The Success and Failure of Talcott Parsons
Methodological Individualism Found and Lost

Rafe Champion

For an updated version of this paper see

The Convergence of Parsons, von Mises and Popper
September 2010

July 2007
Footnotes and references pending.
A draft of a paper to describe how Talcott Parsons reinvented the Austrian wheel with the "action frame of reference" for purposeful  human action but lost the plot due to an obsession with holistic systems theory derived from classical mechanics.

This work by Parsons, published in The Structure of Human Action (1937) could have converged with the praxeology of  Ludwig von Mises and the "situational analysis" of Karl Popper but instead the three programs proceeded independently for several decades and the opportunity to re-integrate and re-orientate the human sciences and political economy was lost, at least for the time being.

For more on this, see Convergence with a comparison and contrast of the action frame of reference, praxeology and Situational Analysis.

The real foundation of the differences between the two schools, which are still not completely bridged, is something much more important: it relates to the different view regarding the objectives of research, and about the set of tasks which a science of economics has to solve.”

That was Carl Menger's comment on the debate over methods, called the methodenstreit, between himself and Schmoller, head of the German "historical school" of economists. One of the issues raised in this paper is the idea that major schools of thought need to be probed at the level of their metaphysical presuppositions, an area which positivists are systematically disabled from pursuing, and where most non-positivsts get into trouble by a combination of "essentialism" (extended conceptual analysis) and failure to engage with practical or policy-oriented problems and fieldwork. Presuppositions at that deep (or high) level can be described as invisible railway lines of thought that place constraints on the field of search for new ideas and frame the way that questions are asked and answered.


At least three varieties of methodological individualism can be identified in the modern social sciences. These are the praxeology of Ludwig Mises, the voluntarist theory of social action of Talcott Parsons and the situational analysis of Karl Popper. This paper describes how Talcott Parsons drew on Marshall, Pareto, Durkheim and Weber to foumulate an individualistic “action frame of reference” in his first book The Structure of Social Action (1937). The paper then signals some flaws in his approach which drove him to abandon individualism in his subsequent work. There are some suggestions about the implications of the action frame of reference for research programs in economics and the human sciences. Finally there is an introduction to some of the railway lines of thought that create problems for the Austrian approach in general and methodological individualism in particular.


This paper reports on a part of a project designed to address some problems in the methods of the social sciences and to build bridges between different parts of the humanities and the social sciences. The aim to to liberate the potential of some lines of thought that have been suppressed or devalued. These include the Austrian school of economics and the political philosophy of classical liberalism. Common to these movements is the notion of the creative individual and the creative potential of all people, so everyone has a degree of autonomy and the capacity to be an entrepreneurial agent (to a greater or lesser extent), not merely a passive response mechanism [Footnote Chomsky on linguistic creativity].

Methodological individualism (MI) is the convention that calls for the explanation of human behaviour, and its unintended consequencess, in terms of the decisions and actions of individuals in situations where some of the elements can be changed by human action even though most of the situation cannot be changed in the short term. MI is contested and it is much misunderstood, especially when it is conflated with other forms of individualism such as political individualism (the notion that the prime function of the state is to protect individuals) or atomistic individualism (that ignores the context). MI maintains that it is individuals and not collectives who think, feel, live, love, suffer, deliberate and make decisions. It does not deny that we usually find ourselves in situations that are not of our own making, that we act under the influence of many traditions of which we are unaware and that our actions produce unintended consequences. MI does not claim that individuals have any kind of ontological priority over groups and it makes no exaggerated claims for the powers of human reason and rationality.

Parsons on the role of theory

Parsons pursued his theoretical interests in a distinctive moral and metaphysical framework derived from a socially oriented form of Christianity which pervaded the Parsons household and Amherst College as well. Although Parsons was not himself a religious believer the framework produced two significant consequences (1) the theory of action had to allow for an element of individual freedom and choice and (2) human welfare and the amelioration of the human condition were over-riding concerns, so despite his lengthy immersion in classical economic theory at the start of his career he supported the progressive wing of the Democrats and the New Deal.

Parsons was unusually sensitive to philosophical issues and late in his career he provided an extended account of his intellectual development including his methodological commitments (Parsons 1970),

“I may start by saying that the main subject matter will be the evolution of a contribution to the generalized theoretical analysis of the phenomenon of human action, with special concern for its social aspects – that is, the theory of the social system…I was perhaps predisposed in this direction by a highly unorthodox education”.

He found his way into theoretical sociology as a result of some accidents, lucky breaks and significant intellectual contacts in his studies in the US, England and Germany.

“In 1923, my junior year, I was converted [from biology and medicine] to social science under the influence especially of the unorthodox ‘institutional economist’ Walton Hamilton. Then all my concentration plans were disorganised by the dismissal, at the end of my junior year, of Alexander Meiklejohn as president of the college. None of the teachers whose courses I had elected was on hand the next fall. I made do with more courses in biology, some in philosophy, including one on Kant’s Critique of Pure Reason, and some in English literature”.

When the time came for graduate work he was pleased to accept an offer of an uncle to finance a year of studies overseas, first at the London School of Economics and then on exchange to Heidleberg where Max Weber had worked until his death five years before. Weber turned out to be Parsons’ most important single influence and he wrote “It is significant that I do not remember having heard his name either at Amherst or in London”.

Parsons' first problem was to defend systematic theory against various forms of empiricism which emphasised the accumulation of facts as the proper occupation of the scientist. At the same time he attempted to justify what he called analytical realism against “instrumentalism”, that is, the idea that theories are merely convenient fictions. Against the empiricists Parsons claimed that there could be no worthwhile fact gathering without some reference to theory, and against the instrumentalists he maintained that some of the general concepts of science are not convenient fictions but actually capture abstracted aspects of the external world.

