Sociological Insights of the Austrian School

JW Rich
17 min readDec 4, 2023

1. The Method of Sociology

“The experience with which the sciences of human action have to deal is always an experience of complex phenomena. No laboratory experiments can be performed with regard to human action. We are never in a position to observe the change in one element only, all other conditions of the event being equal to a case in which the element concerned did not change…The postulates of positivism and kindred schools of metaphysics are therefore illusory. It is impossible to reform the sciences of human action according to the pattern of physics and the other natural sciences. There is no means to establish an a posteriori theory of human conduct and social events.” (Human Action, 1998, pg. 31)

The study of all sciences begins with a single question: how is this science to be conducted? Oftentimes, the answer is readily apparent. Biology observes living organisms, mathematics studies numbers, and so forth. However, in the case of the sciences of human action — better known as the “social sciences” — many complications arise. Our goal is to study the behavior of human beings, that much is obvious. But how are they to be studied? Must we place the human brain under a microscope to discover truth about human action? Or do we just conduct statistical surveys asking people about their actions instead? Do we use both according to various circumstances, or do we use a different method altogether?

Tragically, such foundational questions are never even discussed within the context of the social sciences — not through a unanimity of knowledge, but rather, a unanimity of ignorance. Social scientists are almost entirely unaware of any of these methodological problems, much less that they demand answers. But any attempt to understand human action without first providing these answers is doomed to error. A house built without a foundation will inevitably collapse — so too for intellectual edifices as well. To find answers to these all-important questions of method demands its own comprehensive analysis, to understand how the social sciences, and specifically the science of sociology, ought to be conducted.

To begin, the sciences of human action contain an element absent from all other sciences: their subject matter are the actions and decisions human beings make. While other sciences deal with human beings in some capacity — such as medicinal sciences, for example — they do not deal with actions as such in the way that the social sciences do. What separates human actions from any other phenomena is that human action exhibits purpose, or telos. Unlike all other natural phenomena, human action does not merely react to things around it, but is aimed at achieving a particular end. Importantly, this category of teleology is not derived from any empirical or rational process. It is a primary category, which cannot be learned, but must already be understood a priori. Just as one cannot describe the color green to someone who has never seen color, one cannot describe purpose to a being that does not behave purposefully.

The presence of a teleological factor within the realm of the sciences of human action fundamentally changes how they must be approached. Whereas the natural sciences make use of empirical methods to discover knowledge, such methods are wholly inappropriate in the social sciences. The subject matter of the natural sciences allows for the nature of minerals, animals, and vegetables to be understood through observation in a controlled setting. However, social scientists are never in a position to conduct experiments. All human action is necessarily complicated phenomena, consisting of innumerable factors and variables that factor into any decision being made by an individual. The vast majority of these factors may not even be accessible to us as observers. There is simply no way to ever hold all of these factors constant, change only one of them, and observe the results. Without controlled environments, any data gained from experimentation is useless. Consequently, sociology cannot utilize any empirical methods of the natural sciences to discover truth.

Instead, the social sciences must progress through an understanding of the teleology that lies at its base. This cognition proceeds along two different branches: understanding the structure of action, and understanding the actions of others. The study of the structure of human action is “Praxeology”. The structure of action can be deduced through reasoning, starting from first principles. From there, all the categories of action — means, ends, value, etc. — can be understood. Because we ourselves are actors, none of the conclusions of Praxeology are any surprise to us. We can see them reflected in our own actions, as well as the actions of others, every day. These categories are especially important to the study of economics, which utilizes them to understand action within markets. However, understanding the structure of action is vital also for a proper study of sociology as well.

We can employ our own intuitive understanding of action to understand the motivations behind the actions of others, which is the process of “Thymology”. Because we ourselves are actors, we can look at the actions of others, and reasonably infer the purpose behind their actions. While we employ Thymological reasoning in our own lives routinely, it is also a crucial component of the social sciences — particularly history. For example, if we ask why Caesar crossed the Rubicon, we can examine the historical record to understand the places, events, and situation surrounding Caesar in 49 B.C. and infer the motivations and purpose to Caesar’s actions. Of course, Thymological analysis is never perfect. We can always be incorrect about the motivations or values that led an actor to behave in a particular way. We can never have access to the full teleo-mental process that led to any particular action. However, because of the commonality that all acting human beings share, we can construct approximately accurate representations of why particular actions were taken by particular individuals.

Sociology must also proceed on these same Praxeological and Thymological grounds. Unfortunately, the route that most sociological work has taken is markedly different, preferring purely empirical methods instead. Sociologists have also remained reluctant to integrate any other social sciences into their analysis, particularly economics. The result of these methodological and temperamental errors is that sociology has evolved into a confused amalgamation of psychology, political pontifications, and misguided empiricism. Rather than taking its dignified place along all the other social sciences, sociology has instead fallen deeper and deeper into an identity crisis as a product of its garbled understanding of method. All of this requires correction. As for how such corrections might be attempted, I have no advice to give. All I can say is that these future scholars will have their work cut out for them.

