On the philosophy and logic of human action A Neo-Austrian ...€¦ · A Neo-Austrian Contribution to the Methodology of the Social Sciences Michael Oliva Córdoba University of Hamburg

On the philosophy and logic of human action *

A Neo-Austrian Contribution to the Methodology of the Social Sciences

Michael Oliva Córdoba University of Hamburg

Introduction In the last century, the philosophy and logic of human action received a lot of attention. Mile-stones in its development were Anscombe’s Intention (1957), Davidson’s ‘Actions, reasons and causes’ (1963) and von Wright’s Explanation and understanding. Anscombe aimed at bringing out the subjective basis one must appeal to when ascribing an action to someone. Davidson defended the claim that action explanations are a sort of causal explanations. Von Wright pointed out that explanation in history and the social sciences proceeds in very differ-ent ways. Arguably, these studies formed the shape of the philosophical discipline now known as action theory. They sparked a host of philosophical contributions that eventually broadened the perspective on the philosophy and logic of human action so much as to include as diverse approaches as critical reviews of age-old problems (like the problem of weakness of the will) and present day concerns with normative aspects of reason-based approaches (like patient autonomy in medical ethics). So the stream became a river, and the river became a sea. Today there is no denying that action theory is in fairly good shape. Of course, like in all other sci-entific disciplines there are controversies and difficulties in action theory too. Yet there is a solid consensus as to the phenomena to be explained, there are paradigmatic theories con-stantly being made reference to, and there are classic contributions providing starting points for old insights and new debates. Although there are specialists in the field, philosophical ac-tion theory is not at all marginalised. Even theorists not specialising in action theory acknow-ledge its relevance for the practical disciplines without hesitation. Also, philosophers of every provenance generally have more than an inkling that the relevance of action theory must somehow extend further to the social sciences proper as well. Last, not least: Being a philo-sopher of action makes you neither left, centrist or right. It carries no hidden or overt implica-tions as to your ideology, political and moral views, or creed. It is thus safe to conclude that as a scientific discipline action theory is a decent, well-established, and worthwhile field of study in its own right.

How come all of this is immediately reversed once we shift focus and turn to economics? Apart from occasional fine words found in introductory chapters the study of human action in economics really has a bad reputation. This is especially true of the most comprehensive and complete economic approach directed towards it. Praxeology, which emerged from the Aus-trian school of economics, antedated philosophical action theory by roughly the quarter of a century. In contrast to philosophical action theory, however, praxeology has a bad name in-deed. Even a quick glance at the mainstream literature covering it suffices to produce the im-pression that to engage in praxeology is to engage in a trivial, right wing, dogmatic, or shad-

Unpublished work in progress. A summary of this paper was presented as opening talk of the conference Perspectives of Integrated Austri* -an Theory, held under the auspices of the Department of Philosophy’s Theory of Freedom Research Project at the University of Hamburg, 4. October 2017.

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On the philosophy and logic of human action

owy kind of enterprise. There are illustrious opponents openly toying with the idea that praxeology is not a scientific enterprise at all. Of course, there are personal and historical feuds involved so that the real substance of the arguments is very often far from clear. Still the emerging picture is that the study of human action in economics is treated as a serious menace to the respectability of economic theory in itself. Thus the question arises how this could pos-sibly be true. How can the study of human action in economics give, as Paul Samuelson (1964, 736) once came close to putting it, ‘reason to tremble for the reputation’ of the subject if economics is, as Alfred Marshall (1890, 1) famously stated, ‘a study of mankind in the or-dinary business of life’ and an examination ‘of individual and social action’?

As always the explanation is complex and perhaps largely historical. There are various elements one would have to take into account. For instance, the rise of socialism to scientific respectability at the turn of the 20th century and the missionary impetus of the Vienna Circle played their part. Also, the positivist outlook on science triggered by the Vienna Circle and the stunning progress made in the natural sciences contributed their share. Many were temp-ted to model the social sciences after the image of the natural sciences and their complement-ing auxiliary science mathematics. The last element, not the least though, is the triumphant emergence of equilibrium theory as a reference standard in economic thinking. It gradually led to a transformation of economic theory into what is now a modern version of political economy and thus ultimately a normative enterprise. All these issues surely merit discussion and have been discussed before, some more comprehensively than others. And all these issues contributed materially and detrimentally to the loss of significance of the study of human ac-tion in economics and the social sciences. Consequently, they contributed to the loss of signi-ficance of the Austrian school of economics to the point where it was pronounced dead and mentioned in historical retrospect only.

However, on the present occasion I will not add to that inquiry. The reason for this is that it is not entirely clear whether the study of action in economics and the social sciences is really well taken care of in the Austrian school of economics in the first place. Of course, there can be no doubt that Austrian school of economics openly confesses to subjectivism, the central element in the explanation of human action. In the words of one of its key proponents, Israel Kirzner, Austrian economists remain convinced that regularities in economic life can be understood only by focusing analytical attention on individual actions of the acting individual. But if you really look at this concession it is a bit half-hearted in more than one way. First, what Kirzner calls the ‘modern version of subjectivism’ aims at steering a middle course between the ‘flawed subjectivism of Menger’ and the ‘nihilistic conclusions’ of the Shackle-Lachmann view (Kirzner 1995). The modern Austrian view thus rejects both the Mengerian heritage of perfect knowledge and the idea of the radical spontaneity of choice. It does how-ever, somewhat surprisingly, retain the idea of ‘systematically equilibrating market tenden-cies’, an idea more honoured in the breach than in the observance. But whether you can have ‘systematically equilibrating market tendencies’ without ‘perfect knowledge’ is far from clear. Nor is it clear that you can give the individual actions of the acting individual the full weight they deserve without thoroughly acknowledging the radical spontaneity of choice. Secondly, and more importantly, the Austrian confession to subjectivism remains half-hearted in that it underlines both the importance of subjectivism in economics and economising human actions

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Michael Oliva Córdoba

without bothering to ask about subjectivism and human action in the first place. It proceeds as if the differentia specifica could be understood without understanding the genus proximum. It treats subjectivism-in-economics and economising-human-actions as simple terms whose meanings need not be dissolved into their components in order to be grasped correctly. In a more Austrian way of putting it, it mentions Ludwig von Mises’s claim that economics is grounded in action theory only to set it aside, and it is completely silent on the nature of sub-jectivism in itself.

Mises’s claim that economics is grounded in action theory was, of course, very disturbing to his fellow economists. His fellow Austrians were no exception to the rule. Of course, elim-inative claims of this magnitude very rarely meet with enthusiasm, especially with enthusiasm in those whose discipline is being subsumed under another. This is not at all unprecedented. Just recall the resistance the positivist creed of the unity of sciences met with in the natural sciences now claimed to be a branch of physics. It is perhaps fair to say that both chemists and biologists usually pay lip service at best to the assumption of their being engaged in phys-ics, really. Turning back to our discussion it is left to be desired to clarify what is right and wrong about the claim all economists pay lip service to, namely, that economics is part of the study of man in the ordinary business of life with regard to his individual and social action, and in particular with regard to the influencing aspects of his action, i.e. his subjective point of view. Thus it is the purpose of this paper to focus on the two aspects that have not yet have received all the attention they deserve both by mainstream and Austrian economists, which in the case of Austrian economists must seem somewhat baffling since they pride themselves to have erected a complete school of thought upon them. I am, of course talking about subjectiv-ism and human action, and contrary to what is done in economic discussions touching on these issues, we will focus on a more general and more thorough understanding from which subjectivism in economics and economising human actions will emerge as special cases only. Both these investigations will be carried out in complete independence of any applications to the practical issues or the social sciences they will be applied to or of any assumptions or pre-conceptions derived from them. The impatient reader may thus get the impression of a some-what lengthy detour from the contribution to the methodology of the social sciences the present paper is supposed to make. However, the emerging philosophy and logic of human action will be more transparently and more convincingly applied once the ingredients it is composed of and the foundations it is erected upon are independently motivated and derived. Discussing the application of the philosophy and logic of human action sketched will hence be postponed until later in the paper. Bypassing the tedious historical debates we had some many of and turning to the systematic treatment of selected central problems it will be sketched what the study of human action in the way presented can contribute to the study of the social sciences (in general and economics in particular). From these discussions will emerge the outline of a systematic and integrated treatment making use of the well-estab-lished tools of action theory and some neighbouring disciplines and applying them in the field of the social sciences. It will be seen that the philosophy and logic of human action has quite a lot to contribute to economics and the social sciences. It will also be seen that it does so without compromising the rigour, richness and respectability it deserves as the decent, well-established and worthwhile field of study that it is.

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1. The subjective and the objective: A fundamental distinction Let us proceed and derive the categories we must make use of later without peeking at the special contexts where they will be employed. In order to do so we must leave the confines of economics and the social sciences behind us and enter the realm of philosophy, more pre-cisely the fields of metaphysics and the philosophy of mind. There we will realise quickly that the distinction between the subjective and the objective has a very long tradition. The terms refer as far back as to Aristotle’s Categories. In his commentary Boethius used the latin word subiectum as translation of the original Greek ὑποκείµενον (hypokeímenon, the ‘underlying thing’). Yet our modern understanding of these terms originates only in early modern times. The distinction they mark as a pair of contradictories is usually described as some sort of mind-(in)dependence:

If we say ‘The North Sea is 10,000 square miles in extent’ then neither by ‘North Sea’ nor by ‘10,000’ do we refer to any state of or process in our minds: on the contrary, we assert something quite objective, which is independent of our ideas and everything of the sort. (Frege 1884, 34)

This way of putting it, originating with Gottlob Frege, the famous mathematician, logician, and philosopher whose direct and indirect influence on Wittgenstein and the Vienna Circle can hardly be overrated, is by no means idiosyncratic. It rather brings out what underlies the established view of modern times. Present-day philosophers of mind and language echo it all along in many variations. Take a recent example of Tyler Burge’s:

An element in some subject-matter conceptions of objectivity is mind independence: an objective subject matter is a subject matter that is constitutively mind-independent. […] By contrast, minds, beliefs, feelings, […] are not constitutively mind-independent, and hence not objective, in this sense (Burge 2010, 46).

