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Hermeneutics and phenomenology in the social sciences: Lessons from the

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DOI: 10.1007/s11138-021-00548-7

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The Review of Austrian Economics
https://doi.org/10.1007/s11138-021-00548-7

Hermeneutics and phenomenology in the social sciences:

Lessons from the Austrian school of economics case

Gabriel J. Zanotti1 · Agustina Borella3 · Nicolás Cachanosky2

Accepted: 22 April 2021

© The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature
2021

Abstract
We study a case that applies hermeneutics to social sciences, in particular to the
Austrian school of economics. We argue that an inaccurate treatment of hermeneu-
tics contributed to an epistemological downgrade of the Austrian school in the eco-
nomic scientific community. We discuss how this shortcoming can be fixed and how
a proper hermeneutic application to the Austrian school explains why this school of
thought is neither positivist nor postmodern.

Keywords Hermeneutics · Phenomenology · Austrian school of economics ·

Epistemology of the social sciences

JEL B25; B40; B53

1 Introduction

One of the distinctive characteristics of the Austrian school of economics is its epis-
temology or, in words of Mises, praxeology. Most likely, due to Rothbard’s (1957)
influence, praxeology is seen as an “extreme aprioristic” position, where economic
reality can be analyzed only through a set of axioms without any empirical content.
This interpretation of praxeology as an extreme aprioristic position has contributed
to marginalizing, if not ridiculing, the Austrian tradition (see Blaug, 1980, p. 81).

* Nicolás Cachanosky
ncachano@msudenver.edu
Gabriel J. Zanotti
gzanotti@austral.edu.ar
Agustina Borella
agustinamborella@hotmail.com
1
Universidad Austral, Buenos Aires, Argentina
2
Department of Economics, Metropolitan State University of Denver, Campus, Box 77,
P.O. Box 173362, Denver, CO 80217, USA
3
Universidad de Buenos Aires, Buenos Aires, Argentina

13
Vol.:(0123456789)
 G. J. Zanotti et al.

However, Rothbard’s interpretation of Mises’s praxeology has been challenged (Leeson

& Boettke, 2006; Zanotti & Cachanosky, 2015) and contrasted against the views of
another of his disciples, Fritz Machlup (1955). Zanotti and Cachanosky (2015) sustain
that Machlup can be used as a bridge to interpret Mises’s epistemology in Lakatosian
terms, arguing that the Austrian epistemology is not the simple-extreme and untenable
position suggested by Rothbard (also see Rizzo, 1982).
Mises is hardly the only aprioristic thinker in economics. Another salient case
is that of Gary Becker. However, while Mises’s view is dismissed, Becker’s view
is well received by the profession. This paper deals with this divergence in the eco-
nomic scientific community. Why are two aprioristic thinkers so differently received
by the profession? We argue that a key reason for this marked difference is the
underlying hermeneutics in Austrian theory and mainstream economics. We argue
that Austrians should have complemented Gadamer’s hermeneutics with a realistic
interpretation, Husserl’s theory of knowledge, to avoid suspicions of relativism. This
is not the path taken in this field. Storr’s (2010) position is representative when he
argues that Gadamer was a “tactical mistake” and that Austrian should have relied
on Alfred Schütz.
The paper proceeds in the following way. The next section contrasts two differ-
ent hermeneutical positions. Section three discusses the implications of both herme-
neutical positions to the Austrian school of economics. Section four relates herme-
neutics with the contrast between epistemological positivism and postmodernism.
Section 5 explains why the Austrian school is neither positivist nor postmodern.
Section 6 concludes.

