ideas deal with different contexts. Specifically, Austrian and Evolutionary economics deal with the context of analyzing social and economic phenomena. Objectivism, on the other hand, is a comprehensive philosophy. As such, the meaning of the term "axiom" in Objectivism differs from the meaning in the term as used by Austrian and Evolutionary economics. In metaphysics (or ontology), a philosophical statement is made about the nature of being, but Austrian economics and Evolutionary economics both restrict their metaphysical postulates to what Runde ((2009) lines 258-259) calls "Social Ontology" or postulates about the nature of the existence of "of phenomena whose existence depends at least in part on the existence of human actors." Thus, "metaphysics" in Objectivism refers to something else than "metaphysics" in Austrian or Evolutionary economics.This applies to epistemology as well. The epistemology of a philosophy is meant to apply to quite literally everything, whereas the epistemology of an analytical framework for social-economic phenomena only applies to gaining knowledge about those specific phenomena.

As such, throughout the proceeding summary statements, there will be frequent clarifications about context, where appropriate.

OBJECTIVISM

Objectivism is a philosophy originally founded by the novelist-philosopher Ayn Rand. When asked to summarize her own system while standing on one foot, Rand replied;

"Metaphysics: Objective Reality

Epistemology: Reason

Ethics: Self-Interest

Politics: Capitalism"

Unfortunately, this is an inadequate summary. As Dr David Kelley observes in The Contested Legacy of Ayn Rand, none of these individual points are unique to Objectivism and as a whole package it is not particularly far off from many enlightenment-era philosophers (Kelley (1990) p81). Certainly, her characterization of Objectivist epistemology as "reason" ignores the fact that many philosophers have different views of what actually constitutes reason. Immanuel Kant advocated human reason, even if he believed human reason operated in a vastly different way to how Objectivism argues it operates.

Even Rand's longer summaries of Objectivism have their problems. The only full summary of the philosophy she wrote was John Galt's speech in Atlas Shrugged, and this summary is stylistically non-academic. Additionally, it is a possibility that Rand herself hadn't fully developed her own technical philosophy at the time Atlas Shrugged was written. Finally, Rand's summary focuses disproportionately on ethics, and although this makes sense in light of the fact that Atlas Shrugged is a morality-focused novel, it does not help with regards to actually providing a clear and comprehensive summary of the philosophy.

In metaphysics, Objectivism takes a position of Aristotelian realism, i.e. that reality exists independently of consciousness. In Epistemology, Objectivism argues for Direct Realism (i.e. that we perceive the world directly with our sensory faculties) and Empirical Conceptualism (i.e. that universals are concepts which are derived from measuring empirical data). In ethics, Objectivism argues for a value-centric, teleological ethics based on rational self interest (i.e. that the good, for any agent, is that which furthers said agent's life on a level appropriate to said agent's nature). In politics, Objectivism argues that the good society is one where force, fraud and coercion are removed from human affairs (i.e. that individuals have a natural right to live free from other individuals starting the use of physical violence, fraud, or threats thereof, against them). Since the primary focus of this paper is on metaphysics and epistemology, the ethical and political doctrines of Objectivism shall not be discussed. Needless to say, a full review of the entirety of Objectivism would necessitate significant appraisal of these areas as well.

Objectivist Metaphysics

Primacy of Existence vs. Primacy of Consciousness

Metaphysics traditionally consists of two areas: ontology and cosmology. Rand, following Aristotle, avoided cosmology entirely and restricted metaphysics exclusively to ontology. Rand's ontology was fundamentally Aristotelian in nature, and based itself on the principle Rand referred to as the "Primacy of Existence." Specifically, she argued that the ontological positions of philosophies either make existence the primary, irreducible fact (i.e. "there is something" is the basic unavoidable presupposition of every single observation made (and if there was not something, there would be nothing, nothing to observe or make the observations)) or they make consciousness the primary, irreducible fact. This dichotomy is also known as realism vs. idealism (Kelley (1996)), or whether or not reality exists independently of consciousness. Rand unsurprisingly argues for metaphysical realism, or that existence exists independently of consciousness

Axioms

Rand postulates three axioms at the base of Objectivist metaphysics.

1) 'Existence': Existence exists (or reality exists independently of consciousness, "there is something")

2) 'Identity': That to be is to be something (the law of identity, "A is A," every thing that exists is something specific) (a corollary of this is that a thing is what it, not what it isn't ("A is A, A is not B"), this being the law of non-contradiction)

3) 'Consciousness': That I (the observer) exist, and I possess consciousness

Level of Axiomaticness, Postulates vs. Self-Refuting Denial vs. Logical Irreducibility

As stated before, "axiom" means something different in Objectivist metaphysics than it does when discussing, for example, Mises's Axiom of Human Action. Indeed, Objectivism, Austrian Economics and the Dopfer-Potts evolutionary economic framework all have different definitions of "axiom." Dopfer and Potts define "axiom" as a "statement unquestioned during analysis" (Dopfer, Potts (2008) glossary), whereas many Austrians rely on the "self-refuting-denial test" for axiomaticness (i.e. something is axiomatic when it is impossible to deny without assuming it in the first place). However, Objectivism uses a narrower meaning; specifically an axiom is a logically irreducible concept that underlies every possible claim to knowledge. Hence, axioms are impossible to prove deductively; any deduction assumes the axioms. However, denial of these axioms is equally impossible. For instance, if one denies the existence of existence (i.e. of any thing at all), one has had to assume the existence of the proposition to deny, as well as the subject to deny the proposition. Further, these axioms are validated (even if not technically proven) by empirical evidence: whilst one obviously perceives something (Existence and Consciousness), every thing one perceives has a specific nature. One does not perceive things that are all red and all green at the same time. The axioms of Objectivism cannot be further reduced logically: they are the facts that all other facts presuppose. Any claim about "what is" presupposes that there is something (existence), something specific can be said about what is (identity), and that a knower exists and possesses the faculty required to be able to know (consciousness).

As Ray ((1998) ch. 3) elaborates, "An axiomatic concept identifies a self-evident, undeniable fact, present in every act of awareness, upon which all further knowledge depends. For example, existence is such a primary fact. Without awareness of the fact of existence, no knowledge would be possible. I need not show you existence; you already know it. To "prove" that I am right about this fact of existence would be to assume the fact: even if I point, I assume that there is something to point to, that there is someone to see me, and that you know what I mean. To deny the fact of existence again requires affirming it: the one who denies exists. Hence, EXISTENCE is an axiomatic concept."

"Consciousness is a self-evident, primary fact in this sense as well: you are aware of being aware. Consciousness is present in all knowledge--and in all acts of denial. Thus CONSCIOUSNESS is an axiomatic concept."

"Identity is another primary fact. I cannot observe that there are existents, without observing that they exist in some manner, that they are what they are, and are never other than they are. All proofs ultimately rest on this fact of identity, so it is not possible to prove it or deny it. So we see that IDENTITY is an axiomatic concept as well."

Objectivist Epistemology

Perception

The most detailed account of the Objectivist theory of perception is David Kelley's "The Evidence of the Senses" (1986). A full presentation of the Objectivist theory is beyond the scope of this paper; however it can be summarized as a form of direct realism. Direct realism is the theory that we perceive the external world directly, or objects themselves. This contrasts with representational or indirect realism, which states that what we perceive are our own consciousness's internal representations of an external reality, i.e. we perceive a mental representation of the external world. This view, which "arose from the fact that the appearance of an object is partly dependent on the nature and operations of our sensory systems," (Kelley (1996)) was expounded by (among others) Descartes and Kant.

　

Whilst Objectivism endorses direct realism, its theory of direct realism explicitly states that our perceptual faculties operate using a specific means. Whilst we do perceive things in themselves, we perceive them as they appear to a perceiver with our specific faculties. However, we do perceive the things themselves, not merely an internal representation thereof. Thus, fundamentally speaking, "Objectivism subscribes to the thesis of empiricism: that sense perception is our basic form of contact with reality, and that all knowledge rests on perceptual evidence" (Kelley (1996)).

The Problem of Universals, Critical Importance Thereof to Understanding Objectivism

The centerpiece of Objectivist Epistemology (as presented in Rand's Introduction to Objectivist Epistemology) is a solution to the Problem of Universals. The Problem of Universals is a very old problem, indeed it arose out of theological discussions of the Holy Trinity (Saint-Andre (2002)). It must be stressed that Rand's solution to the Problem of Universals is critical to understanding Objectivist epistemology (as well as ethics, but that is beyond the scope of this paper). The Problem of Universals is basically the problem of why we categorize specific things into groups. For example, there is a bird outside one's window. In virtue of what do we categorize it as a bird? This bird obviously is not identical to every other bird one has seen, so in virtue of what do we put things that are non-identical into the same category? Two of the most well-known answers to this problem are Platonic (or Transcendent) Realism and Aristotelian (or Moderate) Realism. Both of them allege that there is a consciousness-independent thing called a Universal which is responsible for our categorization of slightly different concrete particulars into the same category. The Platonic answer states that this Universal exists separately from the concrete particular; indeed the Universal exists in a transcendent realm of perfection as a Platonic Form and we categorize the particular because we recognize the particular as "participating in the form of" the relevant form. The Aristotelian answer states that the Universal exists inside the relevant particular, as an "essence" (continuing from the previous example, we categorize the bird as a bird because all birds, whilst individually different, have an identical 'essence of birdness' within them). Unfortunately, these "realist" theories of Universals are often labeled "epistemological objectivism," which gives the misleading impression that Rand's solution to the Problem of Universals was Realist (usually Rand is presumed to be an Aristotelian Realist owing to her acceptance of Aristotle's metaphysics and logic), when in fact, she was something else.