The main contention is this: The objective is objective insofar as it is independent of the mind, the subjective is subjective insofar as it is not. But what precisely are the elements independ-ence of or dependence on which make the subjective and the objective thus and so? There are two ways open to us, the cognitive and the attitudinal. The cognitive pathway describes the element as a perspective or a view. Taking a subjective stance towards something would be to view it from a special perspective: the individual perspective of the subject. Taking an object-ive stance towards it would be to refrain from viewing it from a special perspective. It this manner, it has become popular to distinguish the view from somewhere against the view from nowhere (cf. Nagel 1979). The single most important metaphor of the cognitive pathway is the metaphor of the eye and what and how it sees. It is a powerful metaphor that provides us with a useful colouring but as one can easily imagine it does not really lead us to the essence of the matter.

More substance is found when we turn to the attitudinal pathway. In doing so, we impli-citly acknowledge the importance of the intentional, that feature of the mental Franz Brentano (Brentano 1874) took to be its very mark (cf. Crane 1998; 2001; 2013):

Every mental phenomenon is characterized by what the Scholastics of the Middle Ages called the intentional (or mental) inexistence of an object, and what we might call, though not wholly unam-biguously, reference to a content, direction toward an object (which is not to be understood here as meaning a [real] thing), or immanent objectivity. Every mental phenomenon includes something as object within itself, although they do not all do so in the same way. In presentation something is

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presented, in judgement something is affirmed or denied, in love loved, in hate hated, in desire desired and so on.

This intentional inexistence is characteristic exclusively of mental phenomena. No physical phenomenon exhibits anything like it. We can, therefore, define mental phenomena by saying that they are those phenomena which contain an object intentionally within themselves. (Brentano 1874, 68)

Eventually, the point Brentano was after gave rise to the development of the theory of (pro-positional) attitudes. This is because in natural language we are familiar with a common fea-ture that quite neatly exhibits what Brentano saw as defining feature of the mental.

Recall that in natural language we very frequently ascribe propositional attitudes to per-sons: For instance, we say that Tom believes that the earth is flat, or that Dick wants the man in the doorway to stop staring at him, or that little Harry hopes that Santa Claus will come vis-it next Christmas. Believing, wanting, and hoping (and others) are propositional attitudes; they are mental states or events ascribed by reference to a person experiencing the mental state or event and described by (the nominalisation of) a sentence within the scope of a suit-able attitude verb. All these theoretical descriptions, however, must not confuse us about the fact that having propositional attitudes is a natural feature of man. Their being expressible in natural language is a natural feature of language. Propositional attitudes are not fancy gadgets of sophisticated theorising. They form part of the cognitive toolbox with which man confronts the world. More importantly in the present context, propositional attitudes exhibit the very important feature of intentional inexistence. This is precisely the connection to Brentano and the topic at hand. As the examples illustrate someone can be in a state of mind such that it may be correct to ascribe a given propositional attitude to him even if the object ‘aimed at’ in the attitude does not exist or is not the way the subject pictures it to be. The earth is not flat, there is no Santa Claus, and sometimes we mistake a reflection of ourselves for something or someone else. Fair enough. Still, Tom can believe that the earth is flat, Harry can hope that Santa Claus will come visit next Christmas, and Dick can want the man in the doorway to stop staring at him. So although attitudes need not have a ‘real’ object, by way of providing an ‘internal object’ they bring out the subjective view of the individual having the attitude. In other words, by describing the attitudes we describe the peculiar view Tom, Dick, and Harry have with regard to the earth, the man in the doorway and next Christmas. We describe their subjective perspective.

Thus we have an explanation of subjectivity that both supersedes the metaphor of the eye and is capable of incorporating it: The cognitively subjective is subjective if and as far as it is grounded in the attitudinally subjective. Turning again to our original distinction we may ap-ply our present findings to illuminate the very nature of this distinction. The mind-dependence defining the subjective turned out to be dependence of the propositional attitudes of the indi-vidual; correspondingly for the objective. Thus we may say that the objective is objective be-cause it is independent of the propositional attitudes of the individual, and the subjective is subjective because it is not. The cognitive pathway leads to the attitudinal pathway, and the attitudinal pathway leads to the proper understanding of the matter

What, in passing, does that mean for the intersubjective, if there is such a thing at all? Well, that depends on your reading of ‘the individual’. If you give this phrase a specific inter-

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pretation rather than a generic, the intersubjective might be a third option in between the sub-jective (proper) and the objective. However, if you stick with a generic reading the intersub-jective will only be the subjective of more than one attitude subject. This reading commends itself anyway since ultimately there are no real super-individual attitude subjects; there is no real ‘common’ intentionality because any seemingly collective intentionality must ultimately reduce to intentional states of individuals or remain a metaphysical artefact whose sole exist-ence is highly dubious. And if attitudes will always and ultimately be the attitudes of single individuals even where they share the same content no new quality is introduced when we turn to groups of individuals rather than looking at one paradigmatic example. Hence what is intersubjective is merely in its own way subjective. It is in any case not objective. Thus, in the present context the intersubjective does not require further discussion in its own right.

Let us for convenience illustrate the peculiarity of both subjectivity and individuality in more formal terms, using ‘Ax,p’ as a schematic expression replaceable by an adequate form of an attitude operator, the expression of an attitude subject, and an indicative sentence in correct order. Then we can express that subjectivity is characterised by the fact that from the attitude you cannot infer its content nor the other way round in the following way:

(Sub) (i) p ⊬ Ax,p (ii) Ax,p ⊬ p

No specific knowledge of early modern history is required in order to acknowledge that from the fact that Columbus discovered America (p) it does not follow (⊬) that he believed that he had discovered America (Ax,p). Also, we need not be familiar with a tragic moment in the history of the House of Windsor in order to acknowledge that, loosely speaking, from the fact that George VI. wanted to not succeed his brother to the throne (Ax,p) it does not follow (⊬) that he did not succeed his brother to the throne (p). This is analytically contained in our un-derstanding of the attitude verbs alone.

In like manner we may express that individuality is characterised by the fact that from someone’s having an attitude with a given content it cannot be inferred that someone else has that attitude, nor vice versa (for x ≠ y, of course):

(Ind) (i) Ax,p ⊬ Ay,p (ii) Ay,p ⊬ Ax,p

This is plain from noting that ancient history is illustrative but not essential in order to realise that from the fact that Cleopatra (x) feared that she be brought to Rome and paraded in the streets as part of Octavian’s triumph (Ap) it does not follow (⊬) that Octavian (y) feared that Cleopatra be brought to Rome and paraded in the streets as part of his triumph (Ap). Nor do we need to be familiar with Virgil’s Aeneid in order to understand that from the fact that Odysseus hoped the Trojans would pull the wooden horse into their city it does not follow that Laocoön hoped it. Here, as before, all that is required is a proper understanding of the attitude verbs.

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Actually, a proper understanding of the semantics and logic of propositional attitudes even extends beyond this point and relates to the important issue of causation or strict causal determination. To see this in the clearest possible way let us turn to a specific instance of (Sub) where ‘p’ describes a certain observable state of affairs and ‘Ax,p’ describes someone’s belief that that state of affairs obtains:

(1) p There is a red rose (2) Ax,p Gertrude believes that there is a red rose

In order to make the case as strong as possible for the advocate of determinism we can make a set of assumptions very convenient to him. Let us borrow a moderate foundationalist setting so popular in discussions of the neighbouring topic of epistemic justification (cf. Armstrong 1973; Alston 1989). In that setting there is a white room in broad daylight containing a subject dressed all in white with plain and normal vision. Placed within the subject’s visual field there is a white vase on a white table with a single RED rose in it. Background conditions are fixed such that circumstances of perception are optimal. Now as we know from the discussions on the topic of foundationalism, if the subject (i.e. Gertrude) under these conditions acquired the belief that there is a red rose she would be directly justified simply by way of acquiring this belief in these circumstances. The question relevant for us now is: Does Gertrude inevitably acquire that belief? More precisely: Is her (acquiring this) belief strictly causally determined (by the state of affairs)?

It is clear that to defend his position the determinist must insist that there is something by which the belief is caused (or strictly causally determined) and the most likely candidate is an element of the foundationalist setting. New and pressing problems would emerge once we tried to identify the proper causal antecedent but or the sake of the argument let us cover them with the cloak of charity. Suffice it to say that the determinist must assume that the belief is caused. He is committed to assume that if there are mental states or events they form interme-diate parts of the causal chain of being. Thus we are back with our original problem relating to the subjective and the objective. For as Thomas Nagel put it:

The problem is one of opposition between subjective and objective points of view. There is a tend-ency to seek an objective account of everything before admitting its reality. But often what appears to a more subjective point of view cannot be accounted for in this way. So either the objective conception of the world is incomplete, or the subjective involves illusions that should be rejected. (Nagel 1979, 196)

The determinist thinks of the causal closedness of the world precisely as the essential mani-festation of the completeness of the objective conception of the world. Was the world not causally closed there would be no point in saying that any objective conception of the world would be complete. And it is precisely the recalcitrancy of the mental to fit into this pattern that hangs as a sword of Damocles over the determinist’s head. It gave rise to such remarkable makeshift solutions as Davidson’s anomalous monism. Recall Davidsons concession that

there are no strict laws at all on the basis of which we can predict and explain mental phenomena. (Davidson 1970, 223)

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To ensure that this does not lead to the feared incompleteness of the objective conception of the world Davidson was prepared to bite the bullet. The mental, he said, is anomalous since mental phenomena cannot be given purely physical explanations; it is monistic since every mental event is physical (i.e. identical with a physical event) and by this token part of the causal chain of being. Despite all bravery, however, this is already fighting a rearguard action. For when we turn back to the foundationalist setting we see that even in these circumstances there is no necessity, law-likeness or mere regularity at all in Gertrude’s believing that there is a red rose. Even assuming constancy of background conditions Gertrude may believe that there is a red rose even if there is none and she may fail to believe that there is a red rose when there in fact is. After all, there is always the possibility of inattentiveness. Even worse, ruling this possibility out explicitly would not help at all since endorsing this strategy we would either have to define inattentiveness in such a way as failing to induce the perceptual belief in the given circumstances of perception, which would not work since it would make the requirement of attentiveness an immunising ad-hoc hypothesis resulting in a question-begging riposte or a trivial result; or we would still have to reckon with the possibility that Gertrude may fail to believe that there is a red rose although there is one and she is not at all being inattentive. So Gertrude’s belief that there is a red rose cannot be regarded as being caused by there being a red rose, or whatever the proper causal antecedent would have to be, regardless of what types of events we take to be involved. Consequently, on pain of violating the causalist’s minimum requirement that the corresponding counterfactual conditional hold (Hume 1748, 76; Lewis 1973, 166f.) there is no grist at all on the determinist’s mill even from the most favourable setting assumed on his behalf. Once we move away from this artificial setting, however, we must realise that the determinist fought a losing battle all along: At every moment of an observer’s conscious experience there are countless causal interactions between the causal setting he is placed in and his perceptual apparatus. Even assuming causation or strict causal determination for these interactions there are typically not countless correspond-ing perceptual beliefs he comes to acquire, and the contrary claim on the determinist’s behalf would, in absence of any independent evidence, clearly beg the question too.