2 Two hermeneutical traditions

2.1 Weber’s hermeneutics

Consider Machlup’s (1955, p. 17) take on Friedman’s (1953) Essays on Positive

Economics. Even though Machlup finds Friedman’s discussion to be “excellent”,
he disagrees with him on a fundamental point. Machlup pays more attention to the
role of the fundamental assumptions in economic theory (his version of Lakatos’
hard-core). For Machlup, different than Friedman, fundamental assumptions are not
subject to independent empirical verification. Applying Schütz’s (1953, p. 34) “pos-
tulate of subjective interpretation”, fundamental assumptions are subject to inter-
pretation (understandability in Machlup’s (1955, p. 17) words). This interpretation
of the fundamental assumptions means that individuals can understand the actions
of their fellow men. However, understanding actions has important implications for
how empirical work should be performed in economics. This is the root of Mach-
lup’s disagreement with Friedman.
Understanding is the Anglo-Saxon translation of the German word verstehen
(very present in Mises’s epistemology). Verstehen is, in turn, the social sciences

13
Hermeneutics and phenomenology in the social sciences: Lessons…

method advocated by Weber and Dilthey, who represent the first notion of herme-
neutics.1 Dilthey takes a historical approach, where each historical case has its own
interpretative categories. Weber, however, takes a neo-Kantian approach by trying
to develop universal categories of interpretation. Weber’s ideal types play the role
of universal a priori categories that can be used to interpret any historical event.
Weber’s ideal types are universal abstractions.
Weber’s work is subject to two interpretations. One is that of Popper (1957, n.
46), where Weber’s ideal types are interpreted as general conjectures of social sci-
ences. Popper takes some distance from Weber’s ideal types certainty even if he
endorses their universality. The other interpretation is that of Mises (1933, Chap-
ter 2, 1949, Chapter II.9), for whom verstehen is the method of history and concep-
tion is the method of economics. Mises’s takes Weber’s ideal types and puts them
inside his praxeology. For Mises, praxeology is a universal method in social sci-
ences, and economics (or catallactics, which is a term also used by Hayek (1976,
Chapter 10) and Buchanan(1964)) is one of the many social sciences that applies
the praxeological method. Mises’ use of ideal types is the reason he reads as a neo-
Kantian Weberian.

2.2 Gadamer’s hermeneutics

A different hermeneutical turn is that of Gadamer (1954, 1959, 1975, 1977a, b, 1996).
In his case, hermeneutics is not the method of history, but rather is the method of
philosophy itself. In Gadamer’s approach, hermeneutics is a general theory of knowl-
edge. The issue with Gadamer is that his approach to hermeneutics can be interpreted
in a postmodernist fashion because of his references to Heidegger (one reading of his
work can lead to relativism).2 However, his references to Husserl (1899, 1950, 1954,
1994) also indicate a non-post-modernist interpretation. Gadamer refers to Husserl’s
life-worlds. Life-worlds are historical, but they are based on intersubjective relation-
ships. Those intersubjective relations are not a situation of arbitrary constructions
versus an objective meaning. They have a meaning in themselves that can be known
through their historical context. Therefore, the historical horizons that Gadamer is
talking about, in the light of Husserl, are not a relativistic theory of knowledge but
are horizons open to a universal meaning. Taking this into account, let us give more
specific explanations for the authors we have been explaining.
Going back to Machlup (1955), it is noteworthy that he relies heavily on Schütz’s
(1953, 1954) interpretation of human action and on Hayek’s (1942) “scientism”. As we
discuss below, these references give rise to the question regarding the nature of social
sciences’ objects of study. Schütz, Hayek, Mises and to some extent Machlup, prob-
ably unintendedly lead to a definition of phenomenology in social sciences (see Zanotti,
1997, 2007). Social sciences study phenomena composed of human actions, and those
actions must be interpreted one way or the other. According to Hayek (1942, p. 279),
facts in social sciences differ in a fundamental way from facts in natural sciences. On

1
According to Gadamer (1975), Schleiermacher and York also belong next to Weber and Dilthey.
2
On Gadamer’s approach to hermeneutics and possible relativism, see Prychitko (1994).

