Sunday, January 30, 2011

The Complex Experiences of Complex Phenomena

Why are aggregates in economics necessarily misleading? Why do statistical methods in economics tell us nothing about what is happening now, and what will happen in the future in an economy, but can only tell us something about economics history? Why methodological individualism? Because we know

that external phenomena affect different people in different ways, that the reactions of the same people to the same external events vary, and that it is not possible to assign individuals to classes of men reacting in the same way. (Mises, Human Action, 351)
In other words, "Experience of economic history is always experience of complex phenomena" (351). Statistics cannot describe such phenomena. Aggregates explain nothing about such phenomena. You can only ever watch what actual people actually do in response to actual situations in actual complex situations. The underlying rules by which we conduct ourselves have to be worked out, with the understanding that each of those rule's outcomes changes in relation to the outcomes produced by our following yet other rules. That is why it is important to understand human action as Mises tries to do. Only then can one understand what is going on in an economy -- or in any social system.

It is no coincidence, by the way, that Hayek attempted to demonstrate that and explain why our brains do exactly what Mises claims in the long quote above. If the brain works like this, then Mises is right. Of course, we have an overwhelming amount of evidence from the brain sciences that the brain does indeed work exactly as Hayek said. What, then, does that say about Mises' insights?
Post a Comment