Mises and Mises (and Knight and Hoppe) on Probability

2 October 2007 at 2:25 pm 6 comments

| Nicolai Foss |

O&M has featured a number of posts on uncertainty as a phenomenon that, in some sense, goes beyond risk. Contributors to these kind of discussions often delight in employing notions such as “Knightian uncertainty,” “genuine, real, true . . . uncertainty,” “the unlistability problem,” “surprise functions,” etc., and they debate whether so-called Knightian uncertainty really is inconsistent with a Bayesian perspective, whether Shackle’s notion of uncertainty is in some sense deeper than Knight’s, etc.

Much of the debate is, if perhaps not a quagmire, then certainly an area where conceptual clarification and some serious formal work would seem to be much needed (with respect to the latter, see this). Conceptual clarification may occasionally involve going back to important figures in the debates and consider what they (really) said.

One such figure is Ludwig von Mises. He held views of uncertainty that in some respects were close to Knight’s views, making a distinction between “class probability” and “case probability” (here), where only the latter, Mises argued, was relevant to human action. Richard von Mises, Ludwig’s younger brother, became known as an eloquent defender of frequentism, that is, the idea that an event’s probability is a limit value of its relative frequency in numerous trials. Perhaps one may think this would lead Ludwig and Richard to conflict on probability (they hold opposite views of most things philosophical) because Mises sounds, in his discussion of case probability (in Human Action), as if he adopts a subjectivist position.

Not so, says Hans-Hermann Hoppe in an interesting piece in the Spring 2007 issue of the Quarterly Journal of Austrian Economics (vol. 10, no. 1), “The Limits of Numerical Probability: Frank H. Knight and Ludwig von Mises and the Frequency Interpretation.” Ludwig von Mises, as well as Frank Knight, essentially subscribed to frequentism, although they used it, in a sense, “negatively.” Thus, both argued that because the probability calculus is only applicable to classes, it cannot be applied to events that are members of no class, such as, Mises argues, human action (Mises’ use of the notion of “case probability” may be a bit problematic against this background). Rather than relying on probabilistic forecasts of the actions of our fellow men, we rely on a process of Verstehen, Hoppe says with substantial textual backing in Mises (Ludwig, that is). (BTW, this is a view that has perhaps been best elaborated by Richard Ebeling in a couple of excellent papers published about two decades ago in obscure places, such as the Lachmann Festschrift.)

One may take issue with Hoppe’s account on a couple of points. I somewhat doubt that it is correct to say that Richard von Mises is the “principal founder” of frequentism, but that he along with Jerzy Neymann and others was an important contributor is of course correct. Also, Hoppe seems to accept frequentism lock, stock, and barrel. To be sure, the distinction between frequentism and Bayesianism is often described as “paradigmatic,” and perhaps it is, in the original Kuhnian sense that proponents of either view simply are unable to establish a meeting of the mind. I, for one, just don’t get why to Mises, Mises, and Hoppe it is “nonsense” to ascribe probabilities to statements, including statements about human action, and only correct to ascribe probabilities to events. But these are minor points. The paper is certainly worth a read.

Entry filed under: - Foss -, Austrian Economics, Entrepreneurship, Management Theory.

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6 Comments Add your own

  • 1. Peter Klein  |  2 October 2007 at 4:22 pm

    Here is another recent paper on Ludwig von Mises’s approach to probability:

    Ludwig van den Hauwe (2007): John Maynard Keynes and Ludwig von Mises on Probability.

    http://mpra.ub.uni-muenchen.de/4665/

  • 2. Dick Langlois  |  4 October 2007 at 9:33 am

    Actually, I weighed in on this issue a very long itme ago, and I still think I got it right.

    Click to access RR-82-09.pdf

  • 3. van den Hauwe  |  11 October 2007 at 1:54 pm

    I thank Peter Klein for having mentioned my paper. It is quite obvious that Hoppe is not familiar with the relevant contemporary literature on the philosophy of probability. Ludwig von Mises and Richard von Mises are so to speak at different poles as far as the interpretation of probability is concerned. There is another paper on the same topic forthcoming; to be followed up!!!

  • 4. van den Hauwe Ludwig  |  4 November 2007 at 12:58 pm

    It is really very kind toward Prof. Hoppe to say that one can take issue with him on a couple of points regarding his interpretation of Ludwig von Mises´ interpretation of probability. While on many issues I side with Prof. Hoppe and I believe he commits less errors than many others, on this issue he is just plainly wrong.
    The most natural explanation for the fact that Ludwig von Mises did not refer to the probability theory of his brother Richard von Mises is that he simply disagreed with his brother Richard who was a positivist. He says so very explicitly – but without naming his brother Richard – when he expresses his disagreement with the neo-indeterminist school in physics to which his brother belonged.

  • 5. Dick Langlois  |  25 November 2008 at 11:21 am

    I have just learned that the link to the paper I mention above has been changed. It is now:

    Click to access RR82-09.pdf

    Thanks to Gustavo Cevolani for noticing.

  • 6. Edmond B.  |  11 December 2008 at 4:36 am

    The van den Hauwe paper can now also be found at:

    http://philsci-archive.pitt.edu/archive/00003864

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