13
 G. J. Zanotti et al.

one hand, individual’s minds are not observable. On the other hand, individual’s behav-
ior has a meaning or a purpose (it is subjective). However, since the observed individ-
ual and the social scientist have similar minds, the scientist can interpret (verstehen) the
behavior of the observed subject. The need to verstehen human behavior is an absent
complication in physical sciences. Hayek offers a clear remark in his Economics and
Knowledge (1937) when he states that “all propositions of economic theory refer to
things which are defined in terms of human attitudes towards them” (p. 50, n.2).3 In
the social sciences in general, and in economics in particular, there is no such thing as
physical objects. However, there are objects because some human being interacts with
them with a specific and personal purpose.

3 Hermeneutics and the Austrian school of economics

One of the problems of the Austrian literature is that, in trying to assimilate her-
meneutics into its epistemology, it has conflated the two different above-mentioned
approaches. Machlup (1955, 1978) and Lachmann (1977, pts. 2, 3) fall into the first
approach to hermeneutics (Weber). Other authors take the Gadamer approach.4 In
particular, Lavoie (1986a, 1987, 1991, 2011) was influential in developing
a next generation of Austrian economists. A reason why these two approaches to
hermeneutics go unnoticed in the Austrian literature is because of a large secondary
literature where both hermeneutics are mixed or not differentiated (for a sample see
Chamlee-Wright, 2011; Kirzner, 1986; Koppl & Mongiovi, 1998; Kurrild-Klitgaard,
2001; Langlois, 1985; Lewis, 2011; Madison, 1989; Smith, 1986).
Weberian hermeneutics does not present serious issues to Austrian epistemology.
Even if this approach has a considerable influence in Rothbard’s (1962) aristotelic
interpretation of praxeology, there is a consensus that Weber’s influence on Mises is
patent. Weber’s influence on Mises also makes it more likely that Machlup’s (1955)
interpretation of Mises’s apriorism is more accurate than that of Rothbard (1957)
(Zanotti & Cachanosky, 2015). Our interpretation is that Austrians had issues with
Gadamerian hermeneutics. We argue that this has not necessary to be the case.
Rothbard’s (1989) reaction to Lavoie’s research program should not be underesti-
mated. This is the same Rothbard that had such a considerable influence in what the
profession (and some Austrians too) thinks Mises’s extreme apriorism is about.5
What is the problem? Humans experience their lives in the context of a given
time and place. Humans are subject to a specific historical and cultural environment.
This context is the life-world, and each single individual life is in one of them

3
Also see Hayek (1948, Chapter 1), Fleetwood (1995), and Zanotti (2003, 2004a, pp. 34–48, 2013, pp.
98–99).
4
On the possibility of merging the epistemology of the Austrian School and hermeneutics. and for a
thorough critical rationalistic reading of Gadamer, see Di Iorio (2013a). On the consistency between the
theory of knowledge and action in Hayek’s The Sensory Order (1952b) and Gadamer’s hermeneutics, see
Di Iorio (2013b).
5
For other negative reactions to Lavoie’s hermeneutical turn see Gordon (1986), Hoppe (1992), and Perrin
(2005).

