The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

With a few exceptions, several epistemological procedures in the science of economics are heavily swayed by the gale force of empiricism or logical positivism. Consequently, we increasingly find the science of economics compartmentalized into various methodological schools which, to various degrees, are keen on importing the methods of the natural sciences at the expense of the actual task of economics.

Within economics, there are entrenched methodological frameworks that heavily favor measurements with the aim of making so-called "falsifiable" empirical predictions. This tinkering with positivism in the study of human action has led to a widespread tendency to misconstrue prices as measurements of value, given the tight link between the two. It is the task of this article to refute this widespread fallacy and to reestablish the clear distinction between the praxeological categories of "value" and "price."

What Makes Measurement Possible?

Measurement presupposes an immutable standard upon which reckoning is made in relation to changing entities. In the natural sciences, there exist standards which are relatively fixed, and which are subsequently employed as media of establishing magnitudes and various degrees of quantitative relationships between entities (e.g., space, volume, length, width