Remember also that in this regard belief is nothing special. It is just one of several pro-positional attitudes, just one of many intentional mental states. So it is nothing special about the attitude of believing that even in the most favourable case possible we cannot conclude that the belief is caused or strictly causally determined by the circumstances under which it is acquired. This is a feature the attitude of believing shares with all the other attitudes in virtue of being an attitude alone. We would not have obtained a different result had we considered other attitudes instead:

(1) p There is a red rose (3) Aix,p Gertrude wants that there is a red rose (4) Ajx,p Gertrude hopes that there is a red rose (5) Akx,p Gertrude fears that there is a red rose

It was precisely the attempt to make the determinist’s case as strong as possible that led us to choose believing, being that attitude that would only make his case initially plausible. Since the result of the investigation was negative we now must broaden the view and take other atti-tudes into account too. Given the larger picture it is hard to see how we could have been

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tempted into accommodating the determinist’s claim in the first place. Despite the fact that attitudes are mental events there is no plausibility to the determinist’s contention that they are caused. There is much more plausibility to the contrary suggestion that attitudes emerge in uncaused spontaneity within the attitude subject, probably due to a genuine and original fac-ulty of the subject’s mind, the faculty to have intentional states. Be that as it may, however, this is the short and the long of it: Attitudes relate to the world but do not originate in it. They are about the world but not produced by it. Perhaps distracted by the metaphor of the eye and the cognitive pathway the determinist may well have overlooked the attitudinal core of the mental. Thus he may not have fully acknowledged the intentionality of the mental, its very mark. In particular he cannot have been fully aware of the most notable feature of intentional states, the feature of intentional inexistence. For had he fully appreciated the significance of intentional inexistence he could hardly have been tempted to assume that any attitude could ever be caused by its content since that is just what it is about, and it may well be about the non-existent or about what is not thus and so. And he may as well have been much more cau-tious with regard to the assumption that someone’s attitude may cause another one’s. So, fully appreciating the spontaneity and originality of attitudes, we may now add to our previous characterisation of the subjective-objective distinction the following:

(Subc) (i) p ⊬causal Ax,p (ii) Ax,p ⊬causal p

(Indc) (i) Ax,p ⊬causal Ay,p (ii) Ay,p ⊬causal Ax,p

This rather formal way of putting it looks like quite a mouthful but we can summarise the whole of our findings in a brief and handy fashion: One’s attitudes are both inferentially and causally independent both of the world they are about and of the attitudes of others. What is subjective is subjective because it is dependent on someone’s attitudes. What is objective is objective because it is not dependent on anyone’s attitudes. It is true that this may not be all what could be said about the subjective, the objective, and their distinction. But whatever is said does not mark a true and sound insight into the matter if it does not ultimately build on the understanding reached above of at least conforms to it. So now that we better grasp the subjective-objective distinction and in what regard it is grounded in the unique mental feature of intentionality we must move on to clarify the next issue, the issue of (human) action.

2. Foundations of action theory From the philosophy of mind, where we dwelled to grapple with the idea of intentionality and to understand that it holds the key to a proper understanding of subjectivity, we must move on to something quite different. We must move on to the philosophy of action and even further to the theory of science and methodology. This is because out starting point here is one about the application of decent and reliable scientific methods:

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2.1 The method of variation Ever since Bernard Bolzano introduced it in his Wissenschaftslehre (Bolzano 1837) the meth-od of variation (also know as the method of substitution) has been held in high esteem indeed. It is widely regarded as a sound methodological tool for the derivation of concepts, categories, and functional units. Of course, Bolzano only applied more systematically what others had employed before. Plato’s ὄνοµα/ῥήµα (onoma/rhema) distinction in his Sophist (262a) is an early point in case. Also, Bolzano applied his method in the context of medieval term logic, and there he was superseded by modern logic with Gottlob Frege’s functional analysis at its heart (Frege 1879; Frege 1891; Frege 1893). Still, the method of variation is intuitive, sound, and respectable. It may be applied to anything that embodies an underlying functional contrast and it rewards us with making that functional contrast visible. Applied properly the contrast may be read from the various substitution instances produced by variation within the test frame as if it was written on their foreheads. Also, the method of variation benefits us with only being capable of bringing to light what is really there. It cannot be used to impose a functional contrast that does not have a correspondence in the substitution instances under examination. So apart from the inescapable possibility of misinterpretation the method of variation is not particularly prone to error. It is so simple and so easy to understand that it is quite unlikely to be used wrongly or to produce mistakes. This may explain why it has be-come so common a method. Surely, few linguists are aware of the illustrious past of the meth-od of variation. Yet they are all well aware of its advantages. They quite commonly and soberly apply it both in theory and in practice, e.g. when studying distribution sets in order to derive linguistic categories like that of a phoneme or a morpheme, when defining grammatical classes like that of a noun, verb or adjective, or when telling determiner phrases from noun phrases, etc. As theoretical linguist John Lyons put it:

In this respect, modern linguistics has merely given recognition, within the theory of grammar, to the distributional principle by which traditional grammarians were always guided in practice. (Ly-ons 1968, 147)

So the method of variation is helpful. More importantly, it may help us in the present context. This is because despite the unifying concern for action explanations and their status it is hard to find a theoretically undemanding and transparent starting point for the philosophical study of human action. The usual approaches chosen by the champions of the profession are quite demanding conceptually and sometimes regarded as biased. They resulted in still on-going foundational disputes and split the profession into causalists (siding with Davidson) and tele-ologists (following Anscombe and von Wright), a fundamental division we cannot discuss at the present moment. The common ground all action theorists stand upon was gradually rendered invisible. However, there is a common ground. Action theory has a solid foundation. Studying human action in any conceivably sound way must draw on understanding the con-cepts involved and respecting the conceptual interrelations they impose on their subject mat-ter. On the assumption that the concepts and their interrelations essentially manifest them-selves in action explanations the method of variation can provide the very intuitive, sound, and respectable starting point called for. As we will see, it provides the least theoretically de-manding and maximally transparent account of which concepts, categories and functional units are embodied in our everyday talk about action, precisely because these concepts and their interrelations inevitably leave their mark in form of functional contrasts detectable in

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action explanations. So applying the method of variation is apt to unveil the very pre-theoret-ical way we fundamentally think about action in itself. Put in more Strawsonian terms, it is apt to uncover the descriptive metaphysics of action. In this way that part of our conceptual scheme becomes visible that deals with acting man and his interrelations with the world acted upon. This is just what we need.

2.2 The right starting point There may be the objection though that choosing action explanation as a starting point (and applying the method of variation to its instances) is in danger of begging the question or is likely to result in some sort of circularity. Let us quickly dismiss this mistaken impression in order to proceed with a clear conscience. Simply recall what Paul Grice and Peter Strawson reminded us of when countering Quine’s attack on the analytic-synthetic distinction:

[I]f a pair of contrasting expressions are habitually and generally used in application to the same cases, where these cases do not form a closed list, this is a sufficient condition for saying that there are kinds of cases to which the expressions apply; and nothing more is needed for them to mark a distinction. (Grice & Strawson 1956, 143)

Obviously, Grice and Strawson do have a point there and this point applies to the present case too. Speakers of a natural language are typically quite versed at systematically telling reports of type (A) from reports of type (B):

(A1) Tom fell because Dick had tied his shoelaces (B1) Tom fell because he wanted to deceive the referee

There are countless everyday examples on both sides. But there are also instances very much discussed in action theory like Harry Frankfurt’s famous example (Frankfurt 1978, 70)

(A2) Harry spills his drink because of his anxiety (B2) Harry spills his drink because he wants that his confederates begin a robbery

However, at this stage it is not important how familiar or how sophisticated these examples are. What matters is that (A1) and (A2) and countless other examples can be grouped together in contrast to (B1) and (B2) and more examples of this latter kind. As a result two distribution classes of functional units emerge whose elements are in complementary distribution and thus stand in functional contrast. What matters most, however, is that neither class of reports forms a closed list. So following Grice and Strawson we may conclude that these different kinds of cases mark a real categorical difference. Also, note that up to now no reference whatsoever to the nature of the respective cases has been made. We might have labelled them arbitrarily in any way deemed appropriate and in fact did so already when referring to them as the class of reports of type (A) versus the class of reports of type (B). So there is no question begging or circularity possible up to this point at all. However, no question begging or circularity is in-troduced either when we move on one small step and add to our description the assumption that speakers of a natural language take action by its very nature to be what manifests itself in reports of type (B) rather than what manifests itself in reports of type (A) (which latter we might aptly label ‘mere happenings’). Dependent on this assumption we may now go on an-other step, this time an even more trivial one, and name type (B) reports ‘action reports’. And

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in line with the proper understanding of the method of variation we may now expect the con-cepts, categories and functional units of action to display themselves in these reports—action reports. This is why studying action reports will lead us to the true understanding and in fact to the recognition of the common ground in action theory. And that is a sound and solid start-ing point.