Realism ('intrinsicism') vs. Conceptualism ('objectivism') vs. Nominalism ('subjectivism')

The two "realist" theories of Universals can be contrasted against two other theories of Universals, specifically Nominalism and Conceptualism. Whereas the realist theories argue that Universals exist in a mind-independent manner, Nominalism and Conceptualism both deny this. Instead, they both argue for the hypothesis of "particularism," being the position that only concrete particulars exist. Rand explicitly accepts this position in Introduction to Objectivist Epistemology (Rand (1990) p1).

If only concrete particulars exist, then why do we put these particulars into the categories we put them in? Nominalism argues that there is no reason for this categorization that is related to that-which-is-categorized. We put things a, b, c, d into category e not because of any metaphysically real sameness between a, b, c, or d, but for reasons unrelated to the properties of a, b, c or d. The objects don't reflect the same Platonic Form, nor do they have an identical 'essence-of-something-ness' within them. Indeed, if extreme Nominalism is true, then our categories for things are just words, or as Roscelin called it, "the blowing of the voice" (Saint-Andre (2002)).

One of Rand's most prominent traits as a philosopher was her ability to perceive a false dichotomy (Kelley (1990) p53), and this is precisely what she considered Realism (Aristotelian or Platonic) vs. Nominalism. Instead, she accepted a Conceptualist position. Conceptualism is the position that "the things named by general terms" are "mind-dependent abstractions" (Ray (1998) ch.3).Whilst Rand disputed she was a Conceptualist in Introduction to Objectivist Epistemology, Saint-Andre (2002) argues this is due to her mischaracterization of Conceptualism as a species of 'subjectivism.'

Of course, if our abstractions are "mind-dependent" then that does raise a legitimate concern that our abstractions are indeed arbitrary. Objectivism, however, argues that a (properly formed) abstraction is not arbitrary, and that although it is built within our consciousness, it is not unrelated to reality either. Indeed, as Saint-Andre argues, "both existence and consciousness contribute to the process of concept-formation: reality contributes the particular entities and their features, while human cognition contributes the abstractions that unite those entities and features into universal concepts" (Saint-Andre (2002)).

Rand's own work unfortunately used idiosyncratic terminology to describe her theory of universals, but the overall pattern identified by Saint-Andre holds true: Objectivism argues that both existence and consciousness contribute to concept-formation, whereas Realism and Nominalism focus exclusively on one of these and ignore the other. Realism believes that Universals exist mind-independently and are just intuitively or automatically grasped by perceivers (removing the role of human consciousness), and Nominalism believes that Universals exist reality-independently because they are just names assigned for reasons unrelated to the objects that the names are assigned to.

Bissell (2003) outlines the pattern in Objectivism's own terms; the "IOS trichotomy." Intrinsicism, the 'I' in 'IOS,' is the Objectivist term for what most contemporary philosophers call "epistemic realism" or "epistemic objectivism," specifically the theory that Universals exist outside the human consciousness and our consciousness grasps them in a passive way ("adherence to external objects, by means of a passive gaze" (Bissell (2003) p3)). Platonic and Aristotelian Realism both fit into this category. Subjectivism, the 'S,' is the theory that Universals exist inside the human consciousness but are not connected to reality, their application to certain groups of concretes not being due to anything about the concretes themselves ("an act of consciousness apart from its holding as its object an aspect of existence" (Bissell (2003) p5)). Nominalism fits into this category. Objectivism, the 'O,' refers to interaction between reality and consciousness, a consciousness actively processing empirical data, objects in reality being held as objects of a subject's consciousness. Ray (1998) emphasizes the active role of the consciousness in forming a concept: "although individuals are experienced as being some way--as "this-such"--they are not experienced as individuals of a sort until the conscious subject sorts them by abstraction and integration; in other words, concept formation is always an active, if sometimes automated, process" (Ray (1998) ch.3). Bissell (2003) characterizes the Objectivist meaning of "objective" as "an aspect of existence insofar as it is held as the object of an act of consciousness and/or an act of consciousness insofar as it holds as its object an aspect of existence" (Bissell (2003) p6). Conceptualism, manifestly, fits here. "Rand's views on the problem of universals are properly classified as a form of conceptualism" (Saint-Andre (2002)).

Whilst Objectivist epistemology contains a technical theory about the exact process of concept formation (i.e. how a consciousness must form a valid abstraction (and note, that the consciousness must act in a specific way, using a specific method), the explicit details of this theory are beyond the scope of this essay and as such it will be simplified. A full exposition of this theory can be found in Kelley's (1984) "A Theory of Abstraction." In essence, the theory argues that abstracting a concept involves two primary processes: integration (observing how the object of consciousness is similar to certain others) and differentiation (observing how the same object is different from others). Particulars are measured along certain dimensions, for example their color and shape, and 'clusters' of relative similarity (in the face of relative difference) are noticed. As an example, particulars A, B, and C are very similar to each other in color, relative to the degree of difference between A, B, or C versus particulars X, Y, and Z. In short, A, B and C are much more like each other (according to our sensory apparatus) than they are like X, Y or Z. The subject then ignores the relatively small level of difference between A, B and C (Rand refers to this process as "measurement omission" (Rand (1990) p13)) in the face of the relatively large level of differentiation between A, B and C versus X, Y and Z, grouping A, B and C into a single mental unit. This is, of course, a simplification, and Kelley's paper should be read for a full treatment.

The Deductive Applicability of Concepts

What is vital for any possible Objectivist-based Evolutionary-Austrian framework is the deductive applicability of concepts. As explained in the later parts of this paper both Austrian economics and Evolutionary economics use logical deductivism when dealing with social-economic phenomena. If Objectivist epistemology dismisses logical deductivism then no synthesis can occur. Thankfully, Objectivism does accept the validity of logical deduction, within certain constraints. As Vacker says ((1999) p136), "For Rand, knowledge begins with concrete particulars, grasped inductively through the senses, from which nonlinear mental abstractions are derived inductively and integrated into cognitive units retained as concepts, themselves applied to reality deductively" (emphasis mine).

However, there are empirical constraints applied to deduction. The constraint is that concepts must be kept within their context. A concept, as stated before, is grounded in empirical measurements. To apply it outside of the context within which it was abstracted is fallacious. For instance, the concept "orphan" developed within the context of human families to refer to children whose parents were dead. But the concept of orphan would not be applicable to a species that did not reproduce via sexual reproduction. An organism that belongs to a species that reproduces via mitosis, for instance, cannot be claimed to have parents, nor children (the entity itself divides into new entities; it does not remain a separate entity during the process of reproduction). Therefore, to categorize a member of a species that reproduces via mitosis as an "orphan" (or "parent," for that matter) is to ignore the facts of reality that originally gave rise to the concept. Rand calls this fallacy "context-dropping."

The second empirical constraint on deduction is that concepts applied to reality deductively must be properly formed. Whilst a comprehensive treatment of concept formation is, as stated earlier, outside the scope of this paper, one specific error of concept formation does warrant attention. As stated before a (valid) concept must be abstracted from empirical concretes (or other concepts that themselves are abstracted from (concepts that are themselves abstracted from...) empirical concretes). A concept without an eventual connection back to empirical reality is ultimately a concept with no referent and thus invalid. Rand's term for this fallacy was a "floating abstraction."

Objectivist Metaphysics and Epistemology: A Summary

Whilst this paper cannot reasonably claim that the following is a definitive summary of the metaphysical and epistemological propositions of Objectivism, the following summary certainly expands on Rand's own summary as well as clearly distinguishes the Objectivist positions from its alternatives. Nor is this summary meant to imply that Objectivist epistemology is complete (indeed, Kelley ((1990) p76) identifies several areas where it is not).

In metaphysics, Objectivism argues for Aristotelian Realism (or Primacy of Reality) and denies Idealism (or Primacy of Consciousness). Objectivism postulates three axiomatic facts that all people are undeniably aware of, all of which being logically irreducible.

1) Existence exists ('there is something')

2) An existent is what it is, not what it is not ('A is A, A is not B')

3) The subject exists, possessing consciousness

Aristotelian logic is an implication of Axiom 2.

In epistemology, Objectivism argues the following:

1) The subject perceives reality directly, through a specific means. The subject does not perceive an internal representation of reality.

2) The subject perceives only concrete particulars. Universals do not exist in a metaphysically objective sense.

3) Through a process of integration and differentiation, the subject measures the empirical world around themself, forming abstract concepts which (assuming these concepts were formed using the correct methodology) are epistemologically valid within their context. They are not just names.

4) If a concept is validly formed and kept within its context, it can be applied to reality deductively. Assuming the laws of logic are followed, then the deduction should result in contextually-valid knowledge.

[To Be Continued]

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AUSTRIAN ECONOMICS

Austrian Economics is a school of economic thought originally founded by Carl Menger. Menger, one of the key instigators of the so-called 'marginalist revolution' in economics (Littlechild (1978) p16), strongly defended the validity of theoretical analysis within social sciences. At the time he was writing, the Prussian Historical School of economics argued that it was impossible to derive universally-applicable laws as to how societies operated, and thus theoretical analysis was impossible. Menger, "realizing that the German economists rejected not only his own theory but all theoretical economics, Menger (in Joseph A. Schumpeter's words) "took up the battle to establish the rightful place of theoretical analysis in social matters""

Again, a note on context is prudent. Unlike Objectivism, but like Evolutionary Economics, Austrian Economics is a framework for the analysis of social-economic phenomena. As such, the metaphysics, axioms and epistemology of Austrian Economics are not focused on the whole of reality in general but rather on human beings and the social world. As such, the ontology of Austrian economics is a "Social Ontology" (Runde 2009), and whereas the primary question of epistemology is "how can I know X?," the primary question of Austrian Epistemology is "how can I know X about social-economic phenomena?"