"Returning to this country I found behaviorism so rampant that anyone who believed in the scientific validity of the interpretation of subjective states of mind was often held to be fatuously naive. Also rampant was what I called 'empiricism', namely the idea that scientific knowledge was a total reflection of the 'reality out there' and even selection was alleged to be illegitimate".

Parson's congenial attitude to theory was shaped by the course on Kant which he took as an undergraduate and it was reinforced by his Continental travels. His position with regard to fact and theory was a marked advance on the various forms of empiricism which he attacked. He never claimed that facts do not matter and he has always insisted that theory should not become divorced from facts. “... the scientific importance of a change in knowledge of fact consists precisely in its having consequences for a system of theory".

The Structure of Social Action (TSA)

TSA runs over 700 pages in four parts. Part I is The Positivistic Theory of Action. Part II is The Emergence of a Voluntarist Theory of Action from the Positivistic Tradition. Part III is The Emergence of a Voluntarist Theory of Action from the Idealistic Tradition and Part IV is the Conclusion with verified conclusions and methodological implications. The substantive problem situation as Parsons defined it was the failure of three broad systems of social theory to provide an adequate general theory of human action. A satisfactory theory has to accommodate the co-existence of social order with voluntarism, that is the perception of freedom and choice (within limits) that all but the most strict determinists regard as an essential feature of human action. The scheme had to allow for social order and also for social change. It had to provide a frame of reference to analyse the emergence of complex systems from less complex beginings and the interpenetration which exists between the factors controlling the whole and the factors controlling the parts. Some of these factors are in the domains of metaphysics, morals and cultural values and these elements have been hard to accommodate in models of explanation borrowed from the natural sciences.

The basic unit of the system that Parsons set out to conceptualise is a single “act” with the following features an agent or actor; an end or objective; the act is initiated in a situation where there are some elements that are beyond the control of the actor (conditions) and some elements that can be manipulated (means); there is an element of discretion in the choice of means (and possibly in the choice of ends as well) and this introduces norms or values into the decision-making process of the actor (TSA p 44-45).

“As will be seen, the discrimination of various possible modes of normative orientation is one of the most important questions with which this study will be confronted” (TSA 45).

The three inadequate systems were:

I) Utilitarianism and classical economic theory which involved a rationalistic, individualistic theory of social behaviour.

II) Positivism, the larger framework of utilitarianism that included some non-economic elements in psychology and biology to account for the aims and ends of human action.

III) Idealism, the set of theories which interpreted social phenomena as emanations from the realm of cultural values.

The failure of positivism

In Part I of TSA Parsons traced some of the history of ideas in the utilitarian and positivist traditions.The situation postulated by the utilitarian scheme consists of “atomistic” individuals, pursuing their own uncoordinated (random) self interest as they (rationally) perceive it. The challenge offered by Hobbes to this system was to account for any kind of social order in the “war” of all against all, absent the imposition of order by a sovereign power.

Two major shortcomings emerged from the analysis of the utilitarian theory. First, this scheme could not account for ritualistic activities which did not seem to serve any rational purpose (as 'rational purpose' was defined within the system). Parsons commented "Their negative valuation of ritual was one of the few points on which the Puritans and the men of the humanistic renaissance could agree". Second , and more important, the theory gave no explanation of social order or the coordination of individual acts into organised social systems. "For the failure to state anything positive about the relations of ends to each other can then have only one meaning - that there are no significant relations, that is, that ends are random in the statistical sense".

Such a theory can give no answer to the Hobbesian problem of order because it provides no explanation for the uncoerced coordination of activities which occurs in small groups, or for the coordination that occurs in the extended order of markets, in social systems and cultural collectives.

Parsons defined positivism as a larger framework that incorporated utilitarianism. It aims to account for the aims and ends of human action that were unexplained in utilitarianism by incorporating advances such as Darwinian evolutionary theory and more complex theories of human motivation than the rational calculator of economic theory. Parsons classified these theories as “positivist” because they were rooted in scientific facts without reference to an autonomous domain of values. They attempted to overcome the utilitarian dilemma by providing a “positive” (objective or natural science) explanation for the coordination of ends.

"If ends mere not random, it was because it must be possible for the actor to base his choice of ends on scientific knowledge of some empirical reality...Then action becomes determined entirely by its conditions...The active role of the actor is reduced to one of the understanding of his situation and forecasting of its future course of development".

But what sort of information would be used by the calcuIator/actor for his forecasting?

According to Parsons' interpretation:

"...the explanation of action lies in the conditions of the action objectively rather than subjectively considered, most practical purposes may be taken to mean in the factors of hereditary and environment in the analytical sense of biological theory".

Parsons was not prepared to accept this as an adequate theory of human behaviour because it ignored the emergent properties of complex systems, particularly the ethical elements which he believed entered as a creative factor in human action.

"The orientation of ethics (as opposed to science) is essentially active. Its centre of gravity lies in the creative role of the actor, his ends. Freedom of choice is basic to ethics; whatever determinism is accepted lies in the field of the consequences of having made a given choice".

Marshall, Pareto and Durkheim

In part II Parsons explained how Marshall, Pareto and Durkheim started in positivism and moved in the direction of a more developed action theory. Marshall is usually regarded as a great economist pure and simple but Parsons drew attention to the second side of Marshall’s work, which was “on the one side a study of wealth and on the other and more important side a part of the study of man. For man’s character has been moulded by his everyday work…more than by any other influence unless it be that of his religious ideals….” [Parsons p 134 Parsons italics]. For Parsons it was significant to discover that the nucleus of Marshall’s concept of human activities was “a system of common ultimate-value attitudes…(453)

Contrary to the more common negative views of capitalism and free enterprise, Marshall regarded the market economy as a force to improve both human nature and the human condition. For Parsons, the recognition of cultural factors and common values marked progress towards an action theory although this was only a tentative step because Parsons found several faults with Marshall’s position.

