Logic Discussions: Praxeology

in #logic8 years ago (edited)

Praxeology - What is it?

Praxeology is the study of human activity, specifically the actions we take and consequences that occur as a result. It is not the same as psychology, which attempts to determine the "why" of an action based on biological and personality factors. Instead, it focuses on the "why" of the consequences, attempting to predict the unforseen implications of an action via logic and reason. It studies all the choices that are made, and determines what can be learned from them. It teaches us to look for both the consequences that can be foreseen, and those that can be inferred by surrounding events.

Okay... Why should I care about this?

Understanding the logical consequences that result from an action (or praxis) , both the good and bad, is necessary to determine if such actions are beneficial to society or the individual. It also helps in determining the logical real world motivations for an action as well, mainly because every action is predicated on previous ones.

This is particularly true in the sphere of politics. Politicians get funding for campaigns from lobbyists and corporate enterprise. This funding then drives their legislative decision making, as they will seek favourable laws and regulations for their backers. This is the main reason why the elite in society can dictate the rules governing that society.

One could claim the personality traits of politicians can be used to predict such behaviour, which may be true. Unfortunately, such analysis is somewhat speculative because the study of the mind is still an ongoing process, one that is heavily reliant on statistical modelling & theoretical interpretations, and less on logical thought. This isn't to say that psychology is not a worthwhile field of study, but it's a field which not everyone can easily comprehend.

One can definitively claim through Praxeology, however, that x action, regardless of the psychological makeup of an individual, can lead to y results. To study it requires an understanding of what actions were taken historically, what results occurred, and whether or not other attempts to take the same actions produced those results again. As such, it is far more intuitive and predictable a system of analysis.

Praxeology, Politics, & Economics

In politics, praxeology is useful for understanding the potential unintended outcomes of policy decisions, the physical motivators for each politician's choices, and the rationales as to why people voting. For instance, a person struggling to make ends meet on $10/hr will likely vote for someone promising $15/hr minimum wages. Conversely, applying a $15/hr minimum wage will logically cause one or more of the following for companies that use cheap labour: job losses, increased prices, or restricted growth, all because of the costs associated with increasing minimum labour costs by 50%.

Extend it further - what can we infer?

If every business knows they can expect more money to be paid out, what stops any business charging even more? The proportion wage benefits get swallowed up by the inflating prices. This can be seen over time, as the price floor adds to inflation. Companies get subsidises to compensate for these differences, which means more money spent, more national debt, and eventually taxes to fund it (or the interest on the debt at least).

Then there are the negative effects on those above minimum wage before the change. If they were already at the proposed new rate, their labour has been effectively devalued to a low paying job. This is another disincentive to productivity, though it can increase demand for higher wages in other sectors in the future. This drives the cost of business up over time, as logically any price floor will do.

Raising the price floor does another odd thing - drives companies to automate everything. Once technology becomes a cheaper solution (as it has at McDonalds), the price floor has eliminated the job market in a company, and eventually that will spread across the industry. All because it became too expensive to give a person the job.

People have a funny way of presuming because something sounds like a good idea, it must be a good idea. Unfortunately, if this were true, the term unintended consequences would be an oxymoron instead of something people have to consider. The PATRIOT act sounded brilliant to many, as does the NSA seeking terror practitioners online. Unfortunately the unintended consequences include access to every single compromising picture on your phone & PC, the ability to blackmail people in power, and provides the means to access all data online if anyone can break into it (don't presume they can't either, it's been done many times in the past).

Praxeology & Real World implications

Here is a different example, from the private sector - ponzi schemes. That's right, the government isn't the only conman out there. These schemes can be enticing, promising huge returns on investment, but they often lead people into a trap, where only the first ones in can get the biggest payouts. This is why it is important to consider any investment carefully. It's like purchasing fruit at a farmers market - sometimes a perfect looking apple has a worm in it.

So assuming you decide to invest in anything, you should consider the consequences of what you decide to put in. Never spend more than you can afford to lose when investing. That way if the worst happens, you haven't ruined your future. It would be like a day at the races (with a fixed budget) when all your horses went lame - incredibly painful to watch, but you'll survive it. And of course if the investment succeeded you'd still make a return, but a less rewarding one. This way, at worst you have a null set impact. It's money you have already assumed you've lost, so to get more back will be a bonus.

Conclusion

Understanding logic is crucial to understand why things have turned out the way they have, instead of how they were intended to turn out. Intentions mean nothing in reality. What matters in the end are consent and understanding the risks inherent in an action. Praxeology provides a means of identifying those risks, and helps us determine if they are actually worth taking in the first place.