Further Reading:

- “Human Action” by Ludwig von Mises, Chapter II

- “Theory and History” by Ludwig von Mises, Introduction and Chapter 12

2. Social Rationalism

“Society is concerted action, cooperation.

Society is the outcome of conscious and purposeful behavior. This does not mean that individuals have concluded contracts by virtue of which they have founded human society. The actions which have brought about social cooperation and daily bring it about anew do not aim at anything else than cooperation and coadjuvancy with others for the attainment of definite singular ends. The total complex of the mutual relations created by such concerted actions is called society. It substitutes collaboration for the-at least conceivable isolated life of individuals. Society is division of labor and combination of labor. In his capacity as an acting animal man becomes a social animal.” (Human Action, 1998, pg. 143)

What is the ultimate cause of all social movements, changes, and developments? What is the driving force behind all social phenomena?

Fundamentally, this force is man’s reason. Man is a complex creature, but at his core he is a rational creature. This does not mean that man always acts in a “perfectly rational” way in the sense that we colloquially use that term. Rather, it means that man always seeks his own self-interest. In all of an individual’s actions, he is looking to better himself and increase his own happiness. That applies not only for his own individual affairs, but also more broadly. Man engages with society because he believes doing so is in his self interest. Social institutions and structures exist and are maintained through these convictions. If this state of affairs ever changed, and man’s self interest instead directed him towards abstention from social relations, then society itself would cease to exist.

Because all social elements are contingent on man’s continued support and engagement for their existence, there are no social elements that lie outside of man. There is no “social mind” or “social consciousness”. Society cannot do anything outside of what its members do. We may speak of “society’s influence” on actions and beliefs, but this is merely shorthand for the effects that many individuals have on one individual. As powerful as these influences may be, they belong to man, not a mystical “social will” that imparts values to us.

Because society is generated and sustained through man’s reason, we can infer a powerful and important conclusion: people engage in society because it is beneficial for them to do so. Man is not bound by his involvement in society, but made better because of it. If it was true that everyone would be better off without society — or at least, society in its current form — then that society would not exist. There would be nobody to maintain it. Society may have unwanted and undesired effects on man, but society’s continued existence is proof that these are far outweighed by the wanted and desired effects it brings.

Further Reading:

- “Human Action” by Ludwig von Mises, Chapters VIII and IX

3. Social Constructivism

“The place where the human individual stands in the order of things brings it about that in one direction what he perceives are the comparatively complex phenomena which he analyzes, while in the other direction what is given to him are elements from which those more complex phenomena are composed that he cannot observe as wholes. While the method of the natural sciences is in this sense, analytic, the method of the social sciences is better described as compositive or synthetic. It is the so-called wholes, the groups of elements which are structurally connected, which we learn to single out from the totality of observed phenomena only as a result to our systematic fitting together of the elements with familiar properties, and which we build up or reconstruct from the known properties of the elements

While most people will readily admit that in this field there may exist special difficulties in recognizing definite wholes because we have never many specimens of a kind before us and therefore cannot readily distinguish their constant from their merely accidental attributes, few are aware that there is a much more fundamental obstacle: that the wholes as such are never given to our observation but are without exception constructions of our mind. They are not “given facts,” objective data of a similar kind which we spontaneously recognize as similar by their common physical attributes. They cannot be perceived at all apart from a mental scheme that shows the connection between some of the many individual facts which we can observe.” (Hayek, “The Counter-Revolution of Science”, 1979, pg. 66–67, 96)

What is the referent of “society”? In other words, when we speak of “society”, what exactly is it that we are talking about? Clearly, it isn’t just one thing. Society is composed of a wide collection of different entities, including but not limited to: culture, markets, institutions, governments, languages, traditions, religions, nations, etc. Society is not just any one of these things, but rather, a product of their summation together into one overarching entity.

But if society can only be recognized with regard to this mental process of summation and not simple observation, then the concept of society itself is inseparable from our own minds. We acknowledge its existence, but it cannot be recognized or observed independently in the outside world. You can’t touch society or point your finger at it. We can only observe it once all of society’s elements are “compiled” mentally in our own minds into a greater whole. In other words, the concept of society is a “constructivist concept”. It doesn’t have a single referent, but many references that are “constructed” together as a whole.