13
Hermeneutics and phenomenology in the social sciences: Lessons…

(Schütz, 1967, 1970; Schütz & Luckmann, 1973). These different life-worlds also
means there are historical horizons (limits) in each individual’s life (Gadamer,
1959). If we disregard Husserl’s intersubjective meanings, the presence of these
personal (intersubjective) life-worlds, which are constrained by their own historical
horizons, can be interpreted as closing the door to universal economic laws. Further-
more, universal laws are part of the foundational core of the Austrian school (the
methodenstreit episode). The perceived tension is clear. On one hand, there are the
undeniable subjectivity of the life-worlds, on the other, the universal economic laws
that are a foundation of the Austrian School. Hermeneutics bridge these two poles.
The problem is that not any hermeneutics will do the job.
Allowing for subjective actions and interpretations seems to clash with the advo-
cacy for universal economic laws. To escape historical relativism, some authors
resort to the (early) works of Husserl6 and Ricoeur.7 In certain interpretations, the
early works of Husserl (1913) did not emphasize the life-world’s approach enough:
he talked of knowledge without assumptions, which meant that the historical context
was not a problem. Ricoeur (1969, 1986) criticizes Husserl’s point on the basis that
there is always a historical context and offers an attempt to establish the phenomeno-
logical foundations of hermeneutics. Even if Ricoeur is right on his criticism of (the
early) Husserl, his hermeneutical applications are too related to the textual inter-
pretation to be useful for the study of unwritten market processes. For economics,
neither Husserl nor Ricoeur by themselves offer an efficient answer to the problem
of historical relativism.
However, Lavoie’s (1986a, b, 1987, 1991, 1995, 2011) approach to hermeneutics
is different. On the one hand, like Gadamer, Lavoie recognizes that life-worlds take
place within specific historical contexts. On the other hand, he relies on (a later)
Husserl on the issue of intersubjectivity and this is the central aspect of our contri-
bution because it has to do with our realistic and non-post-modernist interpretation
of intersubjectivity.8 A realistic interpretation of the intersubjectivity of later Husserl
is key because it offers the ontological framework of Hayek’s subjectivism (Borella,
2017, 2018; Zanotti, 2003, 2005, 2009, 2011).9 However, Lavoie’s (and others)
emphasis on hermeneutics in economics did not convince the scientific community
that his work has nothing to do with postmodern relativism (see Rothbard, 1989).

6
For a sample, see Boettke et al. (2004, n. 5), Lavoie (1990, pp. 2–3, 1995, pp. 388–389, 401, 2011, pp.
109, 112), Madison (1990, p. 37), and Palmer (Palmer, 1990, pp. 296, 302).
7
For a sample, see Boettke et al. (2004, p. 23), and Lavoie (1986a, p. 197, 1987, pp. 587, 583, 585, 587,
595, 1990, pp. 2–3, 1995, p. 388, 2011, pp. 107, 109, 114).
8
Lavoie (1990, p. 2.3, 1995, pp. 388–389, 401). For a secondary literature see Boettke, Lavoie, and
Storr (2004), Madison (1990, p. 37), and Palmer (1990, pp. 296, 302). For an account of the intellectual
context during Lavoie’s initial work on hermeneutics see Boettke and Prychitko (2011).
9
For a realistic interpretation of Husserl’s phenomenology, see Stein (1994) and Leocata (2003).

13
 G. J. Zanotti et al.

4 Hermeneutics, positivism, and post‑modernism

In order to make explicit the realistic interpretation of intersubjectivity in Husserl’s

