The Logical Foundation of Economic Science: Why Human Action Cannot Be Empirically Tested—A Complete Exposition

Modern social science, especially economics, is mired in a protracted methodological crisis. The core symptom of this crisis is a pervasive intellectual impulse: the belief that for economics to attain the prestigious status of a "science," it must rigorously imitate the research paradigms of the natural sciences, such as physics and biology. This view insists that the acquisition of economic knowledge must follow a fixed procedure: begin by observing the complex real world, collect vast amounts of data, then construct mathematical models to propose hypotheses, and finally, use ever more sophisticated statistical tools to subject these hypotheses to so-called "empirical testing."

Any theoretical system that does not conform to this process is readily labeled as "unscientific," "metaphysical," or even "dogmatic." However, this veneration of the methods of natural science is not only misguided but also fundamentally misunderstands the very nature of economics as a discipline. It conflates two entirely distinct realms of knowledge and, consequently, employs wholly inappropriate tools in an attempt to comprehend social reality.

This fundamental methodological schism is centrally embodied in the intellectual system of one of the twentieth century's greatest economists—Ludwig von Mises. Starting from a seemingly simple and self-evident observation—"human beings act"—Mises constructed a grand, coherent, and logically rigorous economic theory he called "Praxeology." Yet, it is precisely the source of his theory's power—its impregnable deductive logical structure—that has made it an object of suspicion, neglect, and even ridicule in an age of positivism. One cannot help but ask: why does a theory so concerned with the empirical phenomenon of "human action" ultimately adopt a stance that rejects all empirical verification?

To thoroughly unravel this confusion and solve the "Mises mystery," we must return to the point of origin. Like a detective, we must retrace Mises's intellectual path, from his methodological toolkit to his specific examples of deductive reasoning, and then delve into the deepest philosophical foundations of his thought, ultimately examining the fortress he built to withstand external criticism. This is not merely an exercise in understanding an intellectual titan, but an exploration into the very soul of economic science itself.

A Fork in the Intellectual Road: Deduction and Induction—Two Fundamental Paths to Knowledge

Any endeavor to acquire knowledge about the world must first choose a path. In modern science, particularly after the immense success of the natural sciences, the predominantly chosen and celebrated path is induction.

The inductive method operates by starting with specific, individual observations and, through extensive repetition, attempts to summarize and generalize to universal laws. For example, after observing that the first swan is white, and the second, and after observing a thousand, or ten thousand, a biologist might arrive at the inductive conclusion: "All swans are white." This method is empirical; its strength derives from the quantity of observed cases. However, induction carries a permanent, incurable logical weakness: its conclusions are always contingent and provisional. No matter how many white swans you observe, you can never logically guarantee that the next one you encounter will not be black. Induction can only establish hypotheses, and these hypotheses are forever at risk of being overturned by new experience. The inductive scientist lives in a world of probability, statistical significance, and a perpetual fear of "black swan events."

Mises, as an heir to the traditions of European continental rationalism and classical economics, resolutely chose another path—one that is more ancient but also possesses greater certainty: deduction. The deductive method proceeds in the opposite direction to induction. It does not begin with scattered, uncertain empirical facts, but rather with one or a few truths considered to be universal and self-evident—axioms. Then, through the application of strict, unassailable rules of logic, it derives specific conclusions step by step.

The power of deduction lies in its certainty. If the initial axiom is true, and every step of the reasoning conforms to the rules of logic (i.e., is free of self-contradiction), then the resulting conclusion must be true. Its truth does not depend on any external empirical observation for "verification." The classic example is undoubtedly Euclidean geometry, which, starting from a few axioms and definitions concerning points, lines, and planes, builds the entire magnificent edifice of geometry through logical deduction. The truth of the theorem "the sum of the angles in a triangle is 180 degrees" is not established by measuring thousands of triangles but is confirmed through a logical proof derived from the axioms. The deductive thinker seeks logical necessity and internal consistency.

All the debates surrounding Mises and the Austrian School of economics he founded ultimately boil down to one core question: is it legitimate to apply the deductive method to the study of the complex and ever-changing phenomena of human society and economy? To his critics (mainly the positivists), this is nothing short of intellectual arrogance and dogmatism, an imposition of a logical game onto the real world. But for Mises and his intellectual heirs, given the unique nature of human action, deduction is not only legitimate but is the only correct method for establishing universally valid economic theory.

