The Ultimate Foundation of Economic Science
Ludwig von Mises
This essay is not a contribution to philosophy. It is merely the exposition of certain ideas that attempts to deal with the theory of knowledge ought to take into full account.
Traditional logic and epistemology have produced, by and large, merely, disquisitions on mathematics and the methods of the natural sciences. The philosophers considered physics as the paragon of science and blithely assumed that all knowledge is to be fashioned on its model. They dispensed with biology, satisfying themselves that one day later generations would succeed in reducing the phenomena of life to the operation of elements that can be fully described by physics. They slighted history as "mere literature" and ignored the existence of economics. Positivism, as foreshadowed by Laplace, baptized by Auguste Comte, and resuscitated and systematized by contemporary logical or empirical positivism, is essentially panphysicalism, a scheme to deny that there is any other method of scientific thinking than that starting from the physicist's recording of "protocol sentences." Its materialism encountered opposition only on the part of metaphysicians who freely indulged in the invention of fictitious entities and of arbitrary systems of what they called "philosophy of history."
This essay proposes to stress the fact that there is in the universe something for the description and analysis of which the natural sciences cannot contribute anything. There are events beyond the range of those events that the procedures of the natural sciences are fit to observe and to describe. There is human action.
It is a fact that up to now nothing has been done to bridge over the gulf that yawns between the natural events in the consummation of which science is unable to find any finality and the conscious acts of men that invariably aim at definite ends. To neglect, in the treatment of human action, reference to the ends aimed at by the actors is no less absurd than were the endeavors to resort to finality in the interpretation of natural phenomena.
It would be a mistake to insinuate that all the errors concerning the epistemological interpretation of the sciences of human action are to be ascribed to the unwarranted adoption of the epistemology of positivism. There were other schools of thought that confused the philosophical treatment of praxeology and history even more seriously than positivism, e.g., historicism. Yet, the following analysis deals first of all with the impact of positivism.
In order to avoid misinterpretation of the point of view of this essay, it is advisable, even necessary, to stress the fact that it deals with knowledge, science, and reasonable belief and that it refers to metaphysical doctrines only as far as it is necessary to demonstrate in what respects they differ from scientific knowledge. It unreservedly endorses Locke's principle of "not entertaining any proposition with greater assurance than the proofs it is built upon will warrant." The viciousness of positivism is not to be seen in the adoption of this principle, but in the fact that it does not acknowledge any other ways of proving a proposition than those practiced by the experimental natural sciences and qualifies as metaphysical—which, in the positivist jargon, is synonymous with nonsensical—all other methods of rational discourse. To expose the fallaciousness of this fundamental thesis of positivism and to depict its disastrous consequences is the only theme of this essay.
Although full of contempt for all it considers as metaphysics, the epistemology of positivism is itself based upon a definite brand of metaphysics. It is beyond the pale of a rational inquiry to enter into an analysis of any variety of metaphysics, to try to appraise its value or its tenability and to affirm or to reject it. What discursive reasoning can achieve is merely to show whether or not the metaphysical doctrine in question contradicts what has been established as scientifically proved truth. If this can be demonstrated with regard to positivism's assertions concerning the sciences of human action, its claims are to be rejected as unwarranted fables. The positivists themselves, from the point of view of their own philosophy, could not help but approve of such a verdict.
General epistemology can be studied only by those who are perfectly familiar with all branches of human knowledge. The special epistemological problems of the different fields of knowledge are accessible only to those who have a perfect acquaintance with the respective field. There would not be any need to mention this point if it were not for the shocking ignorance of everything concerning the sciences of human action that characterizes the writings of almost all contemporary philosophers.
It may even be doubted whether it is possible to separate the analysis of epistemological problems from the treatment of the substantive issues of the science concerned. The basic contributions to the modern epistemology of the natural sciences were an accomplishment of Galilei, not of Bacon, of Newton and Lavoisier, not of Kant and Comte. What is tenable in the doctrines of logical positivism is to be found in the works of the great physicists of the last hundred years, not in the "Encyclopedia of Unified Science." My own contributions to the theory of knowledge, however modest they may be, are in my economic and historical writings, especially in my books Human Action
and Theory and History. The present essay is merely a supplement to and a commentary on what economics itself says about its own epistemology.
He who seriously wants to grasp the purport of economic theory ought to familiarize himself first with what economics teaches and only then, having again and again reflected upon these theorems, turn to the study of the epistemological aspects concerned. Without a most careful examination of at least some of the great issues of praxeological thinking—as, e.g., the law of returns (mostly called the law of diminishing returns), the Ricardian law of association (better known as the law of comparative cost), the problem of economic calculation, and so on—nobody can expect to comprehend what praxeology means and what its specific epistemological problems involve.
 About historicism, see Mises, Theory and History (Washington, D.C.: Ludwig von Mises Institute, 1985) pp, 198 ff.
 A striking example of this ignorance displayed by an eminent philosopher is quoted in Mises, Human Action (Chicago: Henry Regnery, 1966) p. 33 note.
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