thought, it is crucial to distinguish between subjectivity and arbitrariness. The fact
that arbitrariness implies subjectivity does not mean that anything that is subjec-
tive is also arbitrary. In short, the fact that something is subjective does not mean
there can be no universal laws or that it cannot be scientific. In later Husserl (1899,
1950, 1954, 1994), as we have been explaining, and in Schütz, subjectivity means
intersubjectivity. Schütz provides what is now a classic example. The same physical
elements that are found in a classroom, such as desks, chairs, and walls, can also be
found in a court of law or in a religious ceremony. For an outsider, the classroom,
the court of law, and the religious service look exactly the same. What defines the
type of event taking place (a class, a trial, or a religious service) depends on the
intersubjective relations between the individuals, and it does not depend on the
physical qualities of the present instruments (desk, chairs, etc.) Each one of these
three groups of individuals is sharing a unique experience, even if for a Martian
looking from the sky there would be no apparent difference.
What gives meaning to each scenario is the purpose in the actions of each indi-
vidual. In the Schütz example, it is the purpose of the individuals involved that
defines if we are in front of a class, a trial, or a religious ceremony. To be clear,
it is not just behavior, but rather purposeful behavior, that defines the life-world
experience taking place (Husserl, 1899, p. 223). The connection to the Austrian
literature is upfront, and purposeful behavior is the foundational stone of Mis-
es’s epistemology. Furthermore, intersubjectivity also means that each life-world
(classes, trials, and religious ceremonies) are not arbitrary even if they are inter-
subjective. Intersubjectively, interpretation is the spontaneous knowledge that an
individual has about his life-world from his perspective.
Following Husserl, a human person exists in the world, which means all his
actions are subject to interpretation. Hermeneutics, for better or for worse, it is
not something that one decides to add or not to social sciences since it is embed-
ded in the object of study of social sciences, including economics (Zanotti, 2019).
A complication of this situation is that any given individual can be involved
in similar behaviors with different meanings at the same time or at different
moments of time. A person can have the same observable behavior in the morn-
ing and in the afternoon, but while the former is him as a student, the latter is him
as a devoted religious believer in mass. Just as the same actions can have differ-
ent meanings, the same physical objects can have different meanings as well. The
same table can be the desk of a teacher, a judge, or of a priest. The same table
can be a consumer good (owned by a household) or a capital good (owned by
the self-employed head of a household). The same table can be a consumer good
during lunch time and a capital good during the afternoon hours. There is nothing
in the table that defines what type of good it is. Whether this table is a consumer
good or a capital good depends on how it is seen by different individuals. To give
a more ludicrous example, a hammer can either be a carpenter’s tool or a piece of
art if hanged on a wall for contemplation. In fact, one of Husserl’s (1954) points

13
Hermeneutics and phenomenology in the social sciences: Lessons…

is how this interpretation issue has fallen into oblivion in Europe, contributing to
the crisis of European sciences.
The fact that life-worlds occur in different historical contexts does not mean they
are totally dependent of their historical contexts. For instance, assume a learning
experience that takes place during the nineteenth century in a classroom somewhere
in Occident. There is an intersubjectivity of this experience that is common to vari-
ous times and places.10 This is essential to a universal economic science, valid for
all time and place, free of any kind of relativism. Going back to Schütz example, an
outside observer can separate the historical and geographic component of the phe-
nomenon and at the same time recognize the universal features that can take place
in other times and places. If this distinction between historical context and abstrac-
tion were not possible, then there would be no historical data because all historical
events would be meaningless to an outside observer. A scholar who lacks historical
awareness (or considers it unimportant or unscientific) is not free of having his own
historical context affect his research. This historical dependency of any scientific
analysis is one of Gadamer’s main contributions. Therefore, interpretation (hori-
zons) is the knowledge that each person has from his own life-world experience
(Zanotti, 2005, 2007, 2019). If on Mars there is no such thing as religious ceremo-
nies, then a Martian observing a mass in Earth would either interpret it wrongly
(he may think that it is something else that occurs on Mars but not on Earth), or it
would be meaningless. If it is meaningless, unless it piques his curiosity, it would
remain unobserved. Furthermore, if it remains unobserved, it would not be part of
the empirical data used to test hypothesis in the way that most of the economics pro-
fession does.
The above discussion is important because it breaks the false dichotomy between
subjectivism (postmodernism) versus objectivism (positivism) and brings light to the
role of empirical work in the Austrian tradition. The human phenomenon studied by
social sciences is composed of life-worlds. These life-worlds are intersubjective but
not arbitrary. In addition, for better or for worse, a proper study of social phenom-
ena requires awareness of the hermeneutical problem. Otherwise, the social scientist
risks putting himself either in the positivist camp or in the postmodernist camp, both
with serious epistemological limitations. For instance, some authors sympathetic to
the hermeneutics approach to economics favor empirical work that would not eas-
ily fit into a the economic-positivist way of doing science (Chamlee-Wright, 2011;
Horwitz, 2011a).
Debates on the theory of knowledge are almost obsessively focused on the scope
and possibility of knowledge of the object, as if the subject and object were two
opposed entities. The subject (an outsider) approaches the object for study (a foreign
world). However, individuals do not stand opposite to an exogenous world. In addi-
tion, the world is not primarily physical; there is a human component of purpose and
therefore of interpretation. Because each individual lives in his life-world, the rela-
tionship is not subject/object, but rather is human being/world. There is no bridge

10
Lavoie (1987, p. 586) stated the following: “We only understand our world because we understand
one another. We only understand each other, in turn, because we all spent some substantial part of our
lives being enculturated into the life-world, a specific domain we have in common.”.