2.3 The canonical form of action explanation So, studying action reports holds the key to the understanding of the concept of action. But of course we all are natural language speakers so there is no need for an extensive analysis of corpora. Let us just settle for a classic example, e.g. Frankfurt’s example of Harry at the party where a robbery is about to take place. It will help us to uncover that there is a canonical form of action explanations and that variants of it are acceptable only to the degree that they can be regarded as going proxy for the complete account. Note first that the action explanation given by (B2) might just as well have been given by (B3)

(B3) Harry spills his drink because he believes that if he spills his drink his confederates begin a robbery

However, neither (B2) nor (B3) would really seem to be acceptable as action explanations if it was not the case that it would also be correct, if perhaps unwieldy or inexpedient, to explain what was claimed to have been explained by stating (B4)

(B4) Harry spills his drink because he wants that his confederates begin a robbery and he believes that if he spills his drink his confederates begin a robbery

This conforms to the old Humean insight that an action explanation consists of two different elements that need not both be explicitly mentioned but must at least be implicitly assumed. In a more recent formulation by Donald Davidson:

A primary reason consists of a belief and an attitude, but it is generally otiose to mention both. If you tell me you are easing the jib because you think that will stop the main from backing, I don’t need to be told that you want to stop the main from backing; and if you say you are biting your thumb at me because you want to insult me, there is no point in adding that you think that by bit-ing your thumb at me you will insult me (Davidson 1963, 5).

Clearly, what Davidson is after is plausible and ultimately amounts to the very same that we are about to establish. However, Davidson’s way of putting it is couched in a slightly idiosyn-cratic wording. Obviously, he did not care to remember our previous lesson on intentionality and the theory of attitudes. Otherwise he would not have missed the point that quite clearly believing is an attitude too. However, there is no real problem here because all that Davidson wishes to establish at this stage is precisely what we are arguing for before: Reports of type (B2) or (B3) are acceptable as action explanations only inasmuch as they go proxy for the full account given in something like (B4). So if we choose action explanations as our starting point we choose wisely when we apply the method of variation to instances of the canonical formulation.

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2.4 The four categories of action Bearing this in mind it is just a small step to derive the general format of fully-fledged action explanations and thus identifying the fundamental categories of action by variation. We just have to look at another instance of a full account like in another classic example such as (B5):

(B5) Socrates drank the hemlock because he wanted to abide by his principles and be-lieved that if he drank it he would do so

Again, it is not at all important whether this explanation is correct or not. All that matters here is that is no less complete than (B4). Now the general format of action explanations is recog-nised when we see that (B4) and (B5) are variation instances of one another, thus uncovering the four categories of action. The first category where ‘Harry’ and ‘Socrates’ may be thought of substituting one another can be singled out as the category allowing for questions of the type ‘Who [spills his drink/drank the hemlock, etc.]?’ We make take this for convenience as the category giving us the subject of action, which is traditionally called the agent. The second category where ‘spills his drink’ and ‘drank the hemlock’ may be thought of substitut-ing one another can be seen as the category allowing for questions of the type ‘What does [Harry/Socrates]?’ in the appropriate tense and mode. With a due note of caution we may name this category the category of doing.

Caution is needed because in spite of the rigour and perspicuousness we are trying to ob-serve there is this ineradicable bad habit in action theory of conflating doing and acting, which ultimately goes back to a very thoughtless and dangerous manner of speaking. Conflat-ing what must be kept apart inevitably leads to seriously perplexing theoretical difficulties, as if action theory did not abound with them already. Suffice it to say, however, that our method does not require a substantial and antecedent grasp of the notion of a doing that would exceed the humble pre-theoretical knowledge every speaker of a natural language has and which con-sists in nothing more than knowing that a doing is whatever is referred to in an acceptable ex-planation like (B5) at the point where the question ‘What does [he whoever is being talked about]?’ may be regarded as being answered. Fair enough, this is a fundamental, functional, and formal understanding but it does not for that reason pertain to any particular theory. Rather, it is contained in the very way we fundamentally think about man’s interrelation with the world. Unlike this basic understanding warranted by the very way we pre-theoretically speak the notion of acting employed by those thoughtlessly conflating it with the notion of doing is very rarely as humble and without presuppositions. In order not to burden us with a richer set of presuppositions contaminating the pure foundations we are trying to uncover let us bear in mind that we do have a clear understanding of what doing is; a clear understanding of what acting is, however, is still to be reached and cannot be achieved by sheer sleight of hand.

Having safeguarded us sufficiently, I hope, against the annoying mistake just discussed we may now turn to the third and fourth category of acting. Really, they are one, for they may be taken together as allowing for questions of the type ‘Why [did he whoever is being talked about do what he did]?’ Substitution renders them a couple, however, for we can think of ‘he

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wanted to abide by his principles’ and ‘he wants that his confederates begin a robbery’ as well as ‘he believes that if he spills his drink his confederates begin a robbery ‘ and ‘[he] believed that if he drank it he would do so’ as substituting one another respectively. Since in these sub-stitutions one element always remains preserved it is very easy to names the categories as that of wanting and that of believing.

In short, the method of variation reveals four categories of action: Agent, doing, wanting, and believing. It reveals them as part of the very pre-theoretical way we fundamentally think about action. These are the foundations of action theory. This is the common ground all action theories must share. Against this background the two most popular notions of action theory are revealed as conceptually complex and capable of a quite straightforward functional elu-cidation. We already said that an action is what is explained by an action explanation. That was admittedly trivial but at least it was not question-begging. Now we may add the more substantial point that a reason is that by which an action is explained. Reminding ourselves that that by which it is explained is what is offered in response to questions of the type ‘Why [did he whoever is being talked about do what he did]?’ we may conclude even further that reasons are complex and consist of two attitudes, one of wanting and one of believing, under-stood in the pre-theoretical way employed here, intertwined in an appropriate fashion. Thus we have ultimately arrived at what is usually and pompously referred to as the classical de-sire-belief model of action, i.e. the general model favoured by Hume, Anscombe, Davidson and von Wright in their respective version. However, we did so in a purely descriptive way and without any of the many theoretical presuppositions these authors indulge themselves in making.

2.5 The nature of action We are very close now to describing the nature of action in a sound and fairly minimalist way. Another observation will provide the last bit of help we need. Note that the canonical form of action explanations not only manifests the fundamental categories of action, it also reveals their logical form (a distributional feature anyway). So we are in a position to describe the nature of action in both general and formal terms. For this we will have to introduce a (mod-est) logical apparatus, which I shall describe very briefly and then swiftly put to use.

What we will make use here as well as at later stages of our train of thought is a semi-formal language containing certain standard logical connectives, certain variables and the usual quantifiers. In the confines of the present investigation we must be brief so let me rather sketchily point out that standard connectives are ¬, &, v, and → corresponding to their natural language counterpart not, and, or and if … then. Standard individual variables are x, y, z and so on, replaceable by proper names (or expressions of the same logical type) like the familiar names Tom, Dick, and Harry. Standard variables occupying predicate position are φ, ψ, χ and so on, replaceable by predicates (etc.) like sleeps, dropped out of Junior High, and will be joining the Military. Standard propositional variables are p, q, r and so on, replaceable by complete declarative sentences (etc.) like Tom will be joining the Military, Dick sleeps, and Harry dropped out of Junior High. The very essence of variables is that they can be bound, thus we have the quantifiers ∃ and ∀ corresponding to their natural language counterparts at

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least one is such that and all are such that so that if needed we can render formulae like (∃x) (x sleeps) giving us (roughly) Somebody sleeps or (∀x) (∃φ) (φx) to be read (roughly) as Everybody is somehow or (∀p) (Harry says that p → p) expanding to (roughly) Everything is as Harry says. The last step, reserved for a later stage, consists of the addition of some inten-tional attitude operators like B, W, F, and H corresponding to their natural language counter-parts believes that, wants that, fears that, and hopes that so that we can render formulae like Bxr which may be expanded to Tom believes that Harry dropped out of Junior High, Wyq giving us Harry wants that Dick sleeps, Fxp going proxy for Tom fears that nothing is as Harry says, and Hzr expandable to Harry hopes that somebody will join the Military.

So much for the quick sketch of the fairly elementary apparatus involved. An in part rich-er yet still basic logical apparatus will be found in Lemmon (1965), Mates (1972), Quine (1959), Haack (1978), or Sainsbury (2001) but is not needed for the purposes of this paper. With the help of the formal language sketched we may now describe the logical form of ac-tion explanations as the form complete formulations like (B4) and (B5) are instances of:

(B) x 𝜑-s BECAUSE x wants that p AND x believes that x 𝜑-s → p

As this embodies the very fundamental way we do understand the notion of action we may use (B) in a conceptual analysis of the notion of action giving us the following analytical cri-terion (hence ‘df.’):

(Action) x acts ↔df. x 𝜑-s BECAUSE x wants that p AND x believes that x 𝜑-s → p

This amounts to the claim that, as a matter of properly understanding the notion of action, someone acts if and only if he does something because he wants something and believes that what he does suffices to bring about what he wants. Although the claim is clearly that the cri-terion is both necessary and sufficient for someone to act it is only the necessary condition that I shall typically make use of. I do realise that in action theory the sufficient condition is much more controversial than the necessary condition, and I remain confident that the argu-ments in favour of the sufficient condition are conclusive in the end. However, our aim is to lay bare the foundations of action theory. Our aim is not to spark controversy or fuel discus-sion. Hence let us rest content with the claim that our criterion marks a quite essential neces-sary feature of action which to miss means to miss the notion of action altogether.