1. In his method, he stuck to the empirical level of analysis through a distrust of long chains of deduction, abstracted from the concrete reality of people at work.
2. In his theoretical framework (consistent with his empiricism) he kept his detailed analysis at the level of economics (supply and demand) without incorporating the normative elements into a broader framework of analysis.
3. In his ideology he did not consider alternatives to the linear evolution of values that he considered appropriate to the market order. This kept him from following through the theoretical implications of the existence of alternative value systems.

Pareto’s methodological analysis was more sophisticated, starting from a thorough immersion in the methods of the natural sciences. In addition his cynical view (free enterprise for him was plutocratic oligarchy) and his historical scholarship enabled him to see the existing value system as one among many. For Parsons, the importance of Pareto lay with his analysis of the demarcation between the logical component of decision making (based on scientific understanding of cause and effect) and the complex of non-logical elements in human behaviour that he grouped in three categories: the sentiments, the residuals and the derivations. The sentiments operate at the deepest, instinctive level of influence, they are the subject matter for psychology and their existence can only be inferred. The residues are related to the instincts but are more definable and Pareto identified six categories; (1) instinct for combinations, (2) group persistence, (3) need for expressing sentiments by external acts, (4) residues connected with sociality, (5) integrity of the individual and his appurtenances, (6) the sex residue.

The derivations are the complexes of ideas that people use to justify their actions. They are highly variable between groups and over time, and they are based on one or other of the relatively stable residues. For example the residue ‘Group persistence” can be expressed by the beliefs of any of the great religions, which are derivations in Pareto’s scheme. Pareto’s work is usually placed in the “unmasking” tradition and it is often interpreted in a corrosive and cynical manner to dismiss all talk of aims and ideals as a cloak for ulterior motives. For Parsons the important feature is direction that Pareto took to explore and classify the “non-rational” motivational factors in a systematic manner.

Durkheim stands in contrast to the economists Marshall and Pareto in at least three ways. First, he approached from the disciplines of philosophy and law. Second, he was a great empirical researcher with his classic work on suicide and to a lesser extent his work on the relgious beliefs of the Australian Aborigines. And thirdly, far from relegating moral values to a fringe (non-logical) status, he wanted to create a science of morals to address the problem of social fragmentation that he perceived to be caused by the influence of industrial development (the division of labour) and the secular challenge to traditional religions.

Durkheim became aware of a “non-contractual element in contract” and the way that legal sanctions are only the second line of defence to protect the integrity of the legal and moral codes that constitute the social order. The first line of defence is the internalisation of a body of beliefs that underpins and “empowers” the laws, rules and regulations that people generally accept. These are backed up and reinforced by the law enforcement agencies and the justice system which are the second line of defence. He explored the overwhelming influence of shared normative rules which he called the “conscience collective”. This and the related concept of the “collective representations” are often misunderstood and subjected to criticism as a kind of psychological theory of a group mind. For Durkheim they form the subject matter of sociology, not psychology, and they make up the common values that align the interests of individuals into social, politial or cultural collectives. These common values are the invisible cement that binds the instutions of society and for Parsons they became a primary focus of interest for sociological theory.

At the end of section II Parsons concluded that a clear pattern was emerging from the work of Marshall, Pareto and Durkheim and this set of ideas, which he called the “action frame of reference” represented a step forward for the conceptual farmework of economics and other human sciences, especially sociology.

The breakdown of idealism

The framework of human action that Parsons could see emerging from the positivist tradition in the work of Marshall, Pareto and Durkheim tended to converge with another school of thought that evolved out of the very different idealist tradition of social theory. This largely Continental stream of thought presented answers to some of the problems regarding the role of non-scientific facts in human action that were left unsolved by utilitarianism and positivism but it did this by verbal sleight of hand. The Geist or spirit of the culture is invoked to explain human action as a visible expression or emanation of underlying forces and tendencies. This solved the problem of order without using physical reduction to physics and biology but it involved an unsatisfactory reduction of a different kind.

For Parsons, seeking a general theory of action, explanation of human behaviour as a manifestation of the Geist was no better than an explanation in terms of physics and biology. What was worse from Parsons' point of view was the doctrine that every social or cultural situation had to be considered in its concrete uniqueness, a doctrine that prohibited generalisations in time or space to cover different societies or cultures. This was a part of the docrine defended by Schmoller in his debate with Menger in the methodenstreit.

Parsons followed Weber in his reaction against two idealist doctrines which Parsons called objectivism (or particularism) and intuitionism. Both schools agreed that general laws cannot be used in the human sciences but they disagreed as to the reasons. Objectivism in this context is the view that the historical and social sciences should only concern themselves with the detailed facts of particular human acts and not attempt to build up any general theories. Along with this goes the idea that the subject matter of the social sciences has certain peculiarities which make generalisations about it impossible, hence in so far as general concepts are supposed to be rational, then historical reality is 'irrational'. Against this Weber argued that we cannot make sense out of history and human behaviour unless there is some pattern in it, and the necessary pattern is provided by human motivation which we comprehend by sympathetic understanding. In other words, we have access to the subjective aspect of human action and this concept of intuitive understanding he called verstehen following Dilthey and others. Intuitionism involves an extension of the role of verstehen beyond the level of particular actions to grasp the nature of cultural totalities in all their uniqueness and individuality while objectivism/particularism stresses the need to carefully build up a picture of the specific (particular) historical reality.