13
 G. J. Zanotti et al.

to cross between the subject and the object because they are in the same life-world
(Zanotti, 2019).
The above discussion resembles the Popper-Kuhn-Lakatos-Feyerabend (PKLF)
debate. The historical turn of the PKLF debate can be seen as a progressive restora-
tion of the role of interpretation of the physical world given the scientist’s own life-
world (Kuhn, 1977; Zanotti, 2004b). This interpretative turn is important because it
implies that the relationship between social and natural sciences changes. In social
sciences human reality is social, whereas natural sciences must also deal with a
human component (hypotheses are life-world-laden). Maybe Kuhn’s paradigms are
a good example of how humanity can affect allegedly purely objective sciences.11
Consider further implications to social and natural sciences. Even though there
are some things in common across different life-worlds, any explanation of a phe-
nomenon is going to be incomplete. This incompleteness can be filled in different
ways, which are known as language games (Wittgeinstein, 1953) and conjectures.
Universal abstractions are didactic generalizations that leave a door open to perma-
nent linguistic adjustments to a new relevant context (incorporating the richness of
different life-worlds). To put it in Feyerabend’s (1999) words, it “shall gradually
incorporate ‘the abundance of reality’.” Consider how many insights and topics are
re-explained and revisited in the history of economic thought (institutions, invisible-
hand explanations, and expectations, just to name a few). Same concepts can carry a
different emphasis at different point in times because that is what is required in their
respective life-worlds. Additionally, the same concept can be approached differently
as needed by different life-world contexts. Scientific progress is built not only on the
development of new theories but also on the adjustment of previous valid theories to
new life-world requirements. Consider, for instance, the case of mainline economics
(Boettke et al., 2012), which is composed of the core-questions in economics that
transcend time and schools of thoughts. The same research program moves in time
from one life-world to the next.

5 The Austrian school: neither positivist nor postmodernist

Given the arguments we develop in Sect. 2, 3, and 4, is very important to empha-

size that for the Austrian School, the objects of study of economics are intersub-
jective realities. “Prices”, “consumer goods”, or “money” describe intersubjective
relations. This intersubjectivity is the reason why for the Austrian School a phenom-
enological description is more useful to understand real world life-experiences than
conventional mathematical applications and econometric empirical tests. Leeson
(2020), for instance, argues that economics is not statistics (and vice versa),
which is an attitude not so uncommon in the positivist approach to economics.

11
Zanotti and Cachanosky (2015) argue that the Austrian school and mainstream economics are differ-
ent paradigms built on different Lakatosian hard-cores. Of course, each paradigm can have, in turn, their
own sub-paradigms (ie. Keynesians versus monetarists/neoclassical economics).

13
Hermeneutics and phenomenology in the social sciences: Lessons…

Phenomenological descriptions are in the field of analytical narratives, which allow

