#hulsmann

…However, it would be more precise to say that Mises and Rothbard consider indifference to be irrelevant for the explanation of human action. The fact is that an acting person always does something. This is the starting point for any science of human action. Our knowledge of the existence of choice alternatives and of purposes enables us to explain this fact. Thus when we see that Paul eats ice cream we explain this observation by relating it to possible alternative actions that Paul could have performed. We say that he preferred eating ice cream to any other choice he had had. Clearly, this explanation would be impossible if we assumed that Paul were indifferent between eating ice cream and other possible activities. We would still be faced with the undeniable fact that he does eat ice cream, but we could not explain it. Paul’s psychological indifference is thus particularly unsuited as an account of what he does. And so is indifference in general utterly unsuited as an explanation of what people do.[…]

[T]he starting point of the Austrian analysis is not a freely floating choice theory, which is then somehow applied to the real world, but real human action. Choice theory refers to the relations which link realized and non-realized parts of human action, and when applying choice theory we can thus explain any given activity by relating it to other elements of the same action. We can relate an activity to foregone alternatives (“Paul prefers eating ice cream to all other alternatives”) or to purposes (“Paul eats ice cream in order to grow fat and ugly”). In both cases we explain a real-world phenomenon in terms of the relationships in which it stands. 

It is against this background that we have to understand Mises’s critique of the behaviorist perspective on phenomena like “rush hour at the Grand Central Station.” 

There are no laws relating the behavior of people rushing back and forth to previous or later behavior. However, we can explain their behavior by relating it to the underlying purposes, like getting from home to the train, and from there to work, etc. 

Having this in mind, it is easy to give an economic account of the psychic phenomenon of indifference between two events. For example, Paul might be indifferent between buying the red or the green sweater. An economic analysis of Paul’s action could stress that he prefers to be indifferent rather than choose either the red or the green sweater (which implies of course that he does choose a third option—standing around and gazing at the various sweaters). It could also stress that Paul does not choose to buy either a red or a green sweater for a certain reason, for example, because he wants to keep his money or because he wants to deliver a (futile) proof of the importance of indifference in human action. In short, indifference as we know it by introspection is a fact to be explained. It is not and, as we have argued, cannot possibly itself be an explanation of human action.

It is also easy to deal with Caplan’s counterexample of a preference that is not revealed in action. Says Caplan (1999, p. 826):

my preference for ice cream at the current instant cannot be revealed, since by the time I managed to find an ice cream vendor the current instant would have passed. Buying ice cream ten minutes from now only reveals a preference for ice cream then. And yet, I have introspective knowledge that I want some ice cream right now.

This description of a “non-revealed preference” is interesting only as an account of Caplan’s mental state of affairs (that is, of a fact to be explained). But it is irrelevant for the explanation of what Caplan does. It does not tell us why he sits in his office and thinks of a “preference” for ice cream that does not materialize in action. Economic science can explain his behavior only by relating what Caplan does to what he might have done instead. It states that Caplan prefers to spend his time imagining a satisfaction that he cannot obtain.

          — Jörg Guido Hülsman, Economic Science and Neoclassicism