Put simply, what our criterion tells us is that acting is doing something for a reason. This is philosophy: We sure knew this already. However, we have derived this insight in a manner where no dubious presupposition could secretly sneak in. And this is precisely the point about establishing sound and solid foundations. So, finally, we do have achieved a clear understand-ing of what acting is but this understanding is in part dependent upon our foregoing funda-mental, functional, and formal understanding of what a doing is. This is again a very strong methodological reason for not conflating doing and acting since otherwise the criterion of ac-tion would be rendered circular, which it clearly is not. Take this as a first fruit reaped from the lean conception sketched so far. Actually, there is a even richer harvest to be obtained from the fundamental notion of action. It usually goes unnoticed when that notion is charac-

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terised in the theory-laden way so common in action theoretic treatises. Approached in the austere manner of our minimalist approach, however, it comes to light quite easily. For the sake of brevity I shall confine myself to but a few cursory remarks concerning those features relevant at later stages of our investigation:

(i) Intentionality. Acting is doing something for a reason, and this is precisely the connec-tion to the topic of intentionality we discussed in the previous chapter. As we have seen, reas-ons for action consist of two suitably intertwined attitudes and we must remember that this means they are mental states or events ascribed by reference to a person experiencing the mental state or event and described by the nominalisation of a sentence within the scope of a suitable attitude verb. We already said that having propositional attitudes is a natural feature of man and their being expressible in natural language is a natural feature of language. We may now add that according to the fundamental way we think about man’s interrelation with the world attitudes quite naturally play a decisive role in the explanation of action: It is by reference to them that the all-important question is answered why or for what reason the agent acted in the way he did. Note further that this means that reasons for action inherit the feature of intentional inexistence. This means that an agent may do something for a reason even when the object he is thinking about does not exist or is not the way the agent pictures it to be. Con-sequently, the reason an agent in fact has may appear shallow or even grotesque to the omni-scient observer who knows that the object the agent is thinking about does not exist or is not the way the agent pictures it to be. Still, it remains why the agent did what he did—it was his reason. Calling his reason bad or the agent irrational does not change that a bit. It merely amounts to a change of topic only obscured by the implicit introduction of a new (and norm-ative) sense to the term ‘reason,’ which needless confusion can and should be avoided but un-fortunately is quite common in practical philosophy and the social sciences.

(ii) Subjectivity and individualism. Remember that since attitudes can but need not have a ‘real’ object, by way of providing an ‘internal object’ they bring out the subjective view of the individual having the attitude. So by describing the reason-constituting attitudes of an agent we describe the peculiar view he has, in other words his subjective perspective. This is why acting in general is inherently subjective. And this is why acting first and foremost pertains to the level of the individual. You need to be capable of having attitudes in order to be an agent. You need to be capable of having mental states. Because of this dogs are borderline cases of agents: Some would attribute mental states to them, some would not. Because of this neither the group of seven (of the seven major advanced nations) nor the Federal Reserve System nor Haberdashers’ Monmouth School for Girls are: No one would literally attribute mental states to these entities and not rather obfuscatingly refer to the mental states of the leading figures involved, the board of directors, the headmaster or some other natural person or set of natural persons each and everyone of which is literally capable of having mental states.

(iii) Motivation and mode of presentation. The last additional to be addressed concerns (a) the role and (b) the format of the reason-constituting attitudes comprised in our funda-mental understanding of the nature of action. (a) Being that because of which the agent does what he does the reason-constituting attitudes may be described as filling out the role of what motivates the agent to act the way he does. Given the previous results this means that as a matter or pure understanding proper motivation is necessarily subjective and individual. So

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what about the so-called objective reasons or general motivations so popular in practical philosophy and the social sciences? Well, there are only two options open. Either they relate in some conceivable way to subjective individual motivation or they must dissolve into flat-tering and hollow words. As a matter of fact, the essential subjectivity and individuality of motivation bears striking resemblance to the eye of the needle mentioned in the Gospel. Fam-ous is the passage found in The Gospel According to St. Matthew: ‘I say unto you, It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God (Mt 19:24).’ Well, it is none the less easier for a camel to go through the eye of a needle than for an objective reason to become that because of which the agent does what he does. Like the rich man who would have to strip himself of his fortune in order to enter the king-dom of God objective reasons would have to strip themselves of their objectivity and become subjective instead in order to really motivate. But since there is no necessity at all in this the alleged motivating force of objective reasons would be contingent at best and still necessarily mediated. It could never be anything in itself. Hence it is really futile or confusing, whether willingly or not, to theorise about a motivating force of objective reasons in the first place. (b) Concerning the format of the reason-constituting attitudes essentially involved in acting note that the very nature of reason-giving attitudes—in particular that to grasp their content is to grasp a proposition—makes it clear that a reason necessarily includes the specific mode of presentation of the objects the agent is concerned with. This is not an unimportant aspect at all. Sometimes it is essential to understanding the agent. Only when Œdipus came to see Iocaste as his mother did he realise he had met his tragic fate. Only then did Iocaste come to be presented to him in the manner ultimately leading Œdipus to blind himself. Only this shift in the way Œdipus came to think of the woman he had married is capable of ultimately ex-plaining what is described in the ancient tragedy.

2.6 Conclusion Let us close our survey of the foundations of action theory with the methodological idea we started with. Looking at our criterion of action we might as well have described the procedure we followed in a more condensed way. We might have said that the categories of action are manifested as distribution classes derived by substitution salva congruitate within natural language action explanation in their canonical formulation where the congruence to be pre-served is taken to consist of acceptability as an action explanation. Presumably, this way of putting it, although correct, would have had the disadvantage of convincing only those who would have agreed anyway. It would had have the advantage, however, of making visible that what we have achieved is methodologically exactly on a par with what linguists are praised for when deriving linguistic categories or what logicians employ when analysing the logical structure of thought. Borrowing from John Lyons we could have said that in this respect ana-lytical action theory has merely given recognition to the distributional principle by which more traditional theorists were always guided in practice. To this basic and hardly controver-sial insights we have added nothing more than the essential tenets of the theory of intentional-ity discussed in the previous section. Because of the intentional nature of motivation, i.e. the attitudinal nature of reasons, this was an essential part of a complete picture of the funda-mental nature of action. It is a fortunate by-product of our investigation that it made clearly

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visible why human action must necessarily be conceived of in a subjectivist and individualist-ic way.

That human action must necessarily be viewed as subjectivist and individualistic is pre-cisely what the Austrian School of economics would have predicted too. However, as I prom-ised at the outset, our investigation was carried out in complete independence of any ap-plications to the practical issues it will be applied to—including economics or the social sci-ences —. So it was much more fundamental than the correct but weakly founded Austrian claim. Consequently, our results depend on nothing but a fundamental understanding of inten-tionality and a distributional understanding of action explanations. So they were achieved wholly and completely in the realm of philosophy. It is important to note, however, that those branches of philosophy that usually come into play when economists discuss the fundament-als of their subject, i.e. Kantianism and positivism, neither were needed nor would have been helpful at all. Also, to conquer a common misconception on the ultimate foundation of eco-nomic science (Mises 1962) our investigation was not at all epistemological. If need be to de-scribe it in such terms the disciplines to cite would rather be metaphysics, semantics, logic, and the philosophy of mind. It may be a lot to ask of an economist or any other social scientist for that matter to tell these disciplines apart or to fully acknowledge the difference in rigour and method of our way of proceeding compared to the usual way it was done before and still is. However, since the study of human action in economics is quite regularly accused of being founded ‘upon a weak philosophical basis’ (cf. Barrotta 1996: 65) it is virtually all-important to be capable of demonstrating that it does have a sound and solid foundation despite the many theorists who chose to build on sandy soil.

As I said before, from these discussions will emerge the outline of a systematic and integ-rated treatment using the well-established tools of analytical action theory and some neigh-bouring disciplines. I promised that it would be seen that the philosophy and logic of human action has quite a lot to contribute to economics and the social sciences. Having demonstrated that we have rigorous and respectable means at our disposal I now turn to demonstrating their richness, which is in part their contributing to economics and the social sciences. For want of space this can be a sketch only. However, it is a central problem of economics that we now turn to.

3. The study of human action in economics We have now acquired a thorough and robust understanding of the notion of human action and the phenomenon of subjectivity. If economics really is a part of the study of the individual and social action of mankind in the ordinary business of life we should expect these insights to bear fruit with regard to substantial economic issues. Actually, first steps in this direction were already taken when it was demonstrated with the help of analytical action theory that two cornerstone theorems of praxeology, the uneasiness theorem and the scarcity theorem, are truly and purely analytic (Oliva Córdoba 2017). The uneasiness theorem, stating that the in-centive to act is always uneasiness (Mises 1949, 13), and the scarcity theorem, stating that action is the manifestation of scarcity (Mises 1949, 70), are at the very heart of Mises’s pro-gramme of founding economic theory in action theory. Given the controversial nature of this

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programme even among Austrian economists it seems that in order to make a more lasting impression on economists this vindication of the proper study of human action in economics was way to subtle. But, as the proverb says, it is through wisdom that a house is built and by understanding that it is established; the foolish tear it down with impatience. Given the demonstration of the purity and soundness of the foundations we may now advance the study of human action in economics a step further and address an issue that surely qualifies as a substantial issue both in theory and practice: The problem of competition.

3.1 The problem of competition Competition is both an old phenomenon and a central concept of economics. Along with the growing importance of welfare economics as a policy advisor, competitiveness acquired an increasingly important role as main criterion by which to judge the so-called efficiency of ac-tual markets. This significance stands in stark contrast to the still insufficient understanding of the phenomenon and the inadequate grasp of the corresponding concept. Admittedly, a better understanding was hoped to emerge as result of the development of the theory of perfect competition, a centre-piece of general equilibrium theory; and present day mainstream eco-nomic theory seems to consider itself more or less satisfied on this issue. But as we will see shortly there are even graver and more serious difficulties with the equilibrium approach of competition, which aims to explain competition in terms of an perfectly realised market struc-ture. This market structure, economic textbooks will repeat ad nauseam, is said to exist when (i) the number of seller is very large, (ii) the goods traded are homogeneous, (iii) there are no transaction costs or other obstacles to free and immediate exchange, and, perhaps, (iv) every-one in the market is in possession of complete and perfect knowledge.

Quite obviously, the point of these provisions is to ensure that sellers under conditions of perfect competition have no influence over market prices and thus take prices as given. Per-fect competition, as Samuelson puts it, ‘is the world of price-takers’ (Samuelson & Nordhaus 2009, 150). However, from a more general point of view there is no clear-cut division between buyers and sellers in the first place. There is no difference in principle between the case where Dick exchanges his goat for Tom’s sheep or where he exchanges it for Tom’s $ 40. Consequently there is no saying in principle who the buyer is and who the seller. What we can say is that both Dick and Tom are agents, individual participants on the economy, or traders. Seen in this light the idea of a world of price-takers must be formulated more generally. Really, what the provisions for perfect competition aim to ensure is ‘the fundamental compet-itive assumption that agents cannot influence market prices’ (Safra 1987, 225; cf. Khan 2008). So the fundamental perspective of the econometrist becomes to ensure that ‘the influence of an individual participant on the economy […] be mathematically negligible’ (Aumann 1964, 39). This, as Aumann demonstrated, is best captured by rendering the ideal infinity of traders as a single continuum. Since the circumstances in which individual economic agents are eco-nomically negligible are precisely the circumstances in which they are numerically negligible (Bryant 2010, 332), this amounts formally to the introduction of a single entity, the all-trader, as the single unit of economic exchange. Although Aumann explicitly emphasised that the idea of a continuum of traders was ‘not merely a mathematical exercise; it is the expression of an economic idea’ (Aumann 1964, 41), not every equilibrium theorist seems to have been

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comfortable with the implicit metaphysics of such a view. We may safely bypass these intern-al discussions, however, since alternative approaches (e.g. Makowski & Ostroy (1991)) typic-ally share Aumann’s objective of demonstrating ‘that each individual trader have no influ-ence’ and merely seek alternative formal renderings of this idea.