The Unshakeable Starting Point: The Axiom of Human Action and Its Irrefutability

For a deductive system to be more than just an empty logical game, its starting axiom must be an undeniable truth. In his magnum opus, Human Action, Mises established the cornerstone of the entire edifice of economic science—an a priori axiom he considered to be absolutely certain and irrefutable by reason:

Human beings act.

This statement may seem plain and unremarkable, yet it is the bedrock of the entire science of economics. Its power lies not in the startling nature of its content, but in its absolute logical certainty. Its truth is beyond doubt, because any attempt to deny it is, in itself, a proof of the axiom.

  • If you argue aloud, "Man does not act," your very act of "arguing" is a conscious application of your vocal cords, logic, and other "means" to achieve the "end" of persuading your listener. This is an action.
  • If you think to yourself, "How can I construct an argument to refute the axiom of action?" your very "thinking" is a mental action, mobilizing your cognitive faculties (means) to solve an intellectual problem (end).
  • If you choose to protest by sitting still or remaining silent, attempting to demonstrate "non-action" to refute the axiom, your "choice to sit still" or "choice to remain silent" is itself a conscious decision made from among numerous other possibilities (standing, speaking, leaving, making a face). Maintaining a state of stillness requires you to actively suppress other impulses, which is itself an application of willpower (a means) to achieve a specific state (an end).

This self-attesting property was termed a "performative contradiction" by the economist Hans-Hermann Hoppe. Therefore, the truth of the axiom "human beings act" does not depend on the frequency or universality of empirical observation but is established upon its logical irrefutability. It is an a priori truth, its validity is independent of and antecedent to any specific historical experience. We need not conduct any experiment to be certain of its truth, for it is inherent in our very structure as conscious, purposeful beings.

Logical Deduction: From the Axiom to the Complete System of Economics

Once the concept of "action" is established as purposeful behavior—as opposed to unconscious bodily reflexes like a heartbeat or recoiling from a pinprick—an entire suite of logically necessary economic categories unfolds. This process is one of pure deduction, requiring no "input" from empirical data.

  1. Ends and Means: "Action" is defined as purposeful behavior. This implies that every action aims to achieve some desired end by employing some means. An actor acts because he is dissatisfied with the present state of affairs and believes that through some behavior, he can arrive at a more satisfactory state.
  2. Choice and Preference: Since action is undertaken to achieve an "end," it logically implies that the actor has made a choice from among the various possibilities he perceives. He chose to take action A instead of action B, or no action at all. The very existence of choice irrefutably demonstrates that the actor possesses a scale of preferences. He chooses A over B because, at the moment of choosing, he anticipates that A will better (or more quickly, or more certainly) achieve the end he values more highly.
  3. Subjective Value: The value of an action's end, and the means used to achieve it, is not an objective property inherent in goods or services. Value is subjective; it originates from the actor's evaluation of his needs and his judgment of the utility of the means to satisfy those needs. A glass of water is of immense value to a traveler in the desert but may be worthless to someone who has just emerged from a swimming pool. Value resides in the consciousness of the evaluator and is manifested through his ranked preferences.
  4. Scarcity: Action is necessary precisely because means are scarce in relation to our boundless wants and ends. If all means—including our own time, energy, and the resources of the external world—were available in infinite supply, all ends would have been instantly satisfied. Man would no longer need to choose and, therefore, would no longer act. The very existence of action is the most powerful proof of the scarcity of means.
  5. Cost: Because means are scarce, choosing to employ a finite means (such as an hour of time or a dollar of money) to achieve end A necessarily means forgoing the possibility of using that same means to achieve ends B, C, D, and so on. Among all the forgone, feasible alternatives, the one with the highest value is the opportunity cost of the action. Cost is not an entry in an accounting ledger; it is the subjectively evaluated value of the best alternative forgone. Every action has a cost; this is an inescapable logical consequence of scarcity and choice.
  6. Time and Time Preference: All action necessarily unfolds through time. Action always leads from an earlier state to a later state. Furthermore, actors always prefer to attain their ends sooner rather than later (ceteris paribus). No one would willingly wait longer to receive the same reward. This universal human valuation tendency—valuing present satisfaction more highly than the same satisfaction in the future—is known as time preference. It is the ultimate cause of the phenomenon of interest.
  7. Uncertainty: Action is always directed toward the future. And the future, by its very nature, has not yet occurred and is therefore uncertain. The actor chooses means and ends based on his expectation of the future, but this expectation may prove to be mistaken. Consequently, every action contains an element of speculation. Profit and loss are precisely the rewards for entrepreneurial success or failure in dealing with uncertainty.