Deductivist Methodology

Ever since Menger, Austrian economists have been known for their emphasis on theoretical economics. This characteristic, as stated in this paper's introduction, has often resulted in Austrian economics being considered unempirical in nature. The prominent Austrian economist Ludwig von Mises was, epistemologically, a neo-Kantian rationalist who believed that all correct economic theory was aprioristically deduced. This is obviously evidence in favor of characterizing Austrian economics as unempirical. However, Ludwig von Mises was the only epistemological rationalist within the Austrian school. Whilst all Austrians accept the validity of deductive logic in the application of economic first principles, they do differ in how they establish and defend these first principles. Ludwig von Mises "denied the possibility of arriving at laws by induction and defended the possibility of a purely a priori system of economic theory which he labeled "praxeology" (White (1988), ch 4), but Menger, on the other hand, "establishes a methodological dualism in theory by combining inductive and deductive reasoning" (Engelhard et. al (1996) p271). In short, Mises' defense is purely rationalistic, whereas Menger defends his first principles empirically. Menger's tradition of empirically defending first principles was continued by both Eugen von Bohm-Bawerk and Frederich von Weiser; the former of who argued (in White, ch 3) that deduction from empirical facts was empirical rather than rationalistic. "Böhm-Bawerk, while defending the possibility and worth of theory, concedes that it must be firmly based on empirical observation. He denies that the Austrians' "so-called abstract-deductive method" is unempirical, "spinning abstract conclusions without concern as to their empirical reality," claiming instead that it is "in its very essence a genuinely empirical method." He denies that it confines itself to inferences and deductions from a priori axioms, claiming instead that it starts "with observation of actual conditions and endeavors from this empirical material to derive general laws" (White (1988), ch 3).

Social Ontology

Whilst the aforementioned methodological deductivism is certainly one significant characteristic of Austrian economics, it is by no means the only one. Social-economic analytical frameworks are essentially sets of statements about the kind of entities that social systems are composed of and how they act and interact. According to Austrian economics, what entities make up Social-economic systems? Austrians answer: "individual human beings," or "subjects." As White argues, "What unifies this school of thought? What might be called its theme? It’s the methodological outlook of its members: subjectivism. The subjective approach to economic phenomena builds economic analysis upon the insight that every individual chooses and acts purposively, i.e. in pursuit of his purposes and in accordance with his perception of his options for achieving them" (White (1988), ch 1).

The only systematic axiomaticization of this approach was conducted (and "most consistently [been] carried out" (Littlechild (1978) p21)) by Ludwig von Mises, who argued (on a rationalist basis) that the fundamental axiom of social-economic analysis was what he referred to as the Axiom of Human Action, or the fact that individuals act in a teleological manner, "aiming at ends and goals" (Mises ("Human Action" 1949) p11). Indeed, some Austrians, such as the American Misesian Anarcho-Capitalist theorist Murray Rothbard, go so far as to argue "that the correct Austrian paradigm is and can only be the Misesian" (Rothbard (1992)).

　

Austrian School Economist Peter Bottke (2008), writing an article for the Library of Economics and Liberty, summarizes the Austrian approach with nine propositions. The propositions which are relevant to the "Social Ontology" of economic analysis are propositions one and three. Quoting Bottke (2008):

"Proposition 1: Only individuals choose. Man, with his purposes and plans, is the beginning of all economic analysis. Only individuals make choices; collective entities do not choose."

This statement incorporates both Misesian praxeology ("with his purposes and plans") as well as methodological individualism ("Only individuals make choices; collective entities do not choose" (given that Praxeology is based on the axiom that "individuals act" it can be argued that Praxeology is explicitly methodologically individualistic, but Bottke's formulation makes this clearer)).

"Proposition 3: The "facts" of the social sciences are what people believe and think. Unlike the physical sciences, the human sciences begin with the purposes and plans of individuals... The meaning that individuals place on things, practices, places, and people determines how they will orient themselves in making decisions."

This statement again incorporates Misesian praxeology ("purposes and plans of individuals"), but it also implies economic subjectivism by mentioning "the meaning that individuals place on things." This would include valuing things, hence leading to subjective theories of demand (which in turn would lead to subjective theories of supply (insofar as much that the opportunity cost of something is determined by its alternative uses which are themselves subjectively valued)).

Stephen Littlechild's (1978) pamphlet "The Fallacy of the Mixed Economy" also contains a summary of the key Austrian positions on social ontology. Littlechild points back to Menger as embodying the distinctive Austrian positions of Methodological Individualism and Economic Subjectivism. Methodological Individualism was referred to by Menger as the "atomistic method" (1978 p22), and Menger's economic subjectivism is obvious in how he was one of the co-initiators of the marginalist revolution (along with Walras and Jevons) (1978 p20).

Thus, a brief summary of Austrian social ontology and epistemology could be formulated as "logical deduction from the principles of economic subjectivism and methodological individualism," or simply "the consistent recognition of the fact that individual human beings (not collectives thereof) act purposefully in accordance with what they value, think and expect."

Austrian Macro-Phenomena

Although not part of social ontology or methodology, Austrian economics is noted for its emphasis on the fact that not all social phenomena are the products of intentional human creation. For instance, no one deliberately sets out to create a recession. Whilst Austrian economics does allege that all macro-level phenomena can ultimately be explained as caused by the purposeful actions of individuals, it does not allege that macro-level phenomena are created intentionally. Languages are an example of this: no one consciousness ever crafted an entire language that proceeded to be widely adopted and the widely adopted languages in use today are not static either. English, for instance, continually adopts new words. In a manner identical to Smith's Invisible Hand effect, people's purposeful actions often have unintended yet beneficial consequences. Littlechild (1978) quotes Menger on the subject: "the phenomena of markets, of competition, of money, and numerous other social structures are already met within epochs of history where we cannot properly speak of a purposeful activity of the community, as such, directed at establishing them... How can it be that institutions which serve the common welfare and are extremely significant for its development come into being without a common will directed towards establishing them?" (p20, 21).

Menger's empirical observation of the existence of these emergent, spontaneous macro-phenomena inaugurated a research project that was carried out most fully by Frederich von Hayek. The influence of Hayek's work on this subject has impacted both mainstream and heterodox economic thought, and thus an emphasis on organic or emergent social-economic phenomena is often considered an essential component of Austrian economics (even if it is not a part of social ontology or methodology per se). Littlechild (1978) considers it the third core idea of Austrian economics, alongside methodological individualism and economic subjectivism (p21). Bottke's (2008) statement of the Austrian approach to economic science incorporates a focus on these organic, emergent social institutions in its tenth proposition. "Proposition 10: Social institutions often are the result of human action, but not of human design."

Whilst an exhaustive treatment of Hayek's characterization of spontaneous orders is far beyond the scope of this paper, a brief summary of their nature and function is prudent. Put simply, Hayek argued that these unplanned, undesigned social institutions are effectively networks of knowledge generation and transmission. As Horwitz (2000) argues, "For Hayek, social coordination processes and the institutions that comprise them are ultimately about the communication and use of knowledge" ((2000) p27).The roots of this view are firmly based in the economic calculation debate and Hayek's argument that the tastes and preferences and desires of an economy are dispersed, tacit information that can only be transmitted by a price system. Human actions take place within an institutional context, and social institutions have epistemic properties. In the case of economic calculation, "it is the undesigned and unintended institutions of the marketplace that make it possible for individuals to engage in rational planning at the micro level. What makes it possible for a firm to make decisions about what to produce and how to produce it is the fact that there is an array of money prices determined in the marketplace that can guide those choices. It is that array of prices, itself the result of prior human action, that provides information about the success of those prior actions, the possible success of alternate future courses of action, and the possibility of undertaking new actions not previously considered" (Horwitz (2004) p309). Thus, a firm requires a market price system in order to perform rational assessments of the economic costs and benefits of different methods and levels of production, and in making these assessments the firm contributes to the development of the market price system. The price system generates and transmits knowledge that individuals act upon, and (as Bottke (2002) states) "without the market process to generate it, the relevant knowledge would not exist." Bottke (2002) also argues for the fundamentality of this position to Austrian economics (a position restated in Bottke (2008)), "Austrians want to emphasize not just the proficient use of existing information, but the discovery and use of new knowledge that comes into being only because of the context in which actors find themselves acting"((2002) p267).

Dehomogenization and Hayek as an Enemy of Reason?

Unfortunately for the project of this paper, Hayek's focus on spontaneous order at the macro level, as well as the unintended products of human action, resulted in criticism from both Murray Rothbard and Ayn Rand. Rothbard, as well as some of the academics he has influenced (such as Hans-Herman Hoppe and Joseph Salerno) have argued that his work is fundamentally incompatible with Misesian Praxeology. If this charge is correct, then two essential features of Austrian economics (purposeful human action and spontaneous, undesigned order) are contradictory to one another. The Rothbardians have also argued that Hayek's work on the economic calculation problem is fundamentally different to Mises's argument, and that the two arguments need to be "dehomogenized." But it is the final charge that is the most extreme, and most threatening to any possible synthesis of Austrian and Evolutionary economics with Objectivism: both Rand and Rothbard alleged that Hayek's work on spontaneous orders is an attack on human reason. These charges will be dealt with in succession.

First, Hayek has been charged with ignoring Misesian praxeology and ignoring the place of intentional human action. As quoted in Horwitz ((2004) p308-309), the Misesian scholar Hans-Herman Hoppe has accused Hayek's "spontaneous order" of alleging that "people perform "a spontaneous action without knowing why and for what purpose" and that others imitate the process "again without any motive or reason" (Hoppe 1994:139)." Rothbard (1992) argues that Hayek did not believe humans could act purposefully (in an intelligent way) and thus all they could do was "learn to accept the "evolved" rules" which Hayek, according to Rothbard, "wishes us to worship and follow blindly lest we perish." These are, to say the least, very strong claims, and they have been contested by numerous Austrians. For instance, Horwitz ((2004) p308-309), whilst conceding that although "he was prone to under-emphasizing it [intentional, teleological individual action] at times" (square brackets mine), argues that Hayek never abandoned praxeological first principles, quoting a section from the 1976 edition of Hayek's The Road to Serfdom demonstrating that "clearly, as late as the mid 1970s, Hayek was endorsing this view of rational action, intentionality, and individual planning" ('this view' referring to the Misesian view).

