Fermat's Last Theorem and the a priori approach to economics

To my shame, I don’t remember the exact quote or which of the Austrian economists said it, but a wise Austrian economist once stated that economics is necessarily the business of every person. This is because every human action is based upon a choice, and that choice assigns value, and this subjective valuation is the heart of economics. Every human action therefore is an economic action. And who would deny that our daily bread comes to us through the economy, paid for by our participation in the economy? Economics, then, could be said to be the essence of life on earth. With that in mind, I offer these thoughts on economic methodology.

I was watching a show about Fermat’s Last Theorem, and of course I thought about Austrian economics. Well, there was a little more to it than that. In trying to explain why a computer could not be used to prove a mathematical theorem, a mathematician gave the example of a computer testing 100 numbers in the given equation, or 1,000, or 1,000,000: how much closer are you to having tested every number? You need a human mind to set out a proof that explains why it is logically impossible for the equation to work, because with infinite potential inputs, you cannot eliminate them one by one, no matter how fast you’re computing.

The same problem arises when trying to use empiricism in describing human interaction, such as economics: no matter how much data you accumulate, you can attempt to test economic models without logical proofs, but there will always be more relevant data than you can factor into the model, or measure with your test, and you will find yourself in the unenviable position of backtesting and endlessly tweaking various hypotheses (models). Empiricism is destined to fail in economics, because it is the wrong tool for the job, just as it is the wrong tool for proving Fermat’s Last Theorem. You need a priori proofs to describe economics, just as the Austrian School has always maintained.

To illustrate the superiority of the Austrian approach, compare it to the mathematician who does the work of figuring out, logically, why something is necessarily always true, and goes about writing the steps of logic required to reach that conclusion. In both cases, you start with laws that are self-evident, proceed through logic to a series of conclusions that must be true, if our first laws are true, and end at good theory that consistently instructs us about the world we live in. The benefits of this approach, both in economics and in math, are manifold and throughout technology, industry, and leisure.