All the core laws of economics are nothing more than these foundational categories, deduced from the axiom of human action, applied logically in more complex and specific contexts of social interaction. For example, consider the Law of Diminishing Marginal Utility:

  • Logical Premise: An actor possesses n homogenous, interchangeable units of a means (e.g., three identical loaves of bread) and has m ends ranked by importance (n <= m, e.g., A. "survival" > B. "savoring the taste" > C. "feeding the pigeons").
  • Deductive Process: According to the logic of action (satisfying the most important end first), he will necessarily use the first unit of the means (the first loaf) to satisfy the most important end, A; the second unit to satisfy the next most important end, B; and the third unit to satisfy the next end, C.
  • Deductive Conclusion: Therefore, for this actor, the subjective value (utility) of each homogenous unit of the means diminishes. This is because each subsequent unit is always employed to satisfy a relatively less important end. The utility of the first loaf of bread is the utility of satisfying end A; the utility of the second is that of satisfying end B; the utility of the third is that of satisfying end C. Since A > B > C, the marginal utility of the first loaf is greater than that of the second, which is greater than that of the third.

This conclusion is reached without conducting any psychological experiments or making empirical observations about "diminishing satisfaction." It is a purely logical deduction, its certainty derived from the validity of the deductive process and the truth of the initial axiom. In Mises's view, it is a universal, a priori, and certain truth, just like "2+2=4" or "the sum of the angles in a triangle is 180 degrees."

Delving into Philosophical Foundations: Kant's Legacy and the Crucial Divide from Physics

To truly understand why Mises so resolutely defended the a priori status of his theory against the entire tide of positivism, we must venture into its philosophical bedrock. Here we encounter the great philosopher Immanuel Kant. In his Critique of Pure Reason, Kant conducted a revolutionary analysis of the structure of human knowledge, proposing several crucial sets of distinctions:

  • The Source of Knowledge: A Priori vs. A Posteriori
    • A priori knowledge is independent of and antecedent to any particular sensory experience. Its truth can be established by pure reason, without recourse to observation or experiment. Examples: "The whole is greater than the part," "A straight line is the shortest distance between two points."
    • A posteriori knowledge arises from and depends on sensory experience. Its truth must be confirmed through empirical means such as observation and experiment. Examples: "This glass of water is hot," "The sun rises in the east and sets in the west."
  • The Nature of Propositions: Analytic vs. Synthetic
    • Analytic propositions are those in which the predicate concept is already contained within the subject concept. Such propositions are tautological; although absolutely true, they are mere repetitions of a definition and add no new knowledge. Example: "All bachelors are unmarried" ("unmarried" is already part of the definition of "bachelor").
    • Synthetic propositions are those in which the predicate concept adds new information to the subject concept. Such propositions can extend our knowledge. Example: "This rose is red" ("red" is not part of the definition of "rose"; a rose could also be white or yellow).

Before Kant, philosophers generally assumed these two distinctions mapped onto each other: a priori knowledge was necessarily analytic (like logic and mathematics), while synthetic knowledge was necessarily a posteriori (like the natural sciences). Kant's great breakthrough was his demonstration of the existence of a third category, one that is crucial for the foundations of science: the "Synthetic A Priori."

Synthetic a priori propositions possess both the universal necessity of a priori knowledge (requiring no empirical validation) and the capacity of synthetic knowledge to expand our understanding of the world. Kant argued that mathematical propositions (like 7+5=12), the axioms of geometry (like the straight-line axiom), and certain fundamental principles of physics (like the law of causality, "every event has a cause") belong to this category. They are the "scaffolding" that exists within our rational structure prior to experience, enabling us to organize and comprehend sensory experience.

Mises, with extraordinary acuity, recognized that Kant's concept of the synthetic a priori was the very key to understanding the nature of knowledge in economics (praxeology). He made the earth-shattering claim that all the core propositions of praxeology are synthetic a priori knowledge. "Human beings act" and all its logical deductions are neither mere tautologies nor empirical hypotheses requiring testing. They are statements about the logical structure of human action that are both certainly true and richly informative.

