This article is the continuation of The Church and the Market: In Defense of Economics. Elaborating the meaning of praxeology is the subject in this article. This is the first section found in the first chapter of the book.
Praxeology is the "science of human action" (p. 16). Economics falls under this category. At the same time, for the Austrian School, praxeology is its central methodology. From the fact of human action, economists in this school employ reason "to deduce an entire edifice of economic truth" (ibid.).
Though the Austrian economists agree in their central methodology, two of their great leaders, Ludwig von Mises and Murray Rothbard differ in their basic presuppositions. Ludwig von Mises started from a Kantian basis while Murray Rothbard proceeded from an Aristotelian-Thomasian grounds.
After mentioning the difference in the basic assumptions between Mises and Rothbard, Woods demonstrates several Misesian economic postulates derived from praxeology. By doing this, Woods wants to show how praxeology works in concrete situation.
Woods presents the goal in human action as the first postulate. The reason why human acts is to achieve an end better than his present situation. It is the satisfaction of this end that motivates man to act. We can find this concept in the writings of both Aquinas and Mises.
Other components in human action include the use of time, resources, and the human body. When man acts , he employs these components. Inherent in such an action is choice, and this in return implies a cost. By this, Woods means that in deciding for one thing, other alternatives are left out. To do this, it requires an "ordinal ranking of ends" (p. 17) depending on the value that one places on these ends. At this point, "the concepts of subjective value and the subjective nature of costs" (ibid.) enter into the scene.
A related concept is implied in the above explanation. This time, it is "the law of diminishing marginal utility" (ibid.). In simple terms, this means that any good that you have more supply, the lesser you need it.
The foregoing consideration leads to another postulate, the law of supply and demand. Since the law of diminishing marginal utility has something to do with the person's decreasing demand of a particular good as its supply increases, it follows that anyone will only be willing to increase the quantity of the same good provided that its price declines. Similar principle can be applied to labor and employment. Due to the influence of interventionism in imposing higher salary without considering the increased demand for labor, this action will logically results to fewer jobs.
In concluding this section on praxeology, Woods mentions Mises' concept about the two branches of the sciences of human action: praxeology and history. For Mises, the theory derived from praxeology is necessary to interpret history. This is because the concepts derived from praxeology are not taken from experience itself, but through logical deduction. With this principle, praxeology negates logical positivism.
I decided to suspend my assessment concerning the source of presupposition of both Ludwig von Mises and Murray Rothbard. I need to review first the Van Tilian presupposition before I will attempt to give my own assessment.
Source: Woods, T. E. Jr. (2005). The Church and the Market: A Catholic Defense of the Free Economy. Lanham/Boulder/New York/Toronto/Oxford: Lexington Books.