Additionally, Rothbard appears to believe that there is an inherent contradiction between intentional, teleological behavior and rule-following behavior. What about the possibility that following an evolved convention that has stood the test of time could be a means to an end? What about the possibility that the reason said convention has in fact stood the test of time is because, for the majority of people, it has proven to be an effective means to their ends? Whilst Rothbard argues that acting on the basis of human reason can void the need for the rule, perhaps there are situations where working things out from first principles is slower than following an established convention?For example, the task of "killing someone" can be achieved by following the rule of "shoot them in the head at close range." The subject does not need to start with the first principles of human biology, noting the brain as the center of coordinating biological functions, then working out that severing the brain stem is the most efficient way of killing someone etc. Implementing the rule has worked before with more than sufficient reliability and as such the subject doesn't have to spend all that mental effort at making deductions from the facts of basic biology.

The second allegation refers to Hayek's contribution to the economic calculation debate. According to Rothbard (1992), Hayek was obsessed with the problem of knowledge and that Mises in fact was "arguing a totally different point." What Mises was allegedly arguing was that even if the socialist planning board had perfect knowledge, it still could not calculate the most economically efficient uses for the means of production. This characterization of Mises's position is disputed by both Horwitz (2004) and Yeager (1994). Indeed, Yeager argues that "such a reading of Mises' arguments would charictature and trivialize them"((1994) p94). Yeager argues that Mises focus on economic calculation, rather than simply arithmetic calculation, implies (owing to economic subjectivism) that Mises was inevitably assuming the subjective nature of all the prices involved, and hence the individual attitudes and tastes that went into computing these prices. "Was Mises conceding that information might conceivably somehow be made available to a central planning board in complete and utter detail, including all the quantities and supply functions in actual or even potential use, and all utility functions of all persons?... Does his whole argument boil down to a contention about arithmetic? No, of course not"((1994) p97-98). If the subjective, tacit information of individual preferences was not implicitly assumed in Mises, then Mises would not have insisted on genuine market prices. As Yeager personally testifies, "I always understood Hayek to be elaborating on ideas that were clearly implicit if not always totally explicit in Mises's work" ((1994) p103). As Horwitz (2004) concludes, the dehomogenizers, "In their zeal to demonstrate the superiority of the Misesian vision over the Hayekian, they ignore what seems to be the obvious relationship between those microfoundations and Hayek’s vision of the social order. That is, they ignore that the outcome of the use of economic calculation by individual entrepreneurial actors and by firms and households is precisely the "use of knowledge in society" that characterizes the Hayekian spontaneous market order"((2004) p308).

The final, and most extreme charge leveled against Hayek, is that of irrationalism. Both Rand and Rothbard made this charge. In Rand's case, she regarded him as one of capitalism’s "compromisers" (Rand 1995a, 299); she told the individualist writer Rose Wilder Lane that Hayek was "an example of our most pernicious enemy . . . real poison" (Sechrest, Sciabarra (2005) p243). Rothbard (1992) alleged that "At the core of the constellation of crucial differences between the Misesian and Hayekian paradigms is their respective attitudes toward human reason...Hayek’s entire work... is devoted to a denigration of human reason." This seems to be a strawman based upon Hayek's belief in the cognitive limitations of the human mind. As Horwitz ((2000) p27) argues, "The limits of explicit human knowledge form the basis for Hayek’s economic and social thought." But does this mean Hayek denigrated human reason? Indeed, apparently all Hayek was alleging was that it has limits and is fallible. Bottke's (2002) statement that Hayek argued for the contextuality of knowledge is telling, since the contextuality of knowledge is a position Rand endorsed. Additionally, Hayek never doubted the importance of the human mind and ideas in human existence. Quoting Caldwell (2000), "As Hayek writes in "The Constitution of Liberty" (p36), "Which individuals and which groups succeed and continue to exist depends as much on the goals that they pursue, the values that govern their action, as on the tools and capacities at their command."" This is telling given that Rand argued that moral principles were a survival need (see Rand (1964)). It seems that ultimately, hostility towards Hayek on the grounds of 'irrationalism' was at least in part based on misinterpretation.

Kirzner's Argument to Reisman

As previously stated, George Reisman's proposed synthesis of Austrian economics, Classical economics and Objectivism is a parallel project of that of this paper. Some Austrians such as Kirzner ((1999) p81) believe that Reisman abandoned several essential principles of Austrian economics (such as economic subjectivism) in favor of an objective ("intrinsic" in Rand's terminology) concept of economic value. By this, it is meant that Reisman allegedly believes 'economic value' is a mind-independent 'stuff' that exists inside objects, and that this 'stuff' is what imparts exchange value to an object. In short, Kirzner argues Reisman has accepted a Moderate Realist theory of Universals, at least with respect to the Universal of "exchange value." Tabarrok's (1997) review is more positive than Kirzner's, arguing that Reisman has actually misinterpreted neoclassical price theory. Since Reisman does concede that supply is "determined in general equilibrium by competing demands" (1997) p124), Tabarrok argues that ultimately Reisman accepts subjective cost theory (i.e. opportunity costs). Tabarrok suspects that Reisman is "trying to banish subjective and unobservable elements like opportunity costs" ((1997) p125) from his vocabulary even when using the same concepts, if under different labels.

Kirzner argues that "It is, one is led to suspect, the 'objectivist' influence of Ayn Rand which has set Reisman on his path as a dedicated disciple of the classical economists" ((1999) p82)in the sense of having an objective theory of economic value. Kirzner as such implies that Randian philosophy results in a rejection of an essential pillar of Austrian economics. This is a serious charge for both this paper's project as well as Reisman's.

In order to support his charge, Kirzner quotes a section of Reisman's Capitalism saying "activities which can be proven to be inherently destructive of human life, such as, presumably, the manufacture and sale of narcotics, are not to be classified as productive" (Reisman (1996) p.443). This quote raises a number of concerns from an Objectivist perspective as well, since Reisman indeed does, in this quote at least, seem to be subscribing to an intrinsicist theory of economic value, at least with regards to narcotics. However, Objectivism does not support an intrinsicist theory of economic value, since Objectivism does not support intrinsicism. Narcotics, like any commodity, can be used in ways which are destructive of human life or constructive of it. For instance, someone can drown in water; however water is essential to human life. Similarly, someone can overdose on cocaine, however cocaine is also a topical anesthetic and can be used recreationally in a safe manner, and thus the production of it is not inherently destructive to human life. Whilst this appears to be a rebuttal of Reisman's example, it illustrates the fact that it is very difficult to claim any activity within the economic sphere is inherently destructive of human life.

Secondly, Tabarrok's review argues Reisman does in fact accept economic subjectivism even if Reisman doesn't explicitly acknowledge it. A possible reason for this is fear of using what is, to Objectivists, a 'dirty word,' even if (as Tabarrok (2007) emphasizes in footnote 13, page 126) "there is no contradiction between objective value theory in ethics and subjective value in economics. The two theories deal with entirely different questions."

Additionally, a further analysis of the quoted section of Reisman (quoted in Kirzner (1999)) shows that Reisman may not be advocating intrinsic theories of economic value at all. Reisman states that "activities which can be proven to be inherently destructive of human life...are not to be classified as productive" (emphasis mine). Reisman is making not an essentialist argument (i.e. alleging that the activity is in and of itself not productive) but rather a conceptualist one. He is saying that economists should not file these destructive activities under the category "production," and he further argues that the concept of "productive" arises from a value judgement based upon the furthering of human life. As Reisman (quoted in Kirzner (1999)) argues on p443 of Capitalism, "The concept of productive activity ultimately rests on the promotion of life and well-being."

Whilst this economist (and Objectivist) would argue that the concept of economic value arises from the empirical fact of scarcity (and as such the intellectual legitimacy of the standards upon which individuals evaluate something as desirable are not relevant to economics), the point is that Objectivist moral value theory does not necessitate an abandonment of economic subjectivism. Whilst Kirzner is understandably worried about the possibility that Reisman may have abandoned economic subjectivism on the basis of Objectivist ethics, it is by no means clear that Reisman has done so, and additionally there is no inherent contradiction between Objectivist moral value theory and subjective theories of economic value.

Austrian Economics, a Summary

With the above in mind, a list of essential characteristics about Austrian economic analysis can be proposed.

1) Logical Deductivism: social-economic analysis requires deduction from first principles.

2) Economic Subjectivism/Methodological Individualism: the individual subject is the center of social-economic analysis.

3) Misesian Praxeology: individuals act purposefully, aiming at ends.

4) Emergent Order: macro-level social order emerges unintentionally from micro-level purposeful behavior.

This is by no means a comprehensive exposition, but these four characteristics are manifestly essential to the Austrian School's distinctive approach to social-economic analysis and for the purposes of this paper, these four traits will be considered a sufficient summary.

[To Be Continued]

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Note: Yes, I know you typically put the reference list at the end, but I'm putting it here since pasting the whole thesis will take a while and some people might want to check out the references before I've posted the whole lot up. -A

REFERENCES

Backhouse, R (2000), Austrian Economics and the Mainstream: View From the Boundary, Quarterly Journal of Austrian Economics (2000), 3: 2, 31-43

Bissell (2003), Mind and Will as Objective Phenomena, Delivered at The Objectivist Center's advanced seminar (2003), Electronically published at http://www.objectivi...MindandWill.pdf , accessed 11th June 2009

Bottke, P (2008), Austrian School of Economics, The Concise Encyclopedia of Economics. David R. Henderson, ed. Liberty Fund, Inc. Library of Economics and Liberty, available from http://www.econlib.c...fEconomics.html, accessed 13 June 2009

Bottke, P (2002), Information and Knowledge: Austrian Economics in Search of its Uniqueness, The Review of Austrian Economics (2002), 15:4, 263–274

Caldwell, B (2000), The Emergence of Hayek's Ideas on Cultural Evolution, Review of Austrian Economics (2000), 13: 5–22

Dopfer, K. and J. Potts (2008), The General Theory of Economic Evolution, London: Routledge.