However, this assertion immediately gives rise to a critical and formidable challenge, one we have already touched upon: Kant himself had regarded some fundamental principles of Newtonian physics (such as the absoluteness of space and time, and strict determinism) as synthetic a priori, believing them to be indispensable frameworks for human understanding of nature. But in the early twentieth century, Einstein's theory of relativity (which revealed space and time to be relative and variable) and the subsequent development of quantum mechanics (which revealed indeterminacy at the micro-level) seemed to ruthlessly prove Kant's judgment wrong. The foundations of physics were not a priori and immutable but could be revised and even overturned by new empirical observations and theories. So, has history already passed a death sentence on all claims of synthetic a priori knowledge? Is Mises's theory destined to suffer the same fate as Kant's in physics, ultimately to be overthrown by the "economic experience" of the future?

Mises's answer is an emphatic "No." The reason he could confidently uphold the a priori status of his theory lies precisely in his profound recognition of a fundamental, unbridgeable chasm in the theory of knowledge—an Epistemological Dualism—between economics (praxeology) and physics (the natural sciences).

The physicist studies the external physical world. He confronts atoms, planets, and rays of light that have no consciousness and no purpose. He cannot "enter" the "mind" of an electron to understand why it chose one orbit over another. He can only act as an outsider, standing apart and using his senses (aided by instruments) to observe, measure, and collect data. He then employs logic and mathematics to construct a model (such as Newton's F=ma or Einstein's field equations) to "guess at" or "describe" the regularities he observes. The core of this model is an empirical statement about the external world ("we believe the real world operates according to this mathematical formula"). The truth of this statement depends entirely on whether it corresponds with subsequent, more precise, or different external observations. Therefore, any theory in physics, no matter how successful or mathematically elegant, is, in essence, a falsifiable, a posteriori hypothesis.

But when the economist (or, more broadly, the praxeologist) studies "human action," the situation undergoes a qualitative leap. He is studying a domain to which he himself belongs—the conscious, purposeful actions of human beings. Here, he possesses a privilege forever beyond the reach of the physicist studying electrons: he is an insider. His way of knowing his subject matter does not begin with external sensory observation but with an internal, direct understanding and apprehension. He does not need repeated experiments to "discover" that he has purposes, that he makes choices, or that he weighs costs in those choices. These fundamental categories of action—ends, means, choice, preference, cost, time—are not vague concepts he induces from external data. They are, rather, elements of his own conscious structure that he, as an actor, can know directly through introspection.

Therefore, the starting point "human beings act," and the entire system of praxeology deduced from it, is of a completely different nature from a theory in physics. It is not a "model" or "hypothesis" about the external world that needs to be tested against empirical data. It is a "statement of fact" about the logical structure of our own actions, a fact that can be directly confirmed as true through introspection. Its certainty comes not from the accumulation of experience but from logical consistency and the directness of introspection. Its degree of certainty is comparable to Descartes's famous "Cogito, ergo sum" (I think, therefore I am).

The Irony of Intellectual History: The "Instrumental Eclecticism" of Mainstream Economics and Its Consequences

It is precisely because of this failure to deeply recognize the fundamental epistemological divide between economics and the natural sciences that modern mainstream economics (primarily the neoclassical synthesis and its subsequent developments) has gone down a path full of irony and internal contradiction. On the one hand, they crave the precision and predictive power of the natural sciences; on the other hand, their object of study (human beings) possesses subjectivity and purposefulness, qualities that the objects of natural science lack. This contradiction is starkly manifested in their attitude toward the early, momentous discoveries of the Austrian School.

Take the "law of diminishing marginal utility" as an example. As explained earlier, this law is a logically necessary conclusion strictly deduced by Mises from the axiom of human action. However, when this concept (along with other subjective value theories pioneered by Austrians like Menger) was absorbed by mainstream economics, its solid logical foundation was completely discarded. In modern microeconomics textbooks, "diminishing marginal utility" is typically treated as one of two things:

