Three Modes of Analysis: Structure, Design and Purpose

The mind has evolved to analyse objects from three distinct perspectives: 1) purpose, 2) design and 3) structure.  The perspective we take when analysing any given object is largely determined by how useful that perspective is for us to gain knowledge and understanding of the object.

1. We can analyse objects as having a purpose. This works very well for humans, and it also works for animals. When a saber tooth tiger is running towards you, a quick analysis is required. The analysis is: 'that tiger intends to eat me'. We think of the tiger as having intent. There is no time to analyse the design or structure of the tiger. In theory, there is no reason that we can't view plants or rocks as having a purpose, except that it is not useful for us to do so.

2. We can analyse objects as having a design. This can be useful, for example, when trying to understand a leaf. We analyse it as the part of a plant designed to capture light. We think of the leaf as having a function. We can understand a leaf better by taking the design perspective than any other. It is not useful to think of a leaf as "wanting" or "intending" to capture light. We also analyse human-produced objects from the design perspective, thinking of them in terms of their function.

3. We can analyse the structure, the physical properties of all objects. In some cases, where the above two perspectives are not useful at all, it is our only way of getting an understanding of the object. To understand a rock means to understand its structure; there is no additional usefulness from thinking of the rock from either the design perspective or the purpose perspective.

Praxeology is the study of what can be learned by contemplating, and drawing logical deductions from, the concept of action.  Action is purposeful behaviour.  Praxeology is therefore an example of taking the purpose perspective towards analysing objects.

Praxeological laws apply wherever there is action, that is, wherever we perceive an object as behaving with intent and purpose.  The observation that most human behaviours are actions, that is, that humans are an example of beings that are usefully considered as purposeful beings, implies that praxeology is a very useful way of thinking about human behaviour.  However, there is no particular reason why praxeology should be limited to humans.  Non-human objects can also be usefully analysed as actors, such as the example of the saber tooth tiger above.

We may ask: is a saber tooth tiger really an acting being?  That is, is the tiger really making choices about his behavior, or are its behaviors entirely instinctive?  This question is really meaningless, however, when we consider purposefulness not as an attribute inherent to objects, but rather as an attribute that minds imbue onto objects, when it is useful to do so.

A purposeful behaviour (i.e. an action) is a behaviour that has been deliberated about and chosen over other behaviours.  I have a clear conception that my own behaviours can be categorized into those undertaken with a purpose (e.g. typing on my keyboard), and those that are reflexes (e.g. sneezing).  I then extrapolate this personal insight about me onto other human beings.  I assume that the behaviours of other humans are not all reflexes. I assume that other human beings behave with a purpose, i.e. with intent, i.e. that other humans, like me, act.

I do this purely because it is more useful for me to think of other humans as acting beings, rather than purely reflexive beings.  I do not know for certain whether other human beings are really acting; it is possible that everyone else, except for me, is purely reflexive and not really making choices at all.

In short, purposefulness/consiousness is not something inherent to objects. It is a word that denotes those objects that we can usefully analyse using a certain mode of analysis: the perspective of intent, desire, action.  Praxeology is an example of this mode of analysis, and it may apply to any being that we find it useful to consider as purposeful - human or otherwise.


Note: This was originally posted as part of a conversation here at the Mises forum.

What is the Austrian School of Economics? How does it differ from Marxist, Keynesian and Chicago Schools of Economics?

Economics is, understandably, known as ‘the dismal science’. Get a large group of economists in a room together, and they will likely provide a huge variety of different, and mutually contradictory, answers to the same question. It may be a question about government policy, or about what causes prosperity, or about what causes booms and busts. It may even be a more fundamental question about a basic economic law or principle.

Economists are often misunderstood, and misunderstand each other. They often have different definitions of basic terms like money, inflation, monopoly, savings and profits. Debates about economics often sound like the Tower of Babel, where mutual misunderstandings abound.

Economists will even disagree with each other on the question: what is economics?

