Why the Austrians are Wrong

Let me start by saying that I love Mises to pieces. I even have his work of genius, Human Action, sitting on my desk. I've read some of it, and I've even understood some of what I read. It's a damn shame Mises was wrong. Mises was a genius like Aristotle was a genius. They were both pretty amazing and groundbreakingly awesome until science came along and showed them to be wrong. There aren't four elements that make up everything in the universe, sorry Aristotle.

Also, Humans don't Act, sorry Mises. I thought the bit about siding with Liebniz was interesting: "He sides with Leibniz when he answers Locke's famous dictum "nothing is in the intellect that has not previously been in the senses" with his equally famous one "except the intellect itself." The problem is that the more we look into how consciousness works, the more we realize that it isn't above and separate from the universe, or even the senses. Consciousness itself may actually be an illusion! For more on this I'd like to refer you to Consciousness Explained by Dan Dennett. As we are able to peer closer and closer into the brain and how that three and a half pound organ generates what we call "the mind" we realize that humans don't necessarily "act" the way Mises defines action. It's more like we react.

I'd also like to recommend the book, How We Decide, by Jonah Lehrer. It shows how decisions are made often before the person consciously knows he made them. We are learning that the brain isn't one coherent machine guided and focused by the consciousness. It's more like a mish-mash of misappropriated mini mind modules that fight with each other and try to override each other. We have a patchwork of brain components that each may have had one purpose way back in our evolutionary history but are doing something different now. Our consciousness often makes up a story about how we actually 'decided' to do something or 'acted' in a certain way after the fact.

It's telling that a brain scientist can pop your head in an fMRI machine and ask you to 'act' in an economic sense. He can then look at the data on his screen in real time and determine what you are going to do, often before you 'make up your mind'. I wish I could do a better job explaining this, but HUMANS don't ACT. We react. And when we are done reacting, we tell ourselves a lie about how we planned to do what we just did all along.

As far as Mises is concerned, he may have gotten many things right about economics, but it wasn't based on the strengths of his givens. It was a happy accident. I don't think any less of him, just like I don't think any less of Aristotle just because the universe is made of atoms (and things even smaller) rather then different mixtures of dirt, water, fire, and air.