Before turning to the question in what regard the equilibrium approach of competition is more apt to raise doubt than confidence we must briefly address two more issues, one being merely another aspect of these provisions and one being what is often seen as a consequence of the complete equilibrium picture. The other aspect of these provisions has been mentioned already: We are concerned with the assumption that the goods traded are homogeneous. It is easy to see that like the assumption of a continuum of traders it is not meant as a realistic as-sumption but as an abstraction only. What is being abstracted from are the differences between goods, so the target here is product differentiation. It is assumed that under perfect competition it would make no substantial difference whether the items of trade were a bit heavier if purchased from this trader or had a slightly different smell if purchased from that trader. In Samuelson’s words (Samuelson & Nordhaus 2009, 150): ‘A perfectly competitive [trader] sells a homogeneous product (one identical to the product sold by others in the in-dustry).’ Since from a logical point of view we are in one way or another abstracting from the differences in traders anyway we must on logical grounds make a matching assumption with regard to what is being traded too. So really, the homogeneity assumption on part of the goods and the continuum assumption concerning the traders are two sides of the same coin. Both serve the purpose of mathematical integration, aided by the third provision that there be no transaction costs or any other obstacles to free and immediate exchange, which from a logical perspective ensures uniqueness of mapping. So really the picture drawn is this: The all-trader is uniquely mapped onto the all-good. This surely is a Pareto-optimal allocation. There is neither a good left unallocated, nor a trader, nor is there an index at which there is no alloca-tion. There is not even the possibility of waste. If this is what efficiency amounts to the equi-librium picture of perfect competition depicts its optimal state. And if Pareto-optimality and efficiency are welfare-ideals the equilibrium picture of perfect competition depicts the optim-al state of welfare. Also, to introduce a bit of game theory, no one can gain anything by chan-ging his own strategy, given the strategies of everybody else. Thus the perfect equilibrium is a Nash-equilibrium too. Truly a remarkable idea, one might think. We will come back to it in a moment.

Now, the last issue to mention is a near corollary of our provisions that has become so common and widespread it is even being regarded as part of the equilibrium picture of perfect competition. It has implicitly come to be seen as a mark of welfare optimality. More import-antly, it has so to speak escaped the classroom and seized the public sphere. It originates, however, in general equilibrium theory and is taught as elementary in every introductory course on economics. Under perfect competition ‘the maximum profit comes at that output where marginal cost equals price’ (Samuelson & Nordhaus 2009, 151; cf. Acemoglu 2016, 154; et al.). In other words: The price cost margin is zero. So according to the equilibrium picture of competition zero profits are a welfare ideal.

We are now in a position to understand what is being so problematic about the equilibri-um picture of perfect competition. It is not what Friedman thought to have countered, i.e. the

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lack of realism in the assumptions (Friedman 1953). Clearly, the structural assumptions are very strong and highly unrealistic, which does not in itself speak in favour of them. However, what speaks against them is much more troublesome. To begin with, the still on-going at-tempts indicate that the market structure approach has been incapable so far of devising a sound way of measuring competition. As even econometrics concede, the price cost margin, widely used as e.g. in the Lerner-index, is problematic in that its ‘theoretical foundations […] as competition measure are not robust’ (Boone 2008, 1245). More seriously, however, the idea of perfect competition as centring on the assumption of the welfare ideal of zero profit has also proven incapable of providing any rationale for economic subjects to participate in mar-ket exchange in the first place. Thus it has rendered the very idea of entrepreneurship unintel-ligible (cf. Makowski & Ostroy 2001, 480). One might even say that it has accomplished the truly Orwellian inversion of turning the idea of yielding profit from a very mark of the eco-nomic process into the symptom of an imperfection indicating that the ideal economic state has not yet been reached. If zero profits were a welfare ideal it would not be surprising that the economy must not be left to those striving to secure profits. But recall that from a formal point of view (since profit is both subjective and mutual and cannot be measured in money alone) all traders necessarily strive to secure profits. So really, the idea Samuelson so non-chalantly hails, which is being taught in every economics classroom since more than half a century, ultimately amounts to the caveat not to leave the economy to the individual. Evid-ently, this is much more than a mere invitation for the state (thought of as maximal non-profit organisation) to intervene. It is planting an idea at the centre of economic thinking that must inevitably corrupt the very notion of legitimacy of individual ownership (of means of produc-tion, if such a distinction can be made) and their operation for profit. So deeply rooted is this conception that it may even be conceded in a Nobel memorial lecture that ‘hypothetical per-fect competition and hypothetical perfect planning both imply efficient allocation of re-sources’ (Koopmans 1977, 264) without anybody bothering to notice that this is precisely be-cause an economy under perfect competition would be so hard to distinguish from an eco-nomy under perfect socialism that implementing the one would amount to implementing the other. It is thus not surprising at all that the very idea of perfect competition is inconsistent in itself and inevitably leads to contradiction. This has been noted many times over, and not only in the Austrian tradition (cf. Knight 1921, 193; Robinson 1954, 245 ff.; et al.). It is hardly concealed even in Samuelson’s standard textbook where the economic agent is pictured as a ‘maximizer’ of profit whose performance is optimal when there is none (Samuelson & Nord-haus 2009, 151f.).

The necessarily arising inconsistencies and incompatibilities with real world markets and real life competition are regularly brushed off with reference to the idea of perfect competi-tion being an ideal only, comparable to e. g. the idea of frictionless surfaces (Samuelson 1947, Friedman 1953, Aumann 1963, Khan 2008, etc. pp.). The reasoning goes roughly along these lines: Although there cannot be frictionless surfaces to study them it has proven useful for re-ducing the friction with which real world surfaces interact. The big names promoting this ana-logy notwithstanding this is just throwing sand in our eyes. Granted, frictionless surfaces provide a useful ideal for the reduction of friction in real world materials despite the fact that they do not exist. Making progress towards the ideal contributes to the reduction of friction in real world materials: This is why frictionless surfaces are an ideal in the first place. The situ-

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ation is completely different though in the case of ‘perfect competition’. Here, every step to-wards perfection contributes to the diminishing of competition. Take for instance (product) differentiation. Decried in applied equilibrium theory as an unfair barrier to entry detrimental to pure competition it is in real life rather a function of consumer acceptance. In the attempt to secure business for himself every provider or producer will try to attract consumers to his product or service. He will aim at making it as peculiar from the point of view of his potential customers as he assumes they will reward. As a result, with increasing competition we are likely to expect more differentiation rather than less. If need be not in the product itself but in the service, in the transaction costs, or elsewhere in the economic sphere. Differentiating, i.e. making a difference, is of the very essence of true competition. Strip the notion of this feature, abstract away any and all remaining differences, and you really are talking about something else. So in the light of day the idea of perfect competition is not at all an ideal which to pursue enhances competition or which to grasp gives us a better understanding of it but quite the op-posite. It is a mock, false, or anti-ideal. To pursue it gradually removes all competitiveness up to the point where there is none left at all. The very idea of perfect competition lures us into misconceiving the true nature of competition and installs a dangerously distorted picture in-stead.

But we are being thrown sand in our eyes in other regards too. As we mentioned before, it is a consequence of the equilibrium picture of perfect competition that a perfectly competitive market brings about a Pareto-optimal allocation of goods. Samuelson calls this ‘one of the most important results in all economics’ (Samuelson & Nordhaus 2009, 160). But what is so important about it when this result might is merely brought about by misleading successive steps of abstraction? Well and good, according to the econometrist we ultimately have a unique mapping of the all-trader onto the all-good. So there is no possible reallocation that ‘can make anyone better off without making someone else worse off’ as Samuelson contends. Also, the allocation state given is a Nash-equilibrium too. I agree. But how can this be any-thing but trivial given that we have arranged the setting via suitable abstraction in such a way that from a logical point of view there is nobody else, nor any other good, nor any other alloc-ation? It seems that we just pulled a few rabbits out of the hat. Even if done beautifully this trick does not even serve any lasting purpose. The reason is that there simply are no welfare implications of Pareto-optimality at all if ‘welfare’ is to retain any substantial meaning in the first place. Contrary to what the terms suggest there is nothing ‘good’ about a Pareto-optimal allocation of goods. To see this compare the following allocations:

(a) Goods are evenly distributed among all traders (b) All goods are allocated to one trader

For reasons of charity, and since we are troubled enough already, let us ignore for a moment that from the point of view of the miraculous abstraction endorsed (a) and (b) are really one and the same state. As we are not dependent on this assumption when inquiring into the idea whether Pareto-optimality comes with welfare implications we may as well postpone it. I as-sume I need not make the case that (a) is Pareto-optimal. But, clearly, if Bill Gates owned everything there would be no way of making anyone ‘better’ off without making Bill Gates ‘worse’ off either. Hence both (a) and (b) are Pareto-optimal allocations of goods. But does that really mean that it is an welfare ideal that Bill Gates own everything? If not then it cannot

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be a welfare ideal either that goods be evenly distributed among all traders. Or rather the question of allocation of goods cannot not touch upon the question of welfare or the question of being better off, or worse off, or well off at all. Quod erat demonstrandum: Pareto-optimal allocations of goods have none welfare implications whatsoever. As this amounts to uncover-ing a fundamental flaw in the very foundations of welfare economics theorists eager to avert danger resorted to a refinement where an allocation of goods is optimal if it is Pareto-optimal or, if not, ‘allows for a compensation being paid, and which will yet show a net advantage’ (Hicks, 1939, 706). This so-called ‘Kaldor-Hicks-efficiency’ was hoped to have all the advantages of Pareto-optimality and none of its shortcomings, but we need not discuss it here. It relies heavily on Pareto-optimality and at the same time it transcends the confines of a market structure approach. Thus it is incapable of vindicating Pareto-optimality in the first place and also constitutes the abandonment of a purely allocative perspective. In addition, it needlessly trades away the only asset of the equilibrium picture of pure competition, its form-al rigour. Hence I shall leave it out of the picture without discussing its shortcomings.