Economists are categorised according to which “school of thought” they subscribe to. The major schools are Marxists, Keynesians, Chicagoans, and Austrians.

The Austrian School has a unique approach to economics. While all the other schools perceive economics as being an empirical subject – in which hypotheses are created from observations, data and statistics, and tested using predictions – the Austrian School perceives economics as an axiomatic-deductive subject, similar to mathematics. Austrian economists reason with logic rather than through use of the “scientific method”, which they criticize as being inappropriate for the science of economics.

All Austrian economic laws and principles are logically derived from a single axiom: that humans act. That is, humans behave purposefully, using means to try to achieve chosen ends; rearranging their environment to a more satisfactory condition to try to remove “felt uneasiness”.

Basic economic principles – such as the law of association (aka the law of comparative advantage), the law of marginal utility, and the law of diminishing returns – can be derived from the action axiom using logic.

By understanding the laws of human action, we can understand how the market process works. The market process is coordinated by profits, and operates through entrepreneurs being free to seek profits. This is the so-called ‘invisible hand’ which guides the actions of humans and results in a complex structure of production that maximises prosperity. Due to the market process, no central planner is needed for society to function or for prosperity to be generated. No state is needed.

In fact, Austrian economics shows that all government actions – the very existence of government itself – must lower the level of prosperity in society. All government actions waste resources, because when a government involves itself, it disrupts the market process which maximises prosperity. Governments can only redistribute and destroy wealth; they cannot add to it.

Austrian economics is “value-free”. It does not assume any particular ideology. It merely demonstrates the effects of different ideologies, policies and actions. If the economist adopts prosperity as his goal, he must advocate free markets. If the economist favors poverty, at least for some individuals, he must endorse some from of government interventionism. This is the lesson of Austrian economics.

The ultimate form of government interventionism is pure socialism: a monopoly run by the government. This arrangement will lead to impoverishment. The major problem with monopoly, from an economic perspective, is an ability to calculate. The monopolist cannot rationally allocate resources, since that requires prices that have been formed in a free market. Supply and demand are thus critically severed, and there is vast wastage of resources.

A government monopoly, unlike a free market firm, does not go out of business when it fails to satisfy consumer desires efficiently. It endures, and may even receive more of the proceeds of taxation. Incentives are chronically skewed. Corruption is endemic. The structure of production is geared not towards satisfying consumers, but towards enriching the monopolist at the expense of consumers. A monopoly is a system of coercive wealth redistribution.

The two alternatives – free markets or monopolies – are central to any political discussion. Should any given industry be run by a monopoly or by free market firms? The question is always the same. Austrian economics shows us that, whatever the industry, a free market will best satisfy consumers.

A market that is subject to regulations, but not entirely socialized, is a middle-of-the-road policy. The number, nature and scope of the regulations in an industry determine the extent of cartelization in that industry. A cartel is a set of firms that has been given a monopoly privilege in a given industry. All regulations have the effect of cartelizing industries; benefiting existing producers at the expense of potential new competitors, and protecting large firms at the expense of smaller firms.

In terms of policy endorsements, Marxist economists tend to favor full socialism, aka communism. Keynesians and Chicago School economists tend to favor full socialism in certain industries (such as law, security, money, roads, education). In other industries, Keynesians tend to favor heavy regulations, a system known as corporatism or State-capitalism, while Chicago economists tend to favor some free markets. These economists have reached different conclusions based on their various ways of analysing and interpreting economic data, which is the nature of economics in their view.

Austrian economists disregard data when formulating theories. Data can only be used to demonstrate Austrian theory in action. Austrian theories cannot be falsified by any new data or observations. Austrian economics is logically derived from an incontestable axiom; so long as the logic is sound, the theories are similarly incontestable, or apodictically certain.

Since Austrian economics demonstrates unequivocally that free markets generate prosperity better than monopolies or government interventionism, in any industry, Austrian economists tend to be libertarian anarchists.