Weber was well read in the philosophical literature including the philosophy of science which was well advanced in the hands of writers like Rickert, so much so that the logical positivism of the twentieth century represented regression rather than progress [Huff, 1984]. Weber went on to build up a sophisticated methodology including three elements which Parsons adopted. These are:

I) general concepts are required in the social sciences as well as in the natural sciences.
2) verstehen, the faculty of sympathetic understanding, is required to cope with the subjective aspects of action.
3) if action is to be understandable there must be an element of rationality in it. There must be some comprehensible relationship between ends and means.
Parsons was not completely satisfied with Weber's scheme because he thought there was even less difference between the natural and social sciences than Weber allowed. Parsons proposed to make a distinction between analytical and historical sciences, or at least between the generalizing and historical modes of investigation, a distinction which cuts across the boundaries usually placed between the natural and social sciences.

"Then for the historical sciences theoretical concepts are means to understanding the concrete historical individual. For the analytical sciences, on the other hand, the reverse is true; concrete historical individuals are means, 'cases' in terms of which the validity of the theoretical system may be tested.”

[Footnote, Popper made a similar distinction between the generalising and the historical sciences, each using the nomological-deductive model of causal explanation based on a combination of initial conditions and general laws. Hempel followed Popper and this approach became associated with both men although Popper moved on to favour the model of situational analysis in the human sciences.]

Parsons was also critical of Weber's tendency to admit or imply that general concepts such as his system of 'ideal types' were useful fictions. This almost allowed his methodology to lapse back into the errors of particularism and intuitionism.

The Action Frame of Reference

Parsons wrote that he was engaged in a combined theoretical and empirical project, with the data consisting of the theories of the writers that he studied. He claimed that he had verified some conclusions from his research and the evidence consisted of passages from the works, some of which he quoted or summarised, and other evidence could be found by reading the relevant texts. The verified conclusion was the action frame of reference (AFR) which he found in a more or less developed form in the four main players in his game, though in each case adjustments were required to produce a better finished product. He offered his version of the AFR as a contribution to sociological theory, a framework for analysis at a rather high level of abstraction, though he did not claim that it was the last word on the matter.

The main features of the revised action frame of reference are (pp 732-3):
1. The structural elements of the unit act are - ends, means, conditions and norms.
2. There is "A normative orientation of action, a teleological character".
3. "There is inherently a temporal reference. Action is a process in time".
4. "Finally, the schema is inherently subjective...the normative elements can be conceived of as 'existing' only in the mind of the actor."

All of that will be very familiar to people operating in the Austrian tradition.

After TSA: methodological individualism lost

After his first book Parsons set out to correct what he considered to be an excessively individualistic approach implied in the voluntarist theory of action. He wrote that "...the structure of social systems cannot he derived from the actor/situation frame of reference" and this drove him to abandon the methodological individualism of the action frame of reference in favour of the concept of systems. He introduced the concept of system into sociology under the influence of Pareto, Whitehead, Cannon and Henderson because it seemed to be a good thing in classical mechanics and physiology. This may seem a strange procedure for a man who described himself as a participant in the war of independence of social sciences with regard to biology but Parsons always leaned upon the physical sciences for ideas about the methodology of theory construction. The Structure of Social Action contains many references to the tendency for a theoretical system to become "logically closed" in the manner of classical mechanics and late in his career he stated that we need a science "with the nearest possible approach to an equivalent of the role of mathematical analysis in physics”. For the equivalent of maths, Parsons developed an elaborate scheme of “pattern variables” which were supposed to describe the way that people orientate themselves in “social space”. This scheme was subjected to devastating criticism along the lines that the conceptual refinements of the scheme overwhelmed some potentially useful insights that might have been obtained by using conventional language to explore the way that people adopt various sets of values values. [Baldwin].

The voluminous postwar publications of Parsons and his students and colleagues stand as a monument to their industry and the influence that Parsons exerted in the field for some decades. However the theoretical value of this achievement is open to question in view of the retreat from methodological individualism and the tendency towards conceptaul refinements without linkage to testable theories. The extent of his retreat from MI was apparent when (late in the day) he encountered the General Theory of Keynes and immediately and uncritically incorporated it into his own general theory during a visit to England in the 1950s. The result was a book on economics and sociology.

Parsons nominated several levels of theory, with general theory at the apex performing a number of functions from “furnishing general categories of orientation to observation” through “providing a common language” to “providing canons for the criticism of theories”.

"At the end of this road...lies the ideal state scientifically speaking, where most actual operational hypotheses of empirical research are directly derived from a general system of theory....Most emphatically I wish to say that the general theory on which I have placed such emphasis can only be justified in so far as it "spells out" on the research level, providing the more generalised conceptual basis for the frames of reference, problem statements and hypotheses, and many of the operational concepts of research."

It is very hard to find any sign that his general theories ever spelled out at the empirical level and it is most unfortunate that he never wrote the monograph that should have come from the major program of empirical work that he and co-workers conducted on medical practice during the early 1940s. That task would have forced him to confront the task of getting theories and data to meet in a helpful manner. It seems that the stress of losing his brother and both parents in a short period precipitated an emotional crisis and when his strength returned he resumed his pursuit of general theories under the influence of the idea that theoretical development consists of the elaboration and refinement of concepts.

On that topic he wrote:

"To make empirical generalisation the central focus of theory in a science is to put the cart before the horse. In proportion as a generalised theoretical system is really perfected, and, what necessarily goes with it, empirical research and knowledge of fact builds up, it becomes possible to attain more and more comprehensive empirical generalizations. Indeed it can be said that any system of sound empirical generalisations implies a generalised theoretical system."

