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Neurath’s Opposition to Mises’ Argument

Neurath was unimpressed by Mises’ putative impossibility result. On the one hand, he sought to defend his socialisation plans as a plausible alternative—albeit one that was dependent on success in the research programme of “universal statistics” so as to allow the “calculation in kind” of need satisfaction to be properly developed that socialist resource allocation depended on.[1] On the other hand, Neurath revived his ecological argument which claims the impossibility of accounting objectively for sustainability considerations by monetary calculation.[2]

Of these two strategies the second strikes me as more promising but, unfortunately, it did not gain the prominence at the time which it deserves. Neurath’s reason for holding it to be impossible to account objectively for sustainability considerations by monetary calculation was that the monetarisation of environmental goods and particularly of the discount rate for the disutility suffered by future generations due to the exhausted resources was arbitrary.[3] Moreover, to begin with, sustainability considerations and their like required awareness of the incommensurability of the values involved; once that was recognized, the relevant decisions had to be arrived at by democratic deliberation—precisely the kind of process that was preempted by the automaticism of the profit motive in the market economy.

So Neurath challenged Mises’ conception of rationality—importantly, however, he did not challenge its possibility, but only his monopolistic claim for it. Is it true, he asked, that, as Mises put it, “we are unable to grasp the concept of economic action and of economy without implying in our thought the concept of economic quantity relations and the concept of an economic good”?[4] Neurath could grant this (at least for the sake of the argument at issue), but he pressed further. Does rationality demand that all these quantity relations must be expressed in cardinal measures? On this point Neurath disagreed ever since 1911 when he started developing alge- baic calculi for representing goods transfers using only comparative measures: “a unitary measure is not a necessary condition for comparability”[5] (It was, of course, precisely these merely comparative calculi that evaluations of aggregate allocations of resources individually assessed by calculations in-kind were to depend on.) Taking account of the incommensurability of values meant refraining from the com- mensuration by monetarisation that the market required.

Now Neurath did not discuss Mises’ Geisteswissenschaft methodology explicitly. It does not follow, however, that Mises’ claim to have faced methodological opposition was wrong. What prompted Neurath’s disregard of Mises’ impossibility result was, after all, dissent from his methodological starting point. Mises claimed a conceptual impossibility for marketless socialism. Neurath traced this claim back to Mises’ a priorist presuppositions about rational agents and the nature of economic rationality. Neurath rejected these presuppositions. He proposed to deal with recalcitrant socio-economic phenomena (e.g. to effect transparent sustainability calculations) on anti-apriorist methodological grounds: social science had to be done empirically, not by pressing phenomena into a scheme of intuited essences. While allowing for variation between the disciplines, Neurath’s program of unified science prescribed an empirical methodology for both the natural and the social sciences and rejected the separatism of Geisteswissenschaft on epistemological grounds: scientific reasoning required evidence that was intersubjectively accessible—which intuitions of essences are not. That calculation in kind did not issue in the determination of an optimum solution via commensuration of heterogeneous values did not disqualify it from the start.

So Mises was right that methodological considerations played into the socialist calculation debate between himself and Neurath, but he was wrong to claim that these considerations were only a cover for politically motivated dissent. There are good reasons to keep social science empirical: not only Neurathian socialists will want to dispute the adequacy of the methodology behind Mises’ argument.[6]

  • [1] For the research program-defense see Neurath (1925a/2004, 446).
  • [2] See Neurath and Schumann (1919, 15-16), Neurath (1925b/2004, 468-471), Neurath (1928/1973,263); for discussion see Uebel (2005).
  • [3] This is a point shared by contemporary ecological economists: see Martinez-Alier (1995).
  • [4] Mises (1933a/1960, 14).
  • [5] Neurath (1911/1998, 473). Here lies the origin of his later “Inventories of Standards of Living”(1937).
  • [6] Note that even a sympathetic critic like Robert Nozick, who is open to the possibility of syntheticnecessary truths, cast doubt on Mises’s conception of the status of his theory of action (1977,361-369).
 
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