Engelhard, Fehl, Geue (1996) Praxeology as a Semi-Formal Science, Cultural Dynamics 8(3): 271-293

Horwitz (2004), Monetary Calculation and the Unintended Extended Order: The Misesian Microfoundations of the Hayekian Great Society, The Review of Austrian Economics (2004), 17:4, 307–321

Horwitz (2000), From The Sensory Order to the Liberal Order: Hayek's Non-Rationalist Liberalism, Review of Austrian Economics (2000), 13: 23–40

Kelley, D (1996), Foundations Study Guide, Epistemology, Electronically published by The Objectivist Center, http://www.objectivi...etaphysics.aspx, accessed 13th June 2009

Kelley, D (1990), The Contested Legacy of Ayn Rand; Truth and Toleration in Objectivism, Poughkeepsie: The Objectivist Center

Kelley, D (1986), The Evidence of the Senses, Poughkeepsie: The Objectivist Center

Kelley, D (1984), A Theory of Abstraction, Cognition and Brain Theory, Summer/Fall (1984), 7(3, 4) 329-357

Kirzner, I (1999), Report on a Treatise, Review of Austrian Economics (1999), 12: 81–94

Littlechild, B (1978), The Fallacy of the Mixed Economy, London: The Institute for Economic Affairs

Mises, L (1949) Human Action, Electronically published by the Ludwig von Mises Institute at http://www.mises.org/humanaction.asp, accessed 8th June 2009

Rand, A (1990), Introduction to Objectivist Epistemology, Second Edition, New York: Meridian.

Rand, A (1967), Capitalism: The Unknown Ideal, New York: Signet

Rand, A (1964), The Virtue of Selfishness, New York: Signet

Ray, C (1998), Identity and Universals: a Conceptualist Approach, Electronically published by Enlightenment, http://enlightenment...arolynray/diss/, accessed 10th June 2009

Reisman, G (1996), Capitalism: a Treatise on Economics, Ottawa, Illinois: Jameson Books

Rothbard, M (1992) The Present State of Austrian Economics, Delivered at the Ludwig von Mises Institute's Tenth Anniversary Scholar's Conference. Reprinted in Journal des Economistes et des Etudes Humaines (1995), Vol. 6 No. 1, pp. 43-89

Runde, J (2009), Ontology and the foundations of evolutionary economic theory: on Dopfer and Potts’ General Theory of Economic Evolution, Journal of Institutional Economics (2009), 5: 3, 361–378

Saint-Andre (2002), Conceptualism in Abelard and Rand, Journal of Ayn Rand Studies, Volume 4, Number 1 (Fall 2002), pp. 123-140, published online at http://me.stpeter.im...ys/abelard.html, accessed 12th June 2009

Schumpeter, Joseph A. (1942), Capitalism, Socialism and Democracy. New York: Harper and Row. (Reprint, 1950)

Sciabarra, Sechrest (2005), Ayn Rand Among the Austrians, The Journal of Ayn Rand Studies 6, no. 2 (Spring 2005): 241–50.

Tabarrok, A (1997), Book Reviews, Review of Austrian Economics (1997) 10, no. 2: 115-131

Vacker, B (1999), Skyscrapers, Supermodels and Strange Attractors, Feminist Interpretations of Ayn Rand (1999) 115-156, Pennsylvania State University Press

White, L (1988) The Methodology of the Austrian School Economists, Electronically published by the Ludwig von Mises Institute at http://www.mises.org/mofase.asp, accessed 9th June 2009

Yeager, L (1994), Mises and Hayek on Calculation and Knowledge, The Review of Austrian Economics (1994), 7:2 pp. 93-109

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EVOLUTIONARY ECONOMICS

The Dopfer-Potts Evolutionary framework is the newest of the three schools of thought under discussion. As Dopfer and Potts (2008) argue, growing frustration with modelling an economy as if it were a machine has resulted in a wide range of alternative metaphors to describe an economic system, but all of them share one goal in common. Whereas traditional neoclassical models of economic growth focus on change in Gross Domestic Product (i.e. they focus on quantitatively measuring how much is produced within an economy), these conventional models do not explain (within themselves) changes in what an economy produces and how an economy produces what it does. For example, a hypothetical economy may produce one billion US Dollars of wheat (and nothing else) one year, then suddenly change to producing one billion US Dollars of plasma televisions (and nothing else). The Gross Domestic Product of this economy has not changed, but manifestly the economy itself has greatly changed: workers are being employed in completely different industries; new capital is employed to produce the new goods, etc. Whilst this example is highly unrealistic, it shows that "growth in GDP" is by no means the only kind of growth or change that occurs in an economy. It is structural change within the economy, i.e. changes in what is produced and how it is produced, that Evolutionary economics attempts to explain.

But Dopfer and Potts do not stop there. There is a second empirical fact which their framework attempts to explain. This fact is that the economy largely coordinates itself, in the absence of any "outside help" or "intelligent designing" or "central planning." In short, the Dopfer-Potts Evolutionary framework wishes to explain how structural change and macro-level coordination of plans emerge endogenously, i.e. from inside the economic system itself. Declaring their intentions, Dopfer and Potts ((2008), p 3) state that "evolutionary economics ultimately seeks to explain two primitive observations: 1) that the economy is largely self-coordinating and 2) that the structure and content of the economic system is continually changing." It is these two empirical facts (Self-Coordination and Structural Change (or, in Dopfer and Potts's terms, Self-Transformation)) that mainstream economics and Walrasian analysis does not offer an explanation for. This lack of explanatory power (with regard to Self-Coordination and Self-Transformation) that mainstream economics has is, according to Dopfer and Potts, a direct consequence of the mainstream's conceptualization of an economy as a machine. "Primary observation tells us that the economy is not a machine, but a complex adaptive process. In consequence, mechanistic analysis has only limited powers to explain the complex open processes of coordination and change in the economy" ((2008) p4).

Machines are things that (assuming proper maintenance and upkeep) can repeat the same process over and over again infinitely throughout time. Unfortunately the economy changes with time, thus rendering any machine metaphor inappropriate. "This is precisely why evolutionary economists reject the mechanistic analysis, and therefore the ontology that underpins it, and instead seek a new foundation"((2008) p5). What new foundation do Dopfer and Potts propose?

The Ontology of Evolutionary Realism

As Runde ((2009) lines 256-258) makes clear, the ontology that Dopfer and Potts propose is a social ontology (rather than a metaphysical ontology (i.e. it is concerned with existences that are created by humans, not with metaphysically given things)). Referring to this ontology as Evolutionary Realism, Dopfer and Potts proceed to establish an axiomatic basis for this ontological foundation. However, unlike Mises's appeal to

"Axiom 1 (Bimodality): All existences are matter-energy actualizations of ideas

Axiom 2 (Association): All existences associate

Axiom 3 (Process): All existences are processes"

((2008) p5, brackets mine).

As shown by Axiom 1, it is ideas that form the basis of Evolutionary economic analysis. All (human-dependent) existences ultimately descend from an idea inside the human mind. Social institutions, cultural conventions, technological developments, all of these ultimately are based upon an idea that was originated by human consciousness. As Dopfer and Potts say, "the human mind is, therefore, the seat of economic evolution"((2008) p9). Economic evolution, being the phenomenon that the economy is both self-coordinating and self-transforming, is thus ultimately founded upon a process of evolution (i.e. mechanisms of variation, replication and selection ((2008) p6)) that occurs at the level of ideas inside the mind. Thus, "the analytic foundation of evolutionary economics begins with the concept of generic rules"((2008) p10).

A 'generic rule' is essentially the Dopfer-Potts term for a meme. It is an idea that can be transmitted between individual agents. Ultimately, a rule is meant to be used, i.e. implemented. Rules are procedures for doing things. This conception of rules implies a number of other relevant analytical units: the first of which is entities which can implement these rules. Because rules are procedures for actions, they presuppose the existence of actors or agents or carriers. As a corollary, operations (implementations of rules, also known as actions) must exist as well.

In short, carriers implement rules in order to conduct operations.

This, however, is a very broad description, and it needs to take into account the specific nature of the primary carrier and generator of rules: the individual human mind. Given that the human mind is the seat of economic evolution, the nature of the human mind will obviously impact economic evolution. As such, Dopfer and Potts propose three basic statements about the nature of the human mind.

"1) The human mind is internally self-referential and internally coherent... A mind is a self-generating internal world, a subject.

2) The human mind exists in an external world... because environments will differ for different minds, agents will learn different things.

3) The human mind is epistemologically bimodal, in that it knows in two ways: internally through thinking, and externally through sensory information"

((2008) p8).

As such, human beings are subjects (i.e. in possession of a mind) that exist objectively (i.e. they cannot think themselves out of existence). The human mind operates in both objective realms (when dealing with concrete reality or when organizing other subjects as objects) and subjective realms (when either thinking inside itself or interacting with another subject). The human mind has the ability to implement rules in either realm and thus it can implement two different classes of rules: subject and object ((2008) p12). Subject rules can further be decomposed down to rules for operating one's own subject exclusively, i.e. rules for thinking (known as Cognitive rules), or rules for dealing intersubjectively, i.e. with other subjects (known as Behavioral rules). Object rules can be further decomposed down into rules for controlling structures of matter-energy, for example how to create fire (Technical rules) and controlling structures composed of other subjects, for example how to operate a firm (Social rules). To clarify the "CBST" distinction further, the economist Joseph Schumpeter looked at the effects of changes in the set of implemented technical rules (i.e. changes in what technologies are used). Business management techniques are various sets of social rules. Cultural customs and languages are behavioral rules (i.e. rules for interacting with other subjects-as-subjects). Cognitive rules are the rules a subject thinks by, i.e. their standards of rationality.

It is these "CBST" rules that are implemented by carriers in their operations. Changing these CBST rules will change the operations performed by carriers. Thus, economic evolution can ultimately be seen as the product of evolution in CBST rules. "The central tenet of evolutionary economics, then, is that economic systems evolve as generic rules change" ((2008) p13).