It seems that the subsequent failure of development in the Parsons Program may be related to a misleading conception of the relationship between the "generalized theoretical system" or the metaphysical framework, and the testable scientific theories that it is supposed to sponsor. This is apparent in his attitude towards the elaboration of concepts, towards isomorphisms and in his holism.

He thought that the great step forward in theory construction consists of the definition and interrelation of concepts to form a systematic whole. "The history of the natural sciences shows clearly that the critical revision and integration of concepts has at all times been indispensable to the advancement of science". However this belief is not universal and Karl Popper has argued strenuously against it, claiming for example that Einstein's challenge to the notion of simultaneity was not a matter of revising concepts but instead was the result of locating and eliminating a false assumption.

Harold Fallding took Parsons' side, suggesting that analytical theory is a continuation of the grand tradition of ideal types which are heuristic, not explanatory, so they must be replaced first by a hypothetical type and finally by an actual type to achieve a proper explanation. This process can take a long time. "Whole generations may have to work in the field before they wring hypotheses from them. And explanatory theory about these matters lies beyond that again...Preliminary to comprehensive explanatory theory is a mountain of research". This is an amazing idea, that generations of research may be needed to get to the point of testing explanatory theories!

Moving on to isomorphisms, one of the mainsprings of postwar general systems theory building (including the work of Rashevsky and von Bertalanffy) was the idea that isomorphisms (theories with the same logical structure) can be found between theories in different fields i.e. in biology and sociology, or in personality, society and culture. If isomorphisms cannot be found then the general systems venture is a failure. If they are found the issue is still in doubt because the data may have been selected or organised to fit the isomorphic model. And even if this is not the case, Brodbeck has argued that isomorphisms are not scientifically significant.

Parsons appeared to be unsure where he stood on this issue . At one stage he announced, as a result of some importance, that the five pattern variables which he developed to analyse social structures can "when rephrased in accord with the psychological perspective, be identified as fundamental points of reference for the structure of personality also". Baldwin examined this claim and found that the attempt to develop the correspondence between stages of development and the sectors of society had only served to obscure some genuine contributions that Parsons had to make to the theory of socialisation. In reply Parsons simply backed off "the reason why the term 'isomorphism' is a dubious one, is that each of these two grounded in different exigencies". Precisely, but where does this leave us with the use of the pattern variable scheme to organise both the personality system and the social structure?

Parsons' holism is apparent in the following statement regarding the problem of dynamic analysis.

"The ideal solution is the possession of a logically complete system of dynamic generalisations which can state all the elements of reciprocal interdependence between all the variables of the system. The ideal has, in the formal sense, been attained only in the systems of differential equations of analytical mechanics. All other sciences are limited to a more "primitive" level of systematic theoretical analysis...It is thus the functional reference of all particular conditions and process (sic) to the state of the total system as a going concern which provide the logical equivalent of simultaneous equations in a fully developed system of analytical theory."

So the conclusion of this analysis of Parsons' general theory of systems is that he was misled by a defective theory of the relationship between concepts and theories. This was aggravated by his ambiguous view on isomorphism and his holism. Despite this he established himself as the sociological theorist par excellence so that anyone who disagreed with his approach was nevertheless obliged to contend with it, a time consuming process.

The situation was not improved when commentators such as Robert Merton, who appeared to have a more healthy appreciation of the role of theory, still felt obliged to tip his hat to Parsons. "The major contribution [to theory] in recent years is, of course, that by Talcott Parsons in The Social System". However Merton went on to mention some reservations which might very usefully have been spelled out at greater length. "The salient contributions of so comprehensive and logically complex a work as The Social System cannot be readily distinguished from its more provisional and at times debatable conceptual developments". See also his comments on a book by Levy, The Structure of Society. "This book derives largely, as the author says, from Parsons' conceptual scheme, and presents a logical multiplication of numerous categories and concepts. It remains to be seen whether such taxonomies of concepts will prove appropriate and useful in the analysis of sociological problems".


The first thing to note is the remarkable achievement of Parsons to re-invent the wheel of MI along with a number of other ‘Austrian’ elements in the action frame of reference without reference to Menger himself, beyond a footnote referring to the methodenstreit. Equally remarkable is the tribute that Mises paid to Parsons’ historical research, when some comment on the absence of Menger would have been expected ["However, we should not forget that a long line of German philosophers and historians have brilliantly succeeded in the elucidation of the epistemological problems of history…For a critical presentation of these theories, cf Talcott Parsons' The Structure of Human Action [and] Raymond Aron, German Sociology." ]. It is likely that Parsons could have obtained something very close to his final product directly from Menger, or at least Menger's scheme would have required less modification than the others to produce the fully formed Action Frame of Reference [see the bridge that Birner built from Menger to Popper's situational analysis].

The second remarkable aspect of the Parsons story is the way he moved away from MI in his subsequent theoretical work, a movement that may be explained by the widespread tendency to pursue mathematical formalism and general systems theory, a development that was especially pronounced in the vicinity of Harvard at the time. This retreat by the pre-eminent US sociological theorist in the postwar period meant that MI in the work of the Austrians and others was denied the synergy of an additional force lending suport.