Nobel Memorial Prizes in economics were awarded to Kenneth Arrow, John Hicks, and Gerard Debreu for their contributions to developing the theory of perfect competition and its relationship to economic efficiency. Surely, these works were masterpieces on perfect compet-ition. But it is doubtful whether these ingenious works really contributed to our understanding of economic efficiency unless this is not merely taken as a proxy for the completely irrelevant notion of Pareto-optimality. Anyway, the purpose of this section was neither to reassure the believer nor to preach the Gospel to the heathen. It was rather to substantiate the claim that the understanding of competition as given by the equilibrium concept of perfect competition is fraught with problems. I hope you may have come to be tempted, like myself, to side with Paul McNulty:

That perfect competition is an ideal state, incapable of actual realization, is a familiar theme of economic literature. That for various reasons it would be less than altogether desirable, even if it were attainable, is also widely acknowledged. But that perfect competition is a state of affairs quite incompatible with the idea of any and all competition has been insufficiently emphasized. It is this last feature of perfect competition, and not, as is sometimes incorrectly claimed, its high level of abstraction or the “unreality” of its assumptions, which limits its usefulness, especially for economic policy. (McNulty 1968, 641f.)

The most charitable way to put it would perhaps be to conclude that perfect competition is about perfection, not about competition. A perfection admittedly neither attainable nor desir-able in the real world. A neat mathematical rendering of a quasi Parmenidean idea of a nearly all-encompassing monism. Surely, in that metaphysical picture there is neither change nor waste. But unfortunately there is no competition either. This is why the immense intellectual efforts invested into this idea have never ceased to provoke contradiction. Also, the emer-gence of a new and lively debate (cf. e.g. Moudud 2012) bears witness to ever on-going wor-ries that something essential to the concept of competition might have been lost along the way and something inessential might have seized the economist’s attention instead. What has been missing, and what might help us to get a better understanding of competition instead, is what we must turn to next.

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3.2 Competition as rivalry The idea of pure competition came up as an effort to understand more precisely the ultimate ground of truth of two very popular and plausible classical propositions. One was Adam Smith’s contention that the greater the number of sellers the lower the price, the other was John Stuart Mills assumption that there can be only one price in the market. It was the aim of the forefathers of general equilibrium theory to render these assumptions truisms and to do so in a mathematically convenient way. The imprecise understanding econometrists sought to refine and which they came to replace instead usually made reference to man’s behaviour. So here we are back with our topic of the study of human action in economics. Note that there is no idiosyncrasy in this connection. Before competition came to be understood in terms of an assumed perfection it was common to say it essentially referred to a certain form of human conduct. But although everybody still pays lip-service to this way of putting it the correspond-ing understanding of competition is no longer taken at face value, or so it seems. In the in-terest of adopting an explanation more favourable to mathematical calculation competition came to be viewed almost exclusively from the perspective of the assumed market structure we discussed in the previous section. Essential steps in this transition were Augustin Cournot (Cournot 1838), Stanley Jevons (Jevons 1871) and Francis Edgeworth (Edgeworth 1881). So the idea of perfect competition, laid out in mathematical terms and eagerly adopted and fur-ther developed by the increasingly dominating econometric mainstream, preceded the tri-umphant breakthrough of general equilibrium theory and even paved the way for it. In the meantime the traditional understanding of competition in terms of human behaviour increas-ingly escaped the economist’s attention and is mentioned today almost exclusively in provi-sion of historical context. Yet it is very well capable of casting light on important features of economic activity that should not go unnoticed, and it may give us an adequate understanding of competition not fraught with the many problems we had to confront when reviewing the attempts to leave man out of the equation. Not the least of these features are so indispensable traits of economic activity as those of risk, uncertainty and profit, topics from the theorising of Frank H. Knight, but of course in our present study our focus must be on competition.

It is common knowledge that competition is marked by an element of rivalry. Chicago School economist George Stigler provides a useful survey:

“Competition” entered economics from common discourse, and for long it connoted only the in-dependent rivalry of two or more persons. When Adam Smith wished to explain why a reduced supply led to a higher price, he referred to the “competition [which] will immediately begin” among buyers; when the supply is excessive, the price will sink more, the greater “the competition of the sellers, or according as it happens to be more or less important to them to get immediately rid of the commodity.” It will be noticed that “competition” is here (and usually) used in the sense of rivalry in a race—a race to get limited supplies or a race to be rid of excess supplies. (Stigler 1957, 1-2)

Note that Stigler is providing more than a mere historical contemplation. Elsewhere, he ex-pressly defines competition in this way:

Competition is a rivalry between individuals (or groups or nations), and it arises whenever two or more parties strive for something that all cannot obtain. Competition is therefore at least as old as man’s history, and Darwin (who borrowed the concept from economist Malthus) applied it to spe-cies as economists applied it to human behaviour. (Stigler 2008)

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Thus we can say without exaggeration that there is an intimate connection between competi-tion and business rivalry. This connection is so much taken for granted that it usually goes without saying. In many textbooks it is mentioned more or less in passing (cf. Acemoglu et al. 2016, 357; Pindyck & Rubinfeld 2013, 281 et passim; Samuelson & Nordhaus 2009, 172f.; Stiglitz & Walsh 2006, 241 et passim; and others). Sometimes, however, it is stated very clearly as in Mankiw & Taylor: ‘Competition exists when two or more firm are rivals for cus-tomers’ (Mankiw & Taylor 2014, 42). Inherent in all these characterisations is the concession that competition resides essentially in human behaviour. So even if we had not been critical of the notion of pure competition we would still be more than justified in going back to what was always seen as the uncontroversial feature in place. For although some of the theorists mentioned are well aware that there are problems none of them is a critic of general equilibri-um theory or its application to the theory of competition.

Provided we go back, then, how are we to make sense of the idea that competition is es-sentially business rivalry without introducing strong assumptions and making heavily burdened presuppositions on our part? It is here where the minimalist philosophy and logic of action sketched in the first two sections will make the difference. In the following sections it will lead us step by step to a sound, systematic, and sensible understanding of both the phe-nomenon and the concept of competition as founded in the philosophy and logic of human action

3.3 The philosophy and logic of competition We must start with the simple case of economic exchange and apply both our insight as well as the apparatus derived. Let us remind ourselves that to trade with someone is to act. Thus everything we said about acting applies for trivial reasons. Recall also that from a more gen-eral point of view there is no clear-cut division between buyers and sellers in the first place. We do not know who is who but we do know that it takes two agents to have an economic ex-change. We might say as illustration that they inter-act. In the interest of a lean approach let us refrain, however, from starting off with big words like ‘communicative’, ‘coordinated’ and ‘reciprocal’ that might be used to characterise the way the respective actions of the traders are interwoven. Introducing them ex post rather than ex ante will make clear that we did not pre-suppose them in our account but can used them afterwards in description without being de-pendent on their conceptual content.

a) A simple exchange. Given, for instance, that Tom and Dick trade a sheep for a goat what is involved when they make the deal need not be described in stronger terms than as ne-cessarily comprising the following:

(TD1) Dick’s goat in exchange for Tom’s sheep a) Tom gives Dick his sheep b) Dick gives Tom his goat c) Tom wants that Dick gives him his goat d) Dick wants that Tom gives him his sheep e) Tom believes that if he gives Dick his sheep then Dick gives Tom his goat f) Dick believes that if he gives Tom his goat Tom gives him his sheep

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As you might have guessed already we can expressed this is a more formal fashion by using the apparatus sketched in the section on the foundations of action theory:

(TD2) Formal rendering of (TD1) a) φxy b) ψyx c) Wx ψyx d) Wy φxy e) Bx (φxy → ψyx) f) By (ψyx → φxy)

However, this rendering is somewhat preliminary. Remember that both Tom and Dick are act-ing. So they are doing something because they want something and believe that when they do what they do they get what they want. That is precisely what acting is: φ-ing because wanting that p and believing that q (for some adequate φ, p, and q, of course). Note also that our agents are not acting in isolation. The whole point of their so acting is tit for tat (or Latin do ut des). So we must regiment our clauses rather in the following way (for brevity’s sake, in condensed manner):

(TD) [(a) & (b)] because ([(c) & (d)] & [(e) & (f)])

This formulation covers Dick’s goat in exchange for Tom’s sheep but looking at it more closely we can see that it is more general. It covers Tom’s and Dick’s exchange only as a spe-cial instance, but we need not elaborate on that at the present occasion. Admittedly, (TD) would look quite complex when spelled out in detail. But since we are familiar with every single line of it we can oversee the complexity and may rest assured that it is no less descript-ive and no more conceptually demanding than all our rather scant assumptions introduced when sketching the philosophy and logic of human action.

b) An alternative situation. Clearly, up to now no trace of business rivalry is found. How does the picture change once we add the rival to the scene? To make a further step in this dir-ection let us imagine an alternative situation. Tom is still willing to trade his sheep but now there is another trader, Harry. In this alternative situation Tom and Harry trade a sheep for, say, a llama. (Actually, we could have stuck with the same commodity as before, and our for-mulation will still allow for it. But it is easier to describe the setting when keeping Harry and Dick more clearly apart.) So what do the corresponding set of conditions look like when Tom and Harry make the deal? This gives us a variant of (TD1), i.e. (TH1):

(TH1) Harry’s llama in exchange for Tom’s sheep g) Tom gives Harry his sheep h) Harry gives Tom his llama i) Tom wants that Harry gives Tom his llama j) Harry wants that Tom gives Harry his sheep k) Tom believes that if he gives Harry his sheep then Harry gives him his llama l) Harry believes that if he gives Tom his llama then Tom gives him his sheep

The corresponding way of putting it formally is of course (TH2):

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(TH2) Formal rendering of (TH1) g) φxz h) ψzx i) Wx ψzx j) Wz φxz k) Bx (φxz → ψzx) l) By (ψzx → φxz)

which for reasons already given must be regimented as:

(TH) [(g) & (h)] because ([(i) & (j)] & [(k) & (l)])

Of course, (TD) and (TH) merely taken together still do not give us business rivalry. We must piece them together in the right way. To this we turn now.

c) Completing the picture. Let us go back and assume that neither of these exchanges has yet taken place. Tom has only one sheep to trade and is prepared to trade it either for Dick’s goat or Harry’s llama. But no business has taken place and Dick’s closing the deal is no less a possibility than Harry’s. The essential step we have to add comes from the theory of inten-tionality: We must take into account what attitudes the assumed competitors have towards these possibilities. That is what makes them competitors in the first place.