How exactly does this mental construction take place? Through an understanding not only of the physical and material elements of social facts, but their teleological elements as well. For example, to describe markets as goods moving from one place to another is correct from a purely physical perspective, but this perspective does not capture the true essence of a market. That can only be done through comprehension of the purposes behind the individuals acting in a market — namely, engaging in exchange to improve their own well-being. All other social facts contain this teleological element as well. We can recognize them all around us. Moreover, these social facts are not wholly independent, but fundamentally linked to each other. The world we live in today is a dense web of interconnected and overlapping purposeful actions undertaken through institutions, according to beliefs, and following certain customs. Once we recognize these connections amongst social facts, we can view them mentally as one whole. The term that we apply for the summation of all these social facts is “society”.

Further Reading:

- “The Counter-Revolution of Science” by F.A. Hayek, Chapter 4

4. Social Evolutionism

“Law, language, the state, money, markets, all these social structures in their various empirical forms and in their constant change are to no small extent the unintended result of social development. The prices of goods, interest rates, ground rents, wages, and a thousand other phenomena of social life in general and of economy in particular exhibit exactly the same peculiarity.

The characteristic element in the socially teleological genesis of social phenomena is in the intention of society as such directed toward establishing these phenomena, under the circumstance that they are the intended result of the common will of society, thought of as an acting subject, or of its rulers. The social phenomena of “organic” origin, on the other hand, are characterized by the fact that they present themselves to us as the unintended result of individual efforts of members of society, i.e., of efforts in pursuit of individual interests. Accordingly, in contrast to the previously characterized social structures, they are, to be sure, the unintended social result of individually teleological factors.” (Menger, Investigations Into the Social Sciences, 1883, pg. 147, 158)

How do social institutions and structures emerge? There are only two options: either they come into existence in a fully-developed form, or they evolve slowly over time. Given that we can observe institutions changing all the time (especially in the cases of law and language), we can assume that this change has taken place over a long period of time and the original form of these institutions is far different from how they appear to us today. Therefore, the social structures of our modern world are the product of millennia-long processes of change over time.

But how do these structures come into existence at all? They may evolve over time, but how do they emerge in the first place? As with all other social systems, they come about as the result of individual actions. However, in many cases the emergence of these systems was not the explicit goal of these actions. For example, there was never a point in the past where a group of people decided to create law. Instead, law emerged over time as colloquial rules for interpersonal conduct were recognized and eventually codified. Over time, these rules have continued to evolve and adapt to changing circumstances, and will continue to do so into the future. The people at each step of this legal evolution have never seen themselves as being part of an overarching, multi-generational law discovery process. They were and are just people looking for solutions to the problems of living as social beings. However, their individual efforts contributed to the creation and evolution of law that continues into the modern world.

The best example of this evolutionary process at work is the emergence of money. Before money existed, all trade was conducted directly through barter. However, individuals within that barter system soon realized that certain goods are more marketable for trade than others. Because more people are interested in trading for cattle than most other goods, anyone looking to trade their goods might want to trade first for cattle, and then trade for whatever good they actually wish to consume. As people identify these goods as being valuable for intermediary exchange, trade in them begins to accelerate. This sets off a positive feedback loop whereby demand for these goods increases, which makes it more desirable as mediums of exchange, which then attracts even more demand. Eventually, almost all trade is conducted through a good which is the most suitable medium of exchange, at which point it becomes money. Historically, precious metals emerged as the money of choice — specifically, gold and silver.

None of the individuals trading under barter consciously seek to create money for indirect exchange. However, that’s exactly what their actions led to. Over the centuries, money has continued to evolve. Gold nuggets turned into gold coins, which then turned into paper banknotes, which then turned into fiat money through the malfeasance of the state. Possibly, the future will see another evolution from fiat money to money operated via blockchain. Regardless, money has evolved like all social systems and will continue to do so in the future as well.

Without any prior coordination or planning, the actions of disparate individuals can lead to a widespread “spontaneous order”. Social institutions can arise without any centralized direction at all. But this spontaneous aspect of their nature doesn’t mean they are inherently disorganized or disjointed. These institutions can maintain rules and norms without any single source of information to enforce them. Language is the best example of such a spontaneous structure in practice. It has no central directors or single overseer,there are still proper rules of grammar, spelling, and punctuation for all languages. Moreover, the elements of this linguistic structure change over time. What would have been considered “proper” English is very different today than it was four hundred years ago. But even in this change, individuals are still able to understand and participate in the language order.

In order to properly understand social institutions, sociologists must approach them from this evolutionary point of view, seeing these structures as coming about organically, and changing over time not according to a conscious plan but in a spontaneous process. This evolutionary perspective is most important in terms of how these social systems are justified. Because they come about through an organic, unplanned process, their existence cannot be justified in the same way a rational, planned system would be justified. Moral norms cannot be defended in the same way a proposed building plan or construction of a railroad network might be defended. The evolutionary aspect of social systems must be understood and appreciated in this respect. Because these systems have evolved and continued to evolve, we can infer they must be serving some purpose. They must be providing some benefit. If not, then man could have decided to abandon them, as has happened with other social institutions in the past. Their continued existence is testament to their functionality, even if we cannot immediately discern what that function is. Therefore, even if a strictly rational defense of social institutions is insufficient or even impossible, does not mean those systems should be flippantly discarded. Their evolutionary nature requires the Sociologist to instead take a more cautious and nuanced perspective with regard to their evaluation in the broader social landscape.