It is intertesting and intriguing to see the lack of interaction and synergy between three strands of MI propounded by Mises, the young Parsons and Popper. One would expect that the three principals and their associates would have referred to the work of the others but there is little evidence of this in the literature [Note that it is unlikely that anyone  has read all the massive literature in the three schools of thought]. Apart from a highly favourable reference by Mises to TSA there appears to be virtually no subsequent reference to Parsons and his followers in the literature by Mises or other Austrians. For his part, I am not aware that Parsons ever cited Mises or Popper and their associates. Popper in personal communication described Parsons as a contributor to verbalism in the social sciences but did not cite him in print. Jarvie (of the Popper school) referred briefly to Parsons in the course of a protracted debate by sociologists and anthropologistrs over MI involving associates of Popper (mostly Watkins) and others. In that context Hayek was cited as an exponent of MI but there was no reference to Mises or the Austrian tradition generally. This appears to indicate a high degree of fragmentation in the field or at least a lack of collegiate spirt in recognising the contribution of scholars in other schools of thought who are fellow travellers in some respects.

Readers should note that draft from this point covers too much ground and is is very much in need of revision and expansion.

(b) Fine tuning praxeology and Popper’s situational analylsis.

The action frame of reference was presented by Mises and Rothbard as a part of praxeology, the science of human action and interaction. The primary principle of praxeology is the proposition that humans act in a purposeful manner to improve their situation, as they see it. This is the starting point for a body of propositions that are supposed to be perceived as true a priori (beyond criticism or empirical testing) that can be used to build up a whole body of economic theory. This a priori mode of presentation ensures that praxeology and the Austrians cannot be taken seriously in the mainstream of economics ever since Hutchison introduced the idea of Popperian falsification in the 1930s and Samuelson in the 1940s set forth the notion that all meaningful propositions have to be in principle open to refutation. In other words the Austrian a priori guarrantees a priori rejection of Mises et al regardless of their insights into various concrete phenomena. Under these circumstances some strategic thinking is required by the proponents of the action frame of reference to work out how to persuade economists of other persuasions to address some fundamental issues about the kind of questions that we should be asking and the kind fo answers that are sought. Menger signalled the need for this dialogue in the course of the methodenstreit when he insisted that the issue was not between the inductive method of the German historical school and the deductive method of the Austrians, or between the empirical and the rationalist approach.

The real foundation of the differences between the two schools, which are still not completely bridged, is something much more important: it relates to the different view regarding the objectives of research, and about the set of tasks which a science of economics has to solve. [cited in Hutchison].

The reception of Popper’s views on situational analysis and the rationality principle was confused by his 1963 Harvard lecture where he depicted the rationality principle as the animating force for human action, analogous to the laws of motion that move the physical objects in a model of the solar system. This led to some confused and contradictory statements about the rationality principle, that it is almost tautological (empty) but also most likely false in many concrete situations (where the action is not actually rational). Critics such as Latsis were quick to note the tension between Popper’s alleged falisficationism and his willingness to persist with situational analysis despite conceding that the rationality priniciple is most likely either false or tautological much of the time.

The muddle can be simply overcome by depicting the perceptions, plans and intentions of human actors as the principles which animate (or explain) their actions, as suggested by numerous commentators [ Chalmers, Koertge, Boland and Birner]. Popper appeared to be determined to have a universal principle (like the laws of physical motion) as the animating principle, rather than a specific mover for the particular situation. The universal principle in the exercise is the heuristic instruction to look for the plan, purpose or intention that accounts for the action (in the context). Needless to say this will be conjectural (did the Samaritan cross the road to help the victim or to see if there was any thing left to steal?) but that is not a serious problem in principle for a conjectural theory of knowledge.

(c) The program that follows from the action frame of reference.

With the focus on human action in real situations and real time the way is clear to revive the grand tradition of political economy in the great humanist spirit that “nothing human is foreign to me”. This will not make any difference for people who are already doing good economics (like the man who was surprised to learn that he had been speaking prose all his life) but it migiht help others to transform their practice to a greater or lesser extent. The action frame of reference (AFR) provides a location for the intellectual space where a balance can be struck between the “thin and clean” approach of the economist and the “thick” respect for the detail of specific situations [Boettke et al,]. The AFR also provides a hospitable framework for the research programs of Buchanan, Coase, Hayek, Popper, North and Vernon Smith with their concerns about the rules of the game of social life and the incentives (and disincentives) that people confront as a result of the rules that are in place at the time.

The AFR and MI will tend to promote awareness of the human potential for learning, critical thinking and creativity, not only as they are manifested in the feats of scientific, entrepreneurial and artistic pioneers but also in the ingenuity that all people can display as they explore the opportunities that are available to them and created by their own efforts. The process of exploration will be influenced by the values and ambitions that they have internalised and the incentives they are offered. There will be a renewed focus on values and the way that these are transmitted from generation to generation by influences such as religion, high and low culture including sport and games, child-raising practices and children’s stories [footnote Weber, Cowen and also McClelland]. There will be increased efforts to integrate the study of markets with the role of other institutions (especially the law and politics) which influence the “ecology” of economic activity. These studies will also call for a reconceptualisation of the role of the economist, from Engineer to Farmer or Gardener [Horwitz and Boettke]. Incidentally, it is likely that the role of Popper’s “piecemeal social engineer” will be acceptable in the new framework, with the task of monitoring the actual impact of various institutional reforms to assess whether they achieve the desired effects. If the Engineers had adopted this (critical, scientific) approach from the outset they might have reverted more rapidly to the role of Students instead of Saviours (in the language of Horwitz and Boettke, 2004).

There will be more awareness of developments in other academic fields which support or undermine the vitality and rationality of students who are exposed to them. Examples of debilitating influences are (a) the various forms of philosophical positivism, including logical empiricicism, which have disabled the ability of students to understand the factors which promote the growth of knowledge, even in the natural sciences, (b) developments in the study of literature which deny the validity and efficacy of human agency and moral judgement [Freadman and Miller], (c) the deep strain of irrationalism in much of the mainstream of American literature [Yvor Winters, In Defense of Reason].