Appreciating that it is essential to introduce an intentional element to explain rivalry is a near truism. What makes two runners run a race is not that they are speedily moving in the same direction. So many men do it every day. Rather, it is the fact that the one wants to out-perform the other. So, obviously, they must have attitudes toward each other. In this case: They must want something concerning the other runner. This introduces an intentional hence subjective feature as an essential element but this need not bother us since we have discussed it in the first section already. As the role of man in general equilibrium theory does not really differ very much from the role of ‘these individualistic atoms of the rare gas in my balloon’ (Samuelson 1963, 1411) we must not be surprised that the essential element of com-petition cannot but be missing in the equilibrium picture of perfect competition. However, with the help of the philosophy and logic of human action it is not difficult to put this element back in place. Now, we could stick with the attitudes of wanting and believing, however, it is my contention that more realism is added to the picture when we make use of two other pro-positional attitudes instead. So let us describe the essential step as adding to the picture that Dick hopes that he will make the deal but fears that Harry might close it instead, and vice versa. Thus we may say that if Dick hopes that he will make the deal but fears that Harry might close it instead, and vice versa, they see each other as business rivals, and further, that if they act accordingly, they are business rivals. So a first step to a formal rendering would be

(PR) [Hy (TD) & Fy (TH)] & [[Hz (TH) & Fz (TD)]

where Dick and Harry perceive each other to be rivals and

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(ANT) χ1y BECAUSE Wy [(TD) & ¬ (TH)] AND By χ1y → [(TD) & ¬ (TH)] AND χ2z BECAUSE Wz [(TH) & ¬ (TD)] AND Bz χ2z → [(TH) & ¬ (TD)]

where they behave antagonistic. This rendering is capable of much more elaboration but for our purposes this will do. According to this account to compete is to act in a certain way. Loosely speaking, it is to do something because you want to make the deal and do not want your rival to make it instead and also believe what you do will suffice to secure this outcome. Again, this looks quite complicated and to a certain degree it is but qualitatively nothing new has been introduced. If you will, we have added width to our analysis, not depth. So what might χ1 and χ2 be? Well, Dick might offer Tom a discount or some other gratification. Harry might offer Tom special trade relations or immediate delivery. As long as that is what they do because they want to make the deal and do not want their rival to make it, that is what their acting competitively amounts to.

In this paper we discussed causal explanations and action explanations but quite obvi-ously, these are not the only types of explanations. Another type confronts us here. It is exem-plified in a very familiar way of talking employed in daily life, e.g., when we say things like ‘Susan wanted to go home early because she feared she might miss Peter’s call.’ It is not un-common to say that when talking in this way we are giving the reason why Susan wanted to go home early. However, this cannot be a reason like in an action explanation, because having an attitude is neither a doing nor an acting; nor can it be the description of a cause, at least not in any strict sense of causation of any use to the naturalist or the determinist. Here we have a part of the theory of attitudes that did not need to be discussed earlier but that comes up now: Attitudes may give rise to one another without being either cause or effect or being voluntar-ily brought about. This is the case in our example. However, it is the case in our explanation of competition as rivalry too. It is in this very sense that an action is a rivalrous behaviour: An action is rivalrous behaviour if and only if the connection between (PR) and (ANT) is such that seeing each other as rivals is the reason of acting in antagonistic manner. And an action is a competing if and only if it is an instance of rivalrous behaviour. Thus we have finally man-aged to explain competition in terms of rivalry. The last step, to explain business competition, is easy. It is nothing more than to add that an instance of rivalrous behaviour is an instance of business competition if and only if the doing or the reasons for the action pertain to the eco-nomic sphere.

4. Conclusions and a glimpse beyond Looking back at our explanation of competition as rivalry one might be once again tempted to conclude: This is philosophy. We sure knew this before. And it is true, I never meant to cast doubt on the fact that economists we always aware of the truth of the conclusion. Depreciat-ing the importance of the study of action in economics, and seduced by a formal picture which would put that conclusion out of their reach, they needlessly relinquished the means of drawing it for themselves though. So, yes, we may have known all the time that competition is rivalry. What we did not know was that in this understanding there was neither need nor room for something only remotely resembling an equilibrium picture of perfect competition.

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Explaining competition as rivalry cannot be achieved within a market structure approach. The market structure approach makes competition a mystery simply because it leaves out what is essential to it. In contrast, explaining competition as rivalry dissolves this mystery. Also, it gives us a good idea of what the study of human action can contribute to the study of the social sciences in general and economics in particular. Traditionally, economics has fo-cused on understanding prices, competitive markets, and their interaction. If studying human action in the way undertaken here made a substantial contribution to the explanation of com-petition it not only demonstrated the use of the philosophy and logic of human action in the application to the social sciences but did so at the very heart of the realm of economics.

As I said earlier, Mises took economic science to be founded in action theory. This is a claim even his most loyal followers found too disturbing to defend. Also, he thought that ac-tion theory as he envisaged it was ultimately founded in epistemology. So he came to coin the phrase of epistemology as the ultimate foundation of economic science (Mises 1962). In this latter regard Mises erred. There is nothing epistemological about action theory or the theory of intentionality. We have demonstrated this by way of omission: Our account was sufficient yet it made no substantial use of epistemological notions, concepts, or considerations whatso-ever. More important is that what has been demonstrated here is strong evidence in support of the correctness of something very closely akin to Mises’s former claim: The proper founda-tion of economic science is analytical action theory. As I demonstrated elsewhere (Oliva Cór-doba 2017) Misesian praxeology can be rendered nicely compatible with analytical action theory retaining the spirit but not the letter of Mises’s original approach. So the prospects of an integrated approach of Austrian theory as an amalgam of Austrian economics and analytic-al action theory would seem bright—were it not for the timidity with which Austrian econom-ists abstain from endorsing it. But even if the prospects are not as bright as they should be let us not fail to mention that in the course of this investigation we did not need to compromise the rigour, richness and respectability of analytical action theory and the theory of attitudes. If these were decent, well-established and worthwhile fields of study before we most likely will have added to that rather than have subtracted from it.

So, we have finally made good on our promise of giving an understanding of competition as rivalry not fraught with the shortcomings of equilibrium theory. We only made use of con-cepts and tools needed in analytical action theory anyway. Positing new concepts and tools all the way up until you reach your conclusion is very much the lazy man’s approach in science, and we have refrained from doing that. But outside general equilibrium theory economists are accustomed to viewing themselves as practical men asking what a given theory is good for in the first place. So what is the practical use of our way of analysing competition? Closing a toilsome tour d’horizon I can hint at a few points only but I should be glad to elaborate on this in discussion or at some future occasion.

a) Intentional inexistence. As you will have noticed our criteria require only that the competitor be given to his rival as an intentional object. So someone may see someone else as a competitor even if that intentional object does not exist or is not the way the would-be rival pictures it to be. As that would not change the would-be competitors behaviour in the slightest way we can extract from our finding an understanding of competitive behaviour for a singe agent: If the agent engages in rivalrous behaviour because he sees somebody as a rival,

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whether or not that assumed ‘rival’ actually exists or really behaves in the assumed way, this is sufficient for his behaviour being an instance of competitive behaviour.

b) ‘Uncertainty’ and Motivation. It is a near commonplace in action theory (and this is not the place to defend it) that an agent does not aim at what he really considers impossible nor at what he considers achieved already. In this regard motivation can only live in the realm of the uncertain. But only where the agent acts can the point of all competitive behaviour, making profit, arise. So we may underscore a championed result of Frank Knight’s (1921) with the means of the philosophy and logic of action only.

c) Market failure. Competition does not require an equilibrium of whatever kind to exist. To the contrary, if there were such a equilibrium there would not be competition. Con-sequently, there is no market failure and in particular no market failure exhibited or brought about by rivalrous behaviour such as (product) differentiation. What is being described as such is merely a failure of the market structure theory to adapt to the phenomena it aimed at describing in the first place.

Of the consequences of points a) to c) I need not say much. For instance, they would amount to an almost complete repeal of any anti-trust legislation and corresponding action with only the prohibition of state aid and the removal of government barriers to entry left; something concerning which for many years Dominic Armentano was a lone voice in the wil-derness (Armentano 1972). With our conclusion it becomes clear that what drives competition is not the number of sellers or any other feature of market structure. No objective feature could do that. What drives competition is intentional: the fear of losing business and the hope for somehow still securing it. So the most expensive and time-consuming activity the Eu-ropean Commission and similar regulatory bodies engage in, concentration control and the prohibition of cartels, appears conceptually compromised and almost completely unfounded. Even worse, such an ill-advised manner of acting is presumably very costly and detrimental to growth and the satisfaction of the customer. Also, the need for state monitoring the economy and intervening in it built-in in general equilibrium theory is unmasked as being neither suit-able nor necessary as a means of protecting the common good and welfare in the first place. The case could even be made, although that would mean to transcend the ground covered a little too far, that there neither is not nor could be a measure more suitable and necessary for the protection of the common good and welfare than to protect life, liberty and estate of the individual merely by upholding a suitable rule of law. This is very much the sense in which John Locke in his Treatises (Locke 1690, § 123f.) wanted to set the limits of state power. Modern economics provided the state with a justification to extend its limits in a way unpre-cedented in human history. It did so at the cost of effectively transmuting into a well-subsid-ised interventionist state ideology. The study of human action in economics could have avoided that. It is precisely for this reason that it has the odds stacked against it.

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