Further Reading:

- “Investigations into the Social Sciences” by Carl Menger, Book Three

- “Law, Legislation, and Liberty: Volume 1” by F.A. Hayek, Chapter 1

5. Society and the Division of Labor

“The fundamental facts that brought about cooperation, society, and civilization and transformed the animal man into a human being are the facts that work performed under the division of labor is more productive than isolated work and that man’s reason is capable of recognizing this truth. But for these facts men would have forever remained deadly foes of one another, irreconcilable rivals in their endeavors to secure a portion of the scarce supply of means of sustenance provided by nature. Each man would have been forced to view all other men as his enemies; his craving for the satisfaction of his own appetites would have brought him into an implacable conflict with all his neighbors. No sympathy could possibly develop under such a state of affairs.” (Ludwig von Mises, Human Action Scholar’s Edition, pg. 144)

What is the first step in the creation of society? As we have already seen, society is composed of complex webs of institutions, ideas, and norms. But when all of these layers are peeled back, what do we find at society’s core? What is the primary structure that any society cannot exist without?

This primogenitive construct is the division of labor. Society is characterized, above all, by the daily interaction and cooperation of its participants with each other. If every man is self-reliant, consuming only those goods that he himself produces, then there is no reason for that widespread engagement to ever emerge. Without anything to gain, why would you ever interact with numerous other people on a daily basis?

The division of labor changes this incentive structure. Under the division of labor, individuals move from self-reliance to specialization in one line of production. But man requires food, shelter, and clothing to meet his basic needs. Consequently, he must rely on the production of others to fulfill these needs through trade. This drives people into widespread interaction, which lays the groundwork for a society to be built. Over time, this limited interaction grows, and social institutions, norms, and customs begin to develop.

But how does the division of labor emerge? Was it just a happy accident of history that persists to this day? Furthermore, does the division of labor yield any benefits to man? Would he be better off if he was self-sufficient, relying only on himself and not the production of others?

The division of labor arises because of the inherent productive benefits of specialization. Self-sufficiency requires every man to produce everything for himself. This necessarily means that any one person’s time will be split between the production of many different goods. Specialization, on the other hand, allows for the concentration of time and energy into the production of one good. This takes advantage of man’s innate proclivities and skills for different tasks, as well as allowing for investment into specific lines of production that would otherwise be impossible. When specialization is adopted en masse, it raises total productivity, and allows everyone to enjoy higher standards of living.

It was in recognition of these benefits that man first adopted the division of labor, and in so doing, moved from the ancient tribal system of his ancestors into the social system we live in today. As society continues to advance, the division of labor continues to expand, leading individuals into increasingly more specialized lines of production. We can see the results of centuries of advances in our world today, where many workers have highly specialized roles within firms, creating only one part of an enormously large, collaborative product.

The adoption of the division of labor and the rejection of self-sufficiency meant that man’s labor would no longer be spread among many different goods all of which he would consume, but instead in the production of one particular good or only a part of a line of production. In other words, man would be increasingly “removed” from the product of his labor. While this development has been lambasted by various philosophers and social thinkers as disastrous and deleterious for mankind, such “removal” is a necessary by-product of increased productivity. In a state of self-sufficiency, man is very “close” to the final product of all his production. However, his production is limited, and his standard of living is likewise stunted. Adoption of the division of labor and increasing levels of specialization remove him from those final products, but only because there is no need for his labor to be employed throughout the entire process. Doing so would decrease the efficiency of his labor, if it could be accomplished at all in the complex, multi-layered production landscape.

As the division of labor advances through increased specialization, so too does society as a whole advance. As mankind becomes wealthier and his standard of living rises, he no longer has to concern himself only with procuring the bare necessities of survival. Instead, he can turn his attention to other pursuits, such as art, literature, music, etc. As productivity continues to increase, so too does man’s capabilities. Goods and services that were previously too expensive to produce, or impossible to create altogether, become increasingly available to society at large. Access to these new goods and services, apart from increasing living standards, also changes social facts as well, such as culture, norms, and institutions. Thus, as the division of labor continues to expand and specialization continues to intensify, the society built on top of this division of labor continues to grow and evolve as well.

Further Reading:

- “Human Action” by Ludwig von Mises, Chapter VIII

- “Socialism” by Ludwig von Mises, Part 3, Chapter II