one to capture the meaning of an economic agent’s behavior and provide a phenom-
enological explanation (Bates et al., 1999; McCloskey, 1983). This hermeneutical
approach means that the economist must deal with both the historical context of a
phenomenon and with universal abstractions. This abstraction of economic concepts
is the universal character of economic science. For instance, “money” defined as a
“common means of exchange” is free of historical context. These universal defini-
tions built on the meaning of interactions are what early Husserl (1899) referred
as “essence”.
Because phenomenological descriptions cannot be closed or complete, the same
phenomenon is subject to different insights from different life-worlds (and there is
no meta life-world that includes all possible life-worlds). Mises’s (1957) Theory
and History is important because it contributes to re-establishing the relationship
between theory and history. There is a universal definition (abstraction) of intersub-
jective relations that is applied to particular life-experiences (see Rizzo, 2000).
Hayek (1952a, p. 31), probably unknowingly, argued the same when he stated
that “the objects of economic activity cannot be defined in objective terms but only
with reference to a human purpose goes without saying. Neither a ‘commodity’ or
an ‘economic good’, nor ‘food’ or ‘money’, can be defined in physical terms but
only in terms of views people hold about things.” The expression “in terms of views
people hold about things” does not mean arbitrary subjectivity, but rather it means
intersubjective life-worlds to which the same economic definitions can be applied.
Mises (1933, Chapter 3, 1949, Chapter II.8) does the same when he talks about
“conception and understanding” as the method of praxeology. Praxeological defini-
tions are universal concepts that can later be applied to different historical events.
Because of their neo-Kantian roots, neither Mises nor Hayek could travel all the way
to a realistic interpretation of Husserl. However, both describe the circle between
phenomenological definitions and life-worlds. The economist lives in a life-world
from where he can develop a phenomenological definition, which allows him to see
what is common or universal (essential) across different life-worlds.
The unusual epistemological stand of the Austrian school now becomes clear. The
Austrian school is not postmodern as its emphasis on universal economic laws clearly
shows. For Austrians, economics is not just another historical-dependent storytelling.
However, the Austrian school is not positivist because the inter-subjective definition
defies the nature of empirical testing and conventional mathematics. In fact, it could be
argued that Austrians are closer to modern epistemology than their positivist critics are
(Zanotti & Cachanosky, 2015).12 It is now clear why Austrians resort to phenomenol-
ogy and analytical narratives. It is also clear now that Austrians may be opposed to pos-
itivism, but they are not opposed to empirical work (Horwitz, 2012). Some examples of
this work include market and government reactions to the Hurricane Katrina disaster in
New Orleans (Chamlee-Wright & Storr, 2010; Storr et al., 2015), self-governance insti-
tutions (Benson, 1986; Benson & Engen, 1988; Boettke, 2005; Leeson, 2014; Powell

12
Recall that the Austrian school was part of the Vienna circle that shared a common background with
figures such as Popper, among other philosophers.

13
 G. J. Zanotti et al.

& Stringham, 2009; Stringham, 2002, 2015), economic analysis of the prestroika, or
private markets of money and banking (Dowd, 1992; Horwitz, 2011b; Salter & Tarko,
2017; Selgin, 1996; White, 1984).

6 Conclusions

There is a divergent path in the 1970s renewal of the Austrian school that coincides
with Lavoie and his followers. On the one hand, Austrian school insights become
more relevant and the Mises-Hayek-Kirzner research program gains momentum. For
instance, the turn towards the Austrian business cycle theory to explain a significant
event such as the 2008 financial crisis is noteworthy (Cachanosky & Salter, 2017).
However, on the other hand, there was a downturn on its epistemological pedigree.
The Austrian school is not seen as scientific anymore. There are three reasons for
this. One is the positivist turn of mainstream economics in the first half of the twen-
tieth century. A second one is Rothbard’s defense of extreme apriorism. The other
one is the incomplete hermeneutical turn in the late twentieth century. The atten-
tion to hermeneutics is correct. However, it unintendedly contributed to a regressive
research program by allowing a relativist (postmodern) interpretation of Austrian
theory. We show how a different a more careful reading of hermeneutics can lead
to progressive research program by saving the Austrian school from relativism and
properly engaging the economic scientific community without losing its austrianess.
A proper understanding of Austrian subjectivism would allow, once again, for main-
stream and Austrian economics to engage in fruitful exchanges and conversations,
as was common in the early twentieth century.

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