However, there are other types of rules, specifically those that do not deal with operations immediately. Dopfer and Potts further classify rules into orders of rules ((2008) p15). Those rules dealing with operations immediately (i.e. CBST rules) are considered 1st order rules or operational rules. But as we know, agents will not use any 1st order rule: there are rules that themselves govern the operational rules an agent or carrier will implement. These are 2nd order rules, also known as mechanism rules, and can be easily thought of as "rules for changing rules." Finally, there are 0th order rules, which form the basis of that society’s laws and institutions. These 0th order rules essentially "define what is feasible and permissible" ((2008) p15).

Finally, given that change exists in an economic system, ultimately due to change in the underlying rules that are implemented by the agents, there must be some sort of unit for the process of change in rules, i.e. a trajectory. In Evolutionary economics, the primary trajectory (i.e. unit of change) is one focused on change in generic rules (and this is appropriate given how Evolutionary economics focuses on how changes in generic rules generates structural change), as well as the spread of them into a population of carriers. This process has ((2008) p20) three phases: origination (formulation of a new rule), adoption (the spread and initial take-up of that rule into a population of carriers) and retention (the acceptance of that rule's validity/efficacy/usefulness amongst the carrier population, i.e. the end of that rule's 'trial period').

Thus, the Dopfer-Potts Evolutionary framework argues that the empirical facts of economic Self-Transformation and Self-Coordination can be rendered intelligible by conceiving of them as consequences of changes in the rules that carriers implement in their operations. These rules proliferate in units called trajectories. In order to support these four analytic concepts, three basic empirical facts must be acknowledged: 1) all social-economic existents ultimately have a memetic/intellectual basis (bimodality), 2) all social-economic existents associate with other social-economic existents (association), and 3) all social-economic existents exist across a span of time (process). And ultimately, the seat of all economic evolution (changes in an economy's rule-base) is the individual human mind, which (unlike any other rule-carrier) operates in both subjective and objective domains, and uses both inductive and deductive reasoning.

Stating the above in "list" format:

1) All social-economic existents ultimately have a memetic/intellectual basis, they all associate with other existents, and they all exist over spans of time.

2) Structural change and macro-level order in economic systems are both ultimately the product of ideas inside the individual minds of humans.

3) These individual minds use both deductive and inductive reasoning, and operate both in the subjective and objective realms.

4) Carriers implement rules in order to conduct operations.

Possible Issues

Runde (2009) raises some questions as to the clarity of these axioms. For one, he argues that Axiom 1 can be taken to imply some sort of belief in metaphysical subjectivism (that existence itself is a product of ideas (lines 348-351)). Given that these axioms are social ontology, Runde accepts that Dopfer and Potts are only referring to man-made existents, and indeed this is the case (in spite of the unclear wording of the axiom). As such, in light of Runde's critique, "Bimodality" can be rephrased to: "All human-made existents are matter-energy actualizations of ideas."

However, even with this phrasing, a further problem remains. Specifically, not all social-economic existents (i.e. existents that are conditional on the existence of human beings) exist in a matter-energy (i.e. objective) way. Many things which have been extensively economically analyzed, such as social institutions like politeness and protocol (which are often considered forms of social capital that lower transactions costs and produce network externalities) do not have matter-energy forms of existence. In Evolutionary terminology, they are behavioral rules that exist within the minds of subjects and are collectively agreed upon. These rules certainly produce effects within concrete reality, but only at the level of what individuals themselves do. Handshakes, for instance, are actions that do not produce a lasting physical embodiment, and the meaning of this action is fundamentally intersubjective. This further indicates that there is some validity to Runde's criticism that the Dopfer-Potts ontology can be somewhat unclear at times. As Runde ((2009) line 631) argues, "no doubt D&P were striving for parsimony in their terminology" but the risk of unclarity is significant. A possible way to clear things up would be to formulate bimodality as "All human-made material existents are matter-energy actualizations of ideas." However, this statement does not apply to all social-economic existents, only to those that objectively exist (i.e. exist as matter-energy).

To clear up this confusion, a final reformulation of bimodality, meant to capture all social-economic phenomena, including the intersubjective ones, could be made. A proposed reformulation could be:

"All social-economic phenomena (from social institutions and protocols to physical capital) ultimately have a memetic basis."

Yet this is cumbersome and inelegant. However it does seem to capture the meaning Dopfer and Potts obviously intend in a clearer way.

A final problem is that Dopfer and Potts argue that bimodality is an empirical axiom, i.e. an obvious empirical fact ((2008) p4, footnote 5). The problem with this argument is that bimodality cannot be directly observed. Our senses do not directly perceive ideas inside things or inside the minds of other subjects. Additionally, bimodality could be questioned by people that deny the existence of the mind, i.e. Skinnerian Behaviorists in psychology. Whilst Skinnerian ideas have fallen out of academic favor, bimodality is not exactly empirically obvious. Whereas the axiom of process, i.e. time, is empirically obvious (indeed, denying it is self-refuting because to say "time does not exist" takes a span of time), as is the axiom of association (although association of generic rules is not, since it isn't observable via our senses per se, but rather via reflexive introspection), the axiom of bimodality is not. This is not meant to be a refutation of any of these axioms, simply a concern about how well they are founded.

Regardless of all of the above criticisms, there is no attempt here to refute the Dopfer-Potts framework as a tool of social-economic analysis, merely suggestions for future refinements. [To Be Continued]

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PART 3: SYNTHESIS AND INTEGRATION

AN AUSTRIAN-EVOLUTIONARY APPROACH

Given the above outlines of Austrian economics (from a Misesian-Hayekian perspective) as well as the Dopfer-Potts approach to Evolutionary economics, the next step is to ask whether or not these frameworks can be hybridized into one single approach towards the analysis of social-economic phenomena. Given that this is obviously a large task, it should go without saying that this paper can by no means offer a complete analysis of the subject. However, this paper will offer several arguments for the compatibility of Austrian and Evolutionary economics with regards to the analytical statements they make about the nature of the economy and economic analysis in general (however, since this paper aims to justify this framework via Objectivist metaphysics and epistemology, it will not be comparing how Austrian and Evolutionary economics support their first principles).

As stated before, the essential points of Austrian economics are as follows:

1) Logical Deductivism: social-economic analysis requires deduction from first principles.

2) Economic Subjectivism/Methodological Individualism: the individual subject is the center of social-economic analysis.

3) Misesian Praxeology: individuals act purposefully, aiming at ends.

4) Emergent Order: macro-level social order emerges unintentionally from micro-level purposeful behavior.

The essential points of the Potts-Dopfer Evolutionary framework are:

1) All social-economic existents ultimately have a memetic/intellectual basis, they all associate with other existents, and they all exist over spans of time.

2) Structural changes and macro-level order in economic systems are both ultimately the product of ideas inside the individual minds of humans.

3) These individual minds use both deductive and inductive reasoning, and operate both in the subjective and objective realms.

4) Carriers implement rules in order to conduct operations.

The fundamental contention of this paper is that these lists are perfectly compatible. Please note, points from the list relating to Austrian economics will be referred to by "#A" (i.e. the number of the point, followed by 'A'), whereas points of Evolutionary economics will be referred to by "#E."

Economic Subjectivism and Methodological Individualism

Point 2A incorporates both methodological individualism (the proposition that all social-economic phenomena must be reducible to individual agents) and economic subjectivism (the proposition that individuals act, value and expect in accordance with their own beliefs and attitudes). These are key points to Austrian economics, and the Dopfer-Potts framework explicitly endorses them. With respect to methodological individualism, Dopfer and Potts express disagreement with how much extension of biological models of evolution has undermined economic subjectivism in favor of biological determinism. "So, while the methodology of 'Universal Darwinism' and other extensions of the biological model of evolution to economics have been of considerable value and importance to the development of evolutionary economics, it has made a systematic error in overlooking the human mind as an emergent carrier domain, leading it to.... an inconsistent position with respect to methodological individualism" (Dopfer-Potts (2008) p8). With respect to economic subjectivism, Dopfer and Potts explicitly integrate it into their framework, given how the individual subject is the primary rule-carrier and conducts evaluations of things. Additionally, the aforementioned Austrian influence on Evolutionary economics (via Hayek) combined with the fact that the subjective theory of exchange value is accepted by practically all economists would indicate that it is scarcely necessary to demonstrate the economic subjectivism of the Dopfer-Potts framework.

Characterizing Human Action

Point 3A and point 4E are both statements that characterize how subjects (individuals) behave. Point 3A is basically Mises's Axiom of Human Action, i.e. the fact that individual human beings act in a teleological fashion, employing means in the pursuit of ends (Mises (1949) p11). Point 4E is a similar statement, which argues that individual human beings (the primary carriers (secondary characters composed of conglomerates of thereof are subject to a similar analysis but that is beyond the scope of this point)) conduct operations, which are implementation/s of the rule/s that the carrier carries. Fundamentally, Austrian actions and Evolutionary operations are extremely similar, to the point where they can be considered the same.

The difference between the analytic units seems to be one of emphasis. Mises focused on the teleological nature of the action, i.e. the ends, whereas Dopfer and Potts emphasize the rule-implementing nature of the operation, i.e. the means. But as stated before, when dealing with Rothbard's (1992) criticism of Hayek's focus on rules, there is no inherent contradiction between intentional, teleological behavior and rule-following behavior. What about the possibility that following an evolved rule that has stood the test of time could be a means to an end? What about the possibility that the reason said rule has in fact stood the test of time is because, for the majority of people, it has proven to be an effective means to their ends?

A possible attempt at a combined definition of the Austrian and Evolutionary pictures of human action could be formulated as follows:

"Individuals implement rules as means in the process of conducting operations/actions which are themselves directed at an end."