  1. A convenient but dubious mathematical assumption: When constructing models of consumer choice, economists simply "assume" the existence of a "utility function," U(x), and further assume that this function has good properties, such as a first derivative greater than zero (more is better) and a second derivative less than zero (diminishing marginal utility). Why make this assumption? Not because it has been logically proven to be true, but because only a function of this form is convenient for applying the tools of calculus to perform "optimization analysis," thereby deriving well-behaved (downward-sloping and convex to the origin) indifference curves and demand curves. It has been reduced to a "technical assumption" of obscure origin, one that simply makes the mathematical tools work.
  2. A rough and uncertain psychological fact: When it becomes necessary to explain to students or the public why this assumption seems plausible, they often resort to commonsense psychological examples, such as, "When you're very hungry, the first slice of pizza tastes delicious and satisfying, but by the tenth slice, you might feel sick." This explanation grounds diminishing marginal utility in an empirical observation about a human physiological or psychological "sensation of satisfaction" that decreases with increasing consumption. This not only makes the foundation of economics dependent on another, less certain discipline (psychology) but also completely misrepresents the true meaning of marginal utility—which is about means being applied to satisfy ends of diminishing rank, not about a quantifiable measure of physiological "pleasure" or "satisfaction."

This attitude toward a core theoretical concept is like that of a programmer who only knows how to call functions from a pre-existing software library. He knows that calling a certain function can achieve his desired outcome (e.g., sorting), and this function seems to work well in practice (the model seems to explain some phenomena). Everyone else uses it, so he uses it too. But he never cares, and may be completely unaware, of the brilliant algorithm (like quicksort or mergesort) on which the function depends, or the logical proof that guarantees the algorithm will produce the correct result. He just treats the function as a convenient "black box" tool.

Mainstream economics does precisely this, stripping core concepts like "diminishing marginal utility" from the logical-deductive framework in which they were born and treating them as mere "instrumental assumptions" for use in a positivist model. Their legitimacy no longer comes from logical necessity but merely from the fact that they "seem" to accord with everyday intuition and help construct models that "appear," statistically, to explain or predict market behavior. Most of them do not know, and do not care to know, that in the tradition of Mises and the entire Austrian School, this is not a "hypothesis" in need of empirical verification at all, but rather an irrefutable truth derived through pure logical deduction from the axiom of human action. They may arrive at the same destination on some conclusions as the Austrian School, but they have a completely different understanding of—and indeed, are ignorant of—the starting point, the nature, and the meaning of this intellectual journey.

The consequences of this methodological "eclecticism" and foundational vacuity are disastrous. It has turned mainstream economics into a discipline that relies increasingly on complex mathematical formalism and statistical techniques while becoming ever more detached from its true subject—real-world, acting human beings. When models clash with reality (as they repeatedly did in failing to predict financial crises), the tendency is to patch the model and tweak the parameters, rather than to reflect on whether the methodological foundation was fundamentally flawed from the outset.

Confronting Criticism: The Solid Defenses of the Misesian Fortress

Although Mises's deductive system is internally logically unassailable, from the day it was born it has inevitably had to face two core philosophical critiques from the external positivist camp. Mises and his most important students and successors (like Murray Rothbard) long foresaw these critiques and constructed solid logical defenses against them.

The first core critique is: "What you call the 'axiom of human action' is not a true a priori truth. It is merely a high-level empirical generalization derived from a lifetime of observing ourselves and others. Its foundation is still experience."

This critique is very clever, as it attempts to undermine the a priori starting point of the Misesian system from within. The Austrian School's response is that this critique conflates the psychological process of discovery with the logical method of justification.

  • The psychological process of discovery may be empirical: The Austrians concede that for us as individuals to "become aware" or "notice" the fact that humans act may indeed require some life experience. A completely isolated consciousness (if such a thing could exist) that has never come to contemplate the concept of "action."
  • But the logical method of justification is a priori: However, how we "prove" this axiom to be true is another matter entirely. The way we justify it is not by appealing to "I have observed a hundred billion actions, without a single exception," a method of induction that can never provide certainty. The way we justify it is by appealing to its logical irrefutability. As shown earlier, any denial of the axiom leads to an unavoidable "performative contradiction." Its truth is established on logical consistency (to deny it leads to a contradiction), not on the accumulation of empirical evidence.
  • The source of knowledge is introspection, not external senses: Rothbard particularly emphasized that our knowledge of action and its fundamental categories (ends, means, choice, etc.) comes, most fundamentally and directly, not in the way we know a table—through our external senses (sight, touch)—but through introspection. It is a direct grasp of our own conscious states and operations. I know I have a purpose, I know I am choosing, I know I am weighing alternatives. This knowledge is internal and direct, and its certainty is far higher than any observation of the external world (external observation can always be mistaken; it could be an illusion or a measurement error). Our grasp of the conscious state of "intending" to do something cannot be reasonably doubted.