For more information visit praxeology.net

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Very interesting. But your minimum wage example was not a good one in my opinion,as the consequences of that is too hard to predict, as you need to determine the possible causal connection between an increased minimum wage and for example job losses. You also might argue that if the increased minimum wage is based on a human rights perspective,and this increase would create problems for the economy(neo-liberalism) then neo-liberalism is flawed,and needs to be changed. This is my conclusion.

@kooshikoo thank you for the feedback. From my perspective the causal link to the issues I listed with minimum wage is cost reduction measures to remain competitive for investment and retain pre-existing margins for profit. Both are issues to consider when discussing any business.

Well,your statement "cost reduction measures to remain competitive for investment and retain pre-existing margins for profit" does not refer to a causal link,but refers to standard neoliberal economic theories,which are not really provable in my opinion. for instance this quote from a study made by the Center for Economic performance:
It has proven difficult to identify evidence of negative employment effects
associated with these wage gains. Stewart (2004) has presented robust evidence, from a
range of longitudinal data sources, appearing to show that there have been no reductions
in the employment probabilities of minimum wage workers as compared to workers
slightly higher up the wage distribution. Even in the very low wage labour market for
care assistants, a sector one can view as being highly vulnerable to minimum wage
legislation, Machin, Manning and Rahman (2003) report only moderate disemployment
effects http://cep.lse.ac.uk/pubs/download/dp0715.pdf
In any case,the overall impact has to be considered from different perspectives: The national economy as a whole(not just private enterprise) negative effects of poverty which reduce life quality and even harm the economy,such as: Crime,health issues caused by poverty,including drugand alcohol abuse and mental illness(all these are linked).And social instability.
So your praxeology was incomplete.

It's not "standard neo-liberal" - it's standard classical and most post-classical (including neoliberal) economic theory, and it is supported by about 50% of the studies out there. It is hotly debated, and so I agree that he should change it, but you're entering into exactly the sort of debate I warned him about with respect to this topic.

You're also correct in that it is hard to establish a causal link... it is also hard to find any empirical causal links in economics or any social science, because the data is not amenable to the scientific method - it is not repeatable, not controllable, and generally results in this exact sort of situation where specific sets of data are seen to prove this conclusion or that conclusion depending on their framing.

As to Stewart, his problem is one of generality... his examinations look at general employment numbers, not deeply regional/situational effects that might be quite different, and while this all hearkens to Card/Krueger, lots of work subsequent to them have gone back and forth on the question, finding more than "modest" dis-employment effects, all the way to validating Card/Krueger. And that's the problem. The actual science is a shit-show... because you cannot take an empiricist approach to something like an economics question. The data is just not amenable to inference without the risk of massive skew, massive interpretive contamination, researcher bias, since it is neither controllable nor repeatable.

And the effect is different if it is locally applied, vs. federally applied, etc.

Considering "the national economy as a whole" is all fine and dandy, but distinguishing this from "not just private enterprise" is sort of bizarre, since no one studies employment effects across an economy without including state actors in the evaluation, and no one that I've read, who is opposed to wage price-floors are unconcerned about the poor. It's just that they don't believe that minimum-wage controls are the best way to actually help the poor. So adding all the deleterious effects of poverty (which I 100% will stipulate to) doesn't add anything to the argument, it just seems like a vague way of making opponents of minimum wages sound like terrible people.

At any rate - even moderate disemployment is a big deal, since it is the least-privileged "marginal" worker who is most going to feel whatever disemployment effects might be found. So even a modest impact needs to be evaluated against other policy changes which might address the same concerns about poverty without disemployment, such as reducing the payroll-tax burden of employees, increasing income tax minimum deductions, or whatever they're called (basic amount under which you don't pay taxes), or other such measures which decrease or maintain relative cost of labor while still getting marginal workers more of their own money. And we could comfortably fund that by stopping bombing so many brown people in the middle east, or stopping giving money to agriculture and energy sector incumbents.

At any rate, even the bad effects you're concerned about (which I share concern about) aren't actually justifications of the policy, absent consideration of alternatives and of side-effects. That something must be done doesn't imply that any policy that we might imagine should be that something.

Anyway - his praxeology isn't complete... it's just not applicable to the sort of analysis you hope to achieve... which those who tend to appreciate praxeology argue is an unfit method for the study of social sciences such as economics.

David Gordon did a pretty reasonable overview of this methodological dispute in a video for Mises University.

@kooshikoo I've extended it, just for you 😁

To put it bluntly, I know just how easy stats can be manipulated to fit a belief. For instance, this report is a generalised view, not a specific view of companies with high volumes of minimum wage staff. Unless it is logical to have a price floor on labour > 0 for business to be viable, I'll stick to my argument.