However, Evolutionary analysis treats all carriers, not just individual human beings (the primary carriers), as rule-implementing beings that implement rules in their operations. These other carriers of rules are agencies, i.e. organizations or groups. This seems perilously close to arguing that "collectives act too" which would raise concerns over Dopfer and Potts commitment to methodological individualism. However, this concern is ultimately false in that it is possible to argue collectives "act" if that can be explained as a product of individual actions. Ludwig von Mises manifestly understood this. Quoting from Human Action, "In studying the actions of individuals, we learn also everything about the collectives and society. For the collective has no existence and reality but in the actions of individuals, It comes into existence by ideas that move individuals to behave as members of a definite group and goes out of existence when the persuasive power of these ideas subsides. The only way to a cognition of collectives is the analysis of the conduct of its members" (Mises, L. (1949) ch5 part 5). Additionally, the emphasis on collectives being driven by ideas shared amongst its members has a distinctly Evolutionary character to it. Dopfer and Potts call a group held together by shared implementation of a rule a "carrier population." Thus, ultimately, all study of carrier populations must be based on study of the individual carriers themselves. This position is methodologically individualistic.

Additionally, point 3E is implicitly assumed in the mindfulness of human action. Point 3E is basically an affirmation of the existence of a subject that both exists in the real world, is conscious of it, as well as having a self-generated internal world (a mind). Purposeful action requires this. Without a mind, how can an action be purposeful in the first place?

Emergent Phenomena

Another obvious agreement between Evolutionary economics and Austrian economics is the focus on emergent, spontaneous order (or Self-Coordination). In short, statements 4A and 2E are compatible. The difference, again, is on the focus on intentional actions (for Austrian economics) and rule-implementations (for Evolutionary economics). As stated before, these are compatible conceptions of human behavior. Rules inside the mind are fundamentally means to get things done, and means presuppose ends. Since specific ends will require specific means, the use of means (implementation of rules) implies the purposefulness of the implementation.

An attempt to combine 2E and 4A could be formulated as follows:

Economic self-transformation and self-coordination can ultimately be explained by (or is reducible to) purposeful, rule-implementing behavior at the individual level.

Logical Deductivism

An additional point to be made is that, like Austrian economics (see point 1A), Evolutionary economics also supports a logically deductivist methodology. As Runde ((2009) line 40-42) characterizes Dopfer and Potts's General Theory of Economic Evolution, the Dopfer-Potts framework "is an unashamedly abstract theoretical enterprise, a modern attempt at grand social theory building." The fact that Dopfer and Potts establish a series of axioms (Bimodality, Process and Association), as well as two basic observations to be explained (Self-Transformation and Self-Coordination), then proceed to elaborate a whole analytical framework, is more than enough to indicate the use of logically deductivist methodology.

Empirical Axioms

A final point to note is that none of Dopfer and Potts' axioms (1E) are contradictory to Austrian economics. Process, i.e. that the economic system exists in time, is explicitly acknowledged in Austrian economics, particularly in the Austrian theory of capital and interest. Indeed, Mises devotes all of Chapter 5 in Human Action to discussing the subject. Association, i.e. that social-economic existences associate, is practically required for economic theory in the first place (if no social-economic existences associated with each other, then there would not be an economic system in the first place), and as stated before, Bimodality is implicitly acknowledged (human action is purposeful, and an purpose is chosen within the mind of the subject. Additionally, processes to attain these ends (rules, in Evolutionary terms) must be formulated by a subject's mind).

A Synthesized Set of Propositions

Given all of the above it should be possible to propose a joint set of Austrian-Evolutionary propositions upon which to conduct social-economic analysis. Naturally, a full elaboration and defense of this list, explaining the basis of each point in each school of thought, and refuting any possible objection, is a very large project which cannot be undertaken within the scope of this paper (indeed, a project like that would require a treatise-length treatment to be fully comprehensive), and as such this list of propositions will have to be considered tentative, or a starting point for future development of an Austrian-Evolutionary synthesis. However, combining Lists A and E, in the light of the previous discussions of compatibilities, results in the following synthesized framework:

1) Logical Deductivism: economic analysis requires deduction from first principles (Point 1A).

2) Economic Subjectivism/Methodological Individualism: the individual subject is the center of economic analysis (Point 2A).

3) Philosophy of Mind: these individual minds use both deductive and inductive reasoning, and operate both in the subjective and objective realms (Point 3E).

4) Human Action: Individuals implement rules as means in the process of conducting operations/actions which are themselves directed at an end (Point 3A + 4E).

5) Emergent Macro-Phenomena: Economic self-transformation and self-coordination can ultimately be explained by (or is reducible to) purposeful, rule-implementing behavior at the individual level (Point 4A + 2E).

An important thing to note about this list is not so much what is on it, but rather what is not. Specifically, Dopfer and Potts's axioms (1E). In the case of 1E, it can be argued (as it was above) that all three of these ideas are implicit within the statements already made, but that is true of all axioms (with regards to the conclusions that are deduced from them). Axioms would not need to be established if there were no benefit to making them explicit. However, why should 1E's axioms be the only axioms acknowledged? Clearly, many other empirical facts are presupposed by the five points listed above, including the physical existence of subjects and the empirical truth of the laws of logic. Why should certain facts that the analytic framework assumes be axiomaticized, whereas others that the analytic framework assumes not be? A potential answer to this is that only axioms referring to social ontology, i.e. "what it is to be a thing contingent upon human beings," need to be axiomaticized. However, as stated before, Runde's (2009) criticisms (as well as the original ones advanced by this paper) show that the social ontology of Dopfer and Potts is probably in need of additional clarification and minor reformulation of definitions. Again, it must be emphasized that this paper is not rejecting the actual truth of Dopfer and Potts's axioms per se, but is merely emphasizing possible enhancements that could be made.

An interesting point is that of the axiom of bimodality. Bimodality is the most significant of Dopfer and Potts's axioms not only in the breadth of its implications but in how its formulation could be criticized. Runde (2009) argued that the literal meaning of the definition of bimodality was metaphysical subjectivism (lines 348-351). In order to deflect some criticisms, this paper suggested a potential reformulation of Bimodality as:

"All social-economic phenomena (from social institutions and protocols to physical capital) ultimately have a memetic basis."

In spite of the cumbersome nature of this phrasing, it might be suggested that any future work on an Austrian-Evolutionary synthesis should probably incorporate this principle more explicitly in the synthesized framework. For the sake of parsimony, its explicit statement will be omitted from this paper's summary of the synthesized framework (however, it is still a tacit assumption of the synthesized framework).

Additionally, nothing at all is mentioned about how the first principles of any social-economic framework are to be justified. The first reason for this is that, at least with regards to Austrian economics, there have been a number of proposed justifications from different Austrian economists. Menger, Weiser and Bohm-Bawerk's empiricism contrasts greatly with Mises's neo-Kantianism. To allege any specific method of justification of first principles is an 'essential' trait of Austrian economics would be to kick out at least one significant Austrian school economist from the definition of "Austrian Economics." Additionally, the justification of first principles is clearly a matter for technical epistemology rather than for the social-economic framework itself.

Thus, this paper will accept, as a tentative summary, the previously discussed five analytical propositions as the essential points of a combined Austrian-Evolutionary framework for the analysis of social-economic phenomena:

1) Logical Deductivism: social-economic analysis requires deduction from first principles.

2) Economic Subjectivism/Methodological Individualism: the individual subject is the center of social-economic analysis.

3) Philosophy of Mind: these individual minds use both deductive and inductive reasoning, and operate both in the subjective and objective realms.

4) Human Action: Individuals implement rules as means in the process of conducting operations/actions which are themselves directed at an end.

5) Emergent Macro-Phenomena: Economic self-transformation and self-coordination can ultimately be explained by (or is reducible to) purposeful, rule-implementing behavior at the individual level.

Any future references to the points in this list will be denoted by "#S," with # being the number of the point, and S meaning "synthesized framework."

[To Be Continued]

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OBJECTIVIST SUPPORT FOR AUSTRIAN-EVOLUTIONARY ANALYSIS

In metaphysics, Objectivism argues for Aristotelian Realism (or Primacy of Reality) and denies Idealism (or Primacy of Consciousness). Objectivism postulates three axiomatic facts that all people are undeniably aware of, all of which being logically irreducible.

1) Existence exists ('there is something')

2) An existent is what it is, not what it is not ('A is A, A is not B')

3) The subject exists, possessing consciousness

Aristotelian logic is an implication of Axiom 2.

In epistemology, Objectivism argues the following:

1) The subject perceives reality directly, through a specific means. The subject does not perceive an internal representation of reality.

2) The subject perceives only concrete particulars. Universals do not exist in a metaphysically objective sense.

3) Through a process of integration and differentiation, the subject measures the empirical world around themself, forming abstract concepts which (assuming these concepts were formed using the correct methodology) are epistemologically valid within their context. They are not just names.

4) If a concept is validly formed and kept within its context, it can be applied to reality deductively. Assuming the laws of logic are followed, then the deduction should result in contextually-valid knowledge.

As stated before, Austrian and Evolutionary economics are frameworks for social-economic analysis. At least in theory, accepting that a specific framework produces valid conclusions about the causes and nature of social-economic phenomena does not necessarily imply acceptance of said framework's alleged philosophical foundations. For instance, as said before, Objectivists have enthusiastically embraced the economics of Ludwig von Mises, even if they disagreed with his rationalist epistemology. Taking the hybrid framework discussed above, can this be justified with Objectivism?

Objectivist Epistemology and the Empirical Foundationalists

One issue that has not been discussed up until now is that of justifying first principles. The Austrian school economists have been split about how to do this, with Mises arguing for a rationalistic foundationalism where the first axiom of economic analysis is justified not by experience but by reflexive introspection. However, Mises's predecessors Menger, Bohm-Bawerk and Weiser argued that first principles had to be founded on an empirical basis. Quoting White, Bohm-Bawerk "denies that the Austrians' "so-called abstract-deductive method" is unempirical, "spinning abstract conclusions without concern as to their empirical reality," claiming instead that it is "in its very essence a genuinely empirical method." He denies that it confines itself to inferences and deductions from a priori axioms, claiming instead that it starts "with observation of actual conditions and endeavors from this empirical material to derive general laws" (White (1988) ch 3). In short, Bohm-Bawerk argues that there is no necessary contradiction between empiricism and deriving logical conclusions from empirical facts.