Therefore, the Austrian conclusion is: you are confusing "how we came to think of this axiom" with "how we know for certain that it is true." We know it is true because of its logical unassailability, not because of the universality of empirical observation.

The second core critique, which became more influential in the latter half of the twentieth century, stems primarily from the powerful weapon of the philosopher of science Karl Popper: "A theory which is not, in principle, falsifiable by any conceivable empirical observation is not a scientific theory but is instead a closed, unprogressive dogma or a metaphysical system."

This critique seems to strike at the very heart of the Misesian system, because Mises himself openly proclaimed that the theory of human action is a priori correct and not subject to empirical falsification. Does this mean that Mises admitted his own theory was "unscientific"?

The Austrian School’s response is that this critique commits a fundamental category error by wrongly imposing the standard used to evaluate theories in the natural sciences onto a system of knowledge of a completely different nature. To understand this, Mises’s dualistic distinction between “theory” and “history” is crucial.

Mises stresses that economic knowledge comprises two distinct parts:

  1. Theory (Praxeology): This is the a priori, deductive part. It begins with the axiom of human action and deduces the timeless laws of the universal forms and logical structures of human action (e.g., the law of diminishing marginal utility, the tendency for an increase in the money supply to decrease its purchasing power). These laws are products of pure logic, and their validity is independent of any specific time or place. Therefore, they are not themselves subject to empirical "testing" or "falsification."
  2. History (Understanding/Verstehen): This is the a posteriori, empirical part. It studies specific, unique, and unrepeatable historical events. The task of the historian (or the applied economist) is to use the a priori laws of economics as an interpretive framework, combining it with an understanding of the various contingent factors of a specific situation (such as the motivations of particular individuals, the cultural context of the time, unexpected technological changes, specific government interventions, etc.) to explain why a certain historical event occurred in the way that it did.

Based on this distinction, the Austrian response to Popperian falsificationism becomes clear:

  • The theory of human action (like an axiom of geometry) is irrefutable, but it is the tool for understanding reality: The theory itself is indeed not empirically falsifiable, but this is not a defect; it is the very essence of its nature as an a priori logical system. It is like the "axioms of geometry" (e.g., the Pythagorean theorem). The axioms of geometry cannot be "falsified" by measuring a real plot of land.
  • The specific explanation of historical events (like land surveying) can be empirically revised: When we apply economic theory to explain a specific historical event (just as a land surveyor applies geometric principles to measure land), our explanation can be wrong. Such an error does not stem from a flaw in the theory itself, but from an incomplete or inaccurate understanding of the complex and contingent empirical factors of that particular historical context (just as the surveyor might make a measurement error or neglect the fact that the land is not a flat plane).
  • The role of empirical data is to elucidate, not to test: Therefore, the function of economic data and historical observation is not to "falsify" the a priori economic theory itself (just as measurement data cannot falsify geometry). Rather, it is to help us understand which specific empirical conditions, in addition to the universal laws revealed by theory, were at play in a particular historical case, leading to the complex and varied outcomes we observe.

Here, the analogy of the "geometer and the land surveyor" once again highlights the point:

  1. The theory of human action is like the axioms and theorems of Euclidean geometry (e.g., a²+b²=c²). They are products of pure logical deduction and are logically, absolutely, and universally valid.
  2. The economic historian, the statistician, or anyone attempting to understand a concrete economic phenomenon is the land surveyor. He faces a piece of the real world—a plot that is irregular, perhaps rugged, and filled with all sorts of specific features.
  3. The surveyor must use the principles of geometry as his logical tool to guide his measurement activities.
  4. Suppose that after taking measurements, the surveyor finds a discrepancy with the formula a²+b²=c². He would never declare, "I have falsified the Pythagorean theorem!" He would only reflect, "Was my measurement (the empirical data) wrong, or did I neglect the fact that the land is not flat (other empirical factors)?"

Likewise, when economic data (the measurement) appears to contradict economic theory (the geometric principle), this cannot falsify the theory itself. It can only reveal the complexity of the real world. The correct approach is to use the correct theory as a "logical tool" to more carefully "measure" and "understand" this complex reality, not to throw away our only reliable ruler because we encountered difficulty in measuring.