Turning to macroeconomic analysis, the AFR ensures that macroeconomic indicators such as the level of unemployment, inflation and interest rates are seen as (a) the outcome of decisions made by individuals , including boards and committees, and (b) elements of the situation that have to be taken into account when people make decisions about buying and selling. They will not be perceived like the gears of a gigantic machine that act directly on each other independent of the actions and decisions of people.

d. Programs that are called into question by the action frame of reference.

Possibly the major function of the AFR is to call into question those research programs which abandon MI and do not illuminate the way that people act in real situations and real time. Examples include Keynesian macroeconomics and a great deal of associated model building and econometrics, Marxist economics, General Equilibrium Theory and mathematical welfare economics.

e. Railway lines of thought.

Why do people persist in “dead” research programs that cannot, by their very nature, assist in the analysis and understanding of real economic systems and the real world? At least three factors appear to be in play. First is the “brand loyalty” of students who stick with the economics that they are taught in order to achieve professional acceptance and advancement. This situation is not unique to economics and Notturno has written about the formation of schools in psychology where the representatives of different schools proceed from opposing perspectives and employ different methods, so they scarcely communicate with each other at all. He described how training usually starts with an 'indoctrination' into one or another of the competing theories. Later, career prospects depend upon approval from the leaders of the same school. This of course discourages students from exploring alternative views. The resulting lack of communication between schools could reflect the basic incommensurability of the rival frameworks (or paradigms, in the language of Kuhn), but Notturno instead blamed the unwillingness of scholars to investigate the conceptual foundations of other theories. He detected a tendency to use Kuhn's ideas to legitimate this situation, and in contrast he suggested that members of all schools should critically compare and contrast the foundational principles of rival parties. This process could enable people in different research traditions to take a fresh grip on common problems and issues. [Notturno, 1984].

A second factor is another kind of brand loyalty, that is ideological attachments that make some programs such as that of the Austrians hard to sell. Kirzner noted “the refusal of the economics procession, as recenty as 15 years ago, to see Misesian economics as anything but crude, obscurantist apologetics for capitalism.” [Cato Journal Spring Summer 1989].

A third factor is the influence of unstated and often unconscious assumptions of a philosophical or metaphysical nature. A rich literature is available on this front, although economics students in the normal course of events are not exposed to it. It includes Lovejoy on unit ideas, Collingwood on ultimate presuppositions, Kuhn on paradigms, Lakatos on the methodology of scientific research programs, and Popper on metaphysical research programs. Some of this literature is not helpful, most notably the contributions by Kuhn and Lakatos which are also the most widely cited. The point is to identify the assumptions that constitute the framework for debate, especially “the objectives of research, and …the set of tasks which a science of economics has to solve” (in the words of Carl Menger). These assumptions are the key elements of the paradigm, the Lakatosian “hard core”, the Popperian “metaphysical research program”. The reason why Kuhn and Lakatos are not helpful is that they provided no help or instructions about the work that is require to improve the paradigm or the program by imaginative criticism.

Buchanan and Vanberg have demonstrated some of the practical implications of a change in metaphysics by drawing out the implications of the work on the thermodynamics of open and non-linear systems by Ilya Prigogine and the open or indeterminate universe by Karl Popper.

"Our purpose here is to relate the new orientation in the natural sciences [indeterminism] to a particular nonorthodox strand of thought within economics. [This] involves a shift of perspective from the determinism of conventional physics (which presumably inspired the neoclassical research program in economics) to the nonteleological open-endedness, creative and nondetermined nature of evolutionary processes."

The practical concern in the background was the failure of central planning and they considered three views of economic events.
1. Allocation of resources.
2. Discovery of opportunities to make a profit.
3. Creation of opportunities.

"We have suggested that a perceptual vision of the market as a creative process offers more insight and understanding than the alternative visions that elicit interpretations of the market as a discovery process, or, more familiarly, as an allocative process."

The most basic critique of the system pinpointed the defective allocation of resources as a consequence of the incentive structure which did not reward good decisions (or punish bad ones). Kirzner followed Hayek to add another element to the critique because even if the incentive problems were solved there would still be the problem of dispersed knowldedge and the need for entrepreneurs to see better ways to do business. Then Buchanan and Vanberg advanced the crtique another notch.

"We suggest that the critique, even as extended, falls short of capturing an essential element in any comparative assessment of the market and the planning alternatives. The teleological feature remains to be exorcised."

The teleological element is the idea that the system as a whole has a specific destination or end point in view, a position which depends on the assumption of determinism. That is their critique of equilibrium approaches in general, these all make the illicit assumption of deterministic end points unless equilibrium models are clearly recognised as analytical devices like the frictionless pulleys and weightless strings of the physicist. The key to the creative process is the idea that something can come from nothing which is an important corollary of indeterminism in physics and the world at large.

Determinism is one of a suite of “isms” that might be called the "old program" of western philosophy. The elements of the program include justificationism, subjectivism, essentialism, determinism and reductionism. These are defined as follows:

Justificationism. A valid principle of knowledge or value must be derived from some authoritative source, which provides conclusive justification for it.

Subjectivism (“the world is my dream”, not the legitimate subjectivism of personal experience). Knowledge consists of subjective beliefs or concepts. There is no such thing as a structure or fabric of objective knowledge outside the minds of individual people.

Essentialism. Knowledge either results from penetration into the hidden essence of a phenomenon, or is improved by analysis of the concepts used to describe the phenomenon.

Determinism. Every event is pre-determined, so the future is laid down like the sequence of frames in a reel of film passing through a projector.

Reductionism. Complex things are to be explained by reducing them to their simplest constituents. For example, events in society should he examined in terms of biology and eventually reduced to the laws of physics.