Like Menger, Weiser and Bohm-Bawerk, the Dopfer-Potts framework is also founded on empirical statements. As stated in The General Theory of Economic Evolution ((2008) p3), the framework aims "to explain two primitive observations: 1) that the economy is largely self-coordinating and 2) that the structure and content of the economic system is continually changing" (emphasis mine). Originating in an attempt to explain two empirical facts, the Dopfer-Potts framework then establishes three empirical axioms, i.e. (allegedly) obvious empirical facts ((2008) p4, footnote 5). Dopfer and Potts describe their axioms as "empirical propositions" ((2008) p4). Thus, Dopfer and Potts are clearly empirical foundationalists in the same manner that Menger, Weiser and Bohm-Bawerk were, combining inductive and deductive reasoning.

Objectivist epistemology explicitly supports this kind of empirical foundationalism. As Vacker ((1999) p136) characterizes Objectivist epistemology, "knowledge begins with concrete particulars, grasped inductively through the senses, from which nonlinear mental abstractions are derived inductively and integrated into cognitive units retained as concepts, themselves applied to reality deductively." Additionally, Objectivist epistemology considers abstractions that lack empirical foundations (ultimately) to be invalid "floating abstractions" and hence unusable. So, whilst Objectivism would not support Mises's rationalist foundationalism, it explicitly advocates the empirical foundationalism of many other Austrian economists as well as the empirical foundationalism of Dopfer and Potts. Thus, empirically-founded logical deductivism would, as a methodology in the social sciences, be supported by Objectivism. Point 1S (logical deductivism) is compatible with Objectivist epistemology.

Additionally, this lends at least some support to Dopfer and Potts's philosophy of mind (Point 3S). Point 3S states that inductive and deductive reasoning are both used by subjects. Thus, Dopfer and Potts are implicitly arguing the kind of empirically-founded logic advocated by their framework (and Objectivism) is how human consciousness naturally operates. Whilst point 3S is by no means a detailed set of statements about the nature of human cognition, it certainly does not seem to contradict any of the technical propositions of Objectivist epistemology. Although Objectivist epistemology would argue cognition doesn't 'automatically' operate in the correct manner (indeed, correct cognition is a learned skill), the Dopfer-Potts characterization of cognition does appear to at least be similar to the Objectivist characterization of correct cognition. Thus, this paper will tentatively consider point 3S as compatible with Objectivist epistemology.

Objectivist Epistemology and Economic Subjectivism/Methodological Individualism

Point 2S incorporates both economic subjectivism and methodological individualism by stating that the individual subject is at the center of social-economic analysis. It goes without saying that these two points are utterly critical to Austrian-Evolutionary analysis and that if Objectivist epistemology contradicts these two propositions, any attempt to support Austrian-Evolutionary analysis with Objectivism is futile.

The first point to make is regarding economic subjectivism. As addressed before, when discussing Kirzner's review of Reisman, there is no necessary contradiction between Economic Subjectivism and Objectivist theories of moral value. As Tabarrok ((2007) p126) said, "The two theories deal with entirely different questions." Theories of economic value (such as economic subjectivism) simply are attempts to explain why some objects have a price and others do not, whereas theories of moral value are attempts to explain what constitutes 'the good.' Thus, there is no actual contradiction involved in embracing both positions.

Methodological individualism, however, is obviously embraced by Objectivism. As stated before, methodological individualism is the proposition that any property of a group can ultimately be explained with reference to the individual members of the group; or in short, that individual human beings are the fundamental irreducible 'unit' of social analysis. The contrasting position to this is methodological collectivism, which alleges that it is groups which form the fundamental unit of social analysis. Methodological collectivism usually argues this by proposing that individual subjects are conditioned or constructed by their collective environment and thus they cannot be understood without reference to their collective.

Objectivism argues against methodological collectivism on epistemological grounds, relating to the Objectivist solution to the Problem of Universals. Collectives are Universals. For the collective/universal "males" one can find many members/instances thereof. Universals, according to Objectivist epistemology, do not exist prior to or in some manner transcending the concrete particulars (or individual members) that make them up. The individual particulars, i.e. the members of the collective, are metaphysically real, and the collective is "mind-dependent abstraction(s)" (Ray (1998) ch3). Thus, on the Objectivist view, methodological collectivism is false on the grounds of Platonic Realism, i.e. it treats the universal (the collective) as more real than, and separate from, the particular. Since concept formation must start with concrete objects, social analysis too must start with concrete individuals. Thus, Objectivist epistemology inexorably supports point 2S. As Rand argues ((1964) p14-15), "there is no such entity as "society," since society is only a number of individual men."

Objectivist theory of history as proto-Austrian-Evolutionary?

So far, points 1S, 2S and 3S have been (admittedly tentatively) demonstrated to be compatible with Objectivist metaphysics and epistemology. Points 4S and 5S have as of yet been left unmentioned. The primary reason for this is that 4S and 5S are primarily operational in nature, i.e. they describe how individuals operate in the real world and the result of their operating. Rand was a philosopher and not a social scientist, and she did not craft an explicit social-economic analytical framework. However, when she did rely on economic arguments, she invariably used Misesian ones, which would indicate Rand agreed with the Misesian praxeological approach (i.e. that individuals act purposefully) in spite of her disagreement with Mises's rationalism. This alone could validate point 4S (which incorporates Misesian praxeology), however Rand herself argued that humans did (usually) act purposefully, at least by implication. Her only statements regarding purposeful action occurred in the context of ethics rather than epistemology (Rand (1964)) and she clearly believed it was a matter of choice to act purposefully (i.e. an individual consciousness had to choose a purpose in the first place), however she did argue that it was only human beings that had the ability to act purposefully. In The Virtue of Selfishness she argues that "purposive" is "a concept applicable only to the actions of a consciousness" (i.e. a conscious being) (Rand (1964) p16). Additionally, Kelley ((1990) p33) characterizes Objectivist ethics as "teleological." Thus, whilst Objectivism may not agree with the idea that all human actions are inherently purposive, it seems that Objectivism does not consider that a false assumption upon which to base social-economic analysis. Indeed, given that Objectivism argues purposeful action is a necessity for the preservation of life (Rand (1964), p16-17), Objectivism would probably consider purposeful human action to be the most common type of action amongst a community of living human beings.

However, there is at least one occasion where Rand argued for a theory of social development and individual action; specifically in her theory of history. And this theory of history bears some striking resemblances to the Austrian-Evolutionary contention (i.e. point 4S). The fullest statement she made of the Objectivist theory of history is as follows:

"There is only one power that determines the course of history, just as it determines the course of every individual life: the power of man’s rational faculty—the power of ideas. If you know a man’s convictions, you can predict his actions. If you understand the dominant philosophy of a society, you can predict its course" (Rand (1967) p165).

In other words, at both the individual and the collective levels, the ideas that a subject holds to will manifest in their actions, and the ideas held in common by subjects generally will greatly influence the nature, products and success or failure of that society in general. This is also remarkably similar to Hayek's argument in The Constitution of Liberty that "Which individuals and which groups succeed and continue to exist depends as much on the goals that they pursue, the values that govern their action, as on the tools and capacities at their command" (Quoted in Caldwell (2000) p6).

In these instances, Hayek and Rand both argue that memetic content (values, beliefs, convictions, purposes, goals) within individual minds (S2's methodological individualism) ultimately determines actions and outcomes at the individual and collective levels. This seems very compatible with not just point S4 but also point S5. It incorporates purposeful human action that implements said human's ideas/convictions, as well as an acknowledgement of how this influences the state of affairs on a wider scale. Admittedly, Rand's theory is but a sketch at this point, with many implications that need to be worked out. However, its similarity to Hayek's own position on the subject is a very positive indication and further exploration of this commonality seems warranted.

Summary

It appears that Objectivist philosophy endorses, explicitly or by implication, every point of the proposed Austrian-Evolutionary framework. Points S1, S2 and S3 are all affirmed by Objectivist metaphysics and epistemology. Point S4 is alluded to in Objectivist ethics, and both S4 and S5 share many points in common with the Objectivist theory of history.

　

PART 4: CONCLUSION

In conclusion, the positivist approach to economic science often claims that deductivist methodologies are unempirical and rationalistic. This paper has not attempted a full summary and refutation of this claim, or a full critique of positivism. Rather, it has aimed at demonstrating that Austrian and Evolutionary economics can be synthesized and that the synthesized framework can be supported with an Objectivist metaphysical and epistemological basis. Demonstrating the mutual compatibility of Austrian and Evolutionary economics with an explicitly realist, empirical philosophical base would certainly raise questions about the monopoly that positivism claims over "realism" and "empiricism."

In pursuit of this goal, this paper has detailed some of the history between all three schools of thought, and additionally has summarized the basic claims of each. Following that, this paper proposed a tentative summary of a potential Austrian-Evolutionary hybrid framework, and then attempted to show how every point of this framework could be defended on an Objectivist philosophical basis (primarily centered on metaphysics and epistemology, but with significant allusions to the Objectivist theory of history).

Naturally, much of the synthesis done by this project is quite tentative. However, it seems reasonable to conclude that there is much potential value that scholars of Objectivism, Austrian economics and Evolutionary economics could gain from pursuing the possibility of such a synthesis. There is significant common ground shared by the three schools of thought.

Could a future Austrian-Evolutionary-Objectivist synthesis produce the kind of empirically-rooted deductivist framework that even the most ardent positivists will have trouble accusing of "spinning abstract conclusions without concern as to their empirical reality?" In the final analysis, this paper must conclude that such a possibility is very plausible. [THE END]