Re-examining Popper's Contribution and Limits: We must acknowledge Sir Karl Popper's enormous contribution. His principle of "falsifiability" is crucial for distinguishing genuine natural science from pseudoscience that can twist any fact to fit its theory (such as Marxism, historical determinism, and Freudianism). However, as Mises repeatedly emphasized in works like Theory and History, to take this scalpel, designed for a specific purpose, and apply it indiscriminately to a domain of a completely different nature—the logical science of human choice—is itself a methodological error. Economics is neither a natural science nor historicism (the belief that history has its own irresistible laws). To judge it by the standard of "falsifiability" is to apply the wrong criterion. The "irrefutability" of economic theory is not its weakness but is the very essence of its character as an a priori logical system.

Conclusion: Rediscovering the Logical Soul of Economic Science

The true scientific spirit does not lie in blindly worshipping a particular research procedure (such as statistical regression or randomized controlled trials) as if it were the one and only path to truth in all domains. The true scientific spirit lies in matching each unique domain of knowledge with the methodology best suited to discovering its unique truth.

For the ever-changing economic world—constituted by the conscious choices, subjective value judgments, and uncertain future expectations of countless human beings—our only reliable guide cannot be statistical data that is forever in flux, rife with noise, and capable only of recording past correlations rather than revealing causal relationships. Our only reliable guide can only be the immutable, deductive laws of the inner logic of human choice itself, laws that originate from the unshakeable axiom of "human action."

To abandon this solid logical foundation in favor of a futile attempt to imitate physics by quantitatively predicting and controlling a complex reality has already left mainstream economics looking theoretically impoverished and helpless in the face of one major economic crisis after another, from the Great Depression to the 2008 financial tsunami. Rediscovering the deductive tradition, long forgotten and marginalized by modern academia, and re-recognizing economics' unique status and dignity as an a priori science of human choice and purpose, is the only path that can lead the discipline out of its current methodological predicament and back to its core function of explaining the social and economic order.

This is the intellectual legacy left to us by Ludwig von Mises, that lonely sentinel of thought—a legacy both priceless and in most urgent need of rediscovery.

And now, we must face the impending collapse of the Federal Reserve and the great economic depression. The Austrian School has no desire to explain further; we have provided ample proof on this matter, having reached our conclusion at least a century ago.


Frank Xiang

October 25, 2025

Vancouver, Night

Bibliography

For a deeper exploration of the core concepts discussed in this article, the following works provide an essential theoretical foundation and context.

  1. Hoppe, Hans-Hermann. A Theory of Socialism and Capitalism: Economics, Politics, and Ethics. Boston: Kluwer Academic Publishers, 1989.
    (One of Hoppe's major works, deeply exploring his theory of private property based on 'argumentation ethics,' in which the 'performative contradiction' is a core argumentative tool.)
  2. Kant, Immanuel. Critique of Pure Reason. Translated and edited by Paul Guyer and Allen W. Wood. Cambridge: Cambridge University Press, 1998.
    (Kant's foundational work, from which the distinctions between analytic/synthetic and a priori/a posteriori, as well as the concept of the 'synthetic a priori' discussed in this article, originate.)
  3. Menger, Carl. Principles of Economics. Translated by James Dingwall and Bert F. Hoselitz. Auburn, AL: Ludwig von Mises Institute, 2007.
    (The founding work of the Austrian School, which established the foundation of subjective value theory and is a key source for Mises's thought.)
  4. Mises, Ludwig von. Epistemological Problems of Economics. Translated by George Reisman. 3rd ed. Auburn, AL: Ludwig von Mises Institute, 2003.
    (A work in which Mises specifically discusses the methodology of economics, systematically explaining why economics must be an a priori science.)
  5. ———. Human Action: A Treatise on Economics. The Scholar's Edition. Auburn, AL: Ludwig von Mises Institute, 1998.
    (Mises's magnum opus, which builds the entire deductive edifice of economic science starting from the axiom of human action.)
  6. Popper, Karl R. The Logic of Scientific Discovery. London: Hutchinson, 1959.
    (In this book, Popper systematically proposed 'falsifiability' as the demarcation criterion between science and non-science. It is a representative work of the positivist philosophy of science to which this article responds.)