An alternative program can be found in the work of Karl Popper, as interpreted by Bartley. In place of justified beliefs, Popper and Bartley opt for conjectural objective knowledge. In place of conceptual analysis and debate about the meaning of terms we should argue about the truth of falsity of theories, or, in the realm of action, the desirability of alternative policies. In place of determinism we need to realise that the future to some extent depends on decisions that we make, and these decisions can be influenced by arguments and ideas which cannot be reduced to the laws of physics, nor to biological instincts nor to immutable social or historical forces.

The ideas of the "old program" are notoriously resistant to criticism. In fact they are often not subjected to criticism at all, they are simply assumed as a part of the invisible framework of debate. Metaphysical ideas been declared "out of bounds" in the positivist or empiricist tradition from the time of Hume but this has not released the bonds of metaphysics, it has simply rendered positivists the slaves of whatever metaphysics they unconsciously picked up. Elements of the old program can be shared by rival schools that fight like cat and dog about more superficial matters (the classic is the Rationalists ve Empiricists over the basis of justified beliefs – insight vs evidence).

Shared assumptions are seldom in dispute, and they operate invisibly to shape the formulation and selection of problems and the kind of solutions that are acceptable. They operate like invisible railway lines that dictate the type of problems that people choose to work on, the way that they are formulated and the type of solutions that are sought. These invisible “railway lines” render certain theories and methods either "wrong" or stupid or in some cases, virtually unthinkable. In some circles this applies to Popper’s theory of conjectural objective knowledge and to the core of the Austrian program in economics. Metaphysical assumptions are not amenable to experimental test or falsification and so they have persisted despite the rise of empiricism in the philosophy of science and the triumphs of science itself. Far from being challenged by science, some of these ideas are located at the core of modern physics, like worms in an apple and they derive strength from their association with popular interpretations of quantum physics.

Popper and Bartley have transformed this situation in four ways. First, Popper’s theory of “metaphysical research programs (MRPs) helps to make metaphysical theories visible, in the way that an improved microscope brings objects into sharp focus where previously they were either invisible or indistinct. Second, Popper has systematically provided criticisms of (and alternatives to) the unhelpful theories of reductionism, determinism and subjectivism in physics, where they originated. Thirdly, Bartley’s work on the limits of criticism shows that we can form critical preferences for theories of morals, methods and metaphysics instead of being forced to rely on acts of faith or allegiance to authority. Finally, Bartley’s results can be applied to the practical matter of creating “non-dogmatic zones” where people can explore and criticise metaphysical ideas and other deep structural assumptions, which carry high emotional charges. These “zones" could also be used for counselling, for psychotherapy and indeed for any type of self-exploration and transformation.

Like children who grow up, leave home and seek fame and fortune in distant lands, important ideas have implications far beyond their point of conception. This applies to Popper’s theory of MRPs and the alternative metaphysical program that has the capacity to liberate the potential of many other lines of thought that have been suppressed or devalued. These include some aspects of the Austrian tradition in economics, individualism in literature and the political philosophy of classical liberalism. Common to these movements is action frame of reference and methodological individualism, with the notion of the creative individual who has a degree of autonomy and the capacity to be a responsible agent, a thinking reed. This perspective is not compatible with determinism, reductionism and holism which are part and parcel of the dominant metaphysics.

In economics the old program sponsors various forms of economic determinism and analysis of aggregates. The theory of literature has been dominated by I. A. Richards’ psychologism (precursor of the New Criticism), by psychoanalytical probing for themes of neurotic maladjustment in artists and their products, by Marxist reductionism and its offspring, structuralism. The creative function of the author is replaced by the confluence of drives and influences. Counter-attacks on these overtly reductive tendencies (by T. E. Hulme, T. S. Eliot, F. R. Leavis and the deconstructionists) have not succeeded because much of the old metaphysics is common to both parties. Some genuine progress in the theory of criticism could result in literature becoming once again an agent of civilised values instead of being to a large extent a vehicle for the expression of boredom, hatred and pessimism.

In psychology the reductionist program is clearly apparent in the two major schools of psychoanalysis and behaviourism which share the reductionist “nothing but” metaphysics however much they are antagonistic towards each other. Political theory and practice are dominated by collectivist ideas such as “social justice’’, originally propounded by Plato and revived by Hegel and the socialists. These ideas have poisoned the theory of democracy which is almost universally summed up in the simplistic: formula “majority rule”. Under the influence of this formula persecuted minorities attempt to secede to form their own majority and freedom fighters establish new dictatorships. In the climate of a non-reductive and individualistic metaphysics it may be possible to explain that the task for democracy is not just to establish a representative system of some kind but to secure the rights of individuals and minorities against unreasonable interference from other people and from the state itself.

At present Popper’s ideas have been marginalised in academic philosophy in the same way that the ideas of the Austrians have been marginalised in the mainstream of economics. It may be that the fortunes of these two bodies of thought will rise or fall together because there is a great deal of synergy to be obtained from a creative merger, with the possibility of some modifications on each side. A revival of these minority interests depends on recruiting people from the dominant orthodoxies where they tend to be “locked in” by the three influences noted above. First, by the guild mentality, second, by ideological commitments and finally by the hidden hand of unexamined metaphysical beliefs. The third is probably the most insidious influence because it traps people who might otherwise be prepared to resist intellectual and ideological brand loyalties. One of the people who was trapped in that manner was Talcott Parsons (after The Structure of Social Action), despite his philosophical sophistication and his moral orientation towards voluntarism and individualism, when he sacrificed the integrity of the individual in the interests of general systems theory, inspired by the model of mathematical physics.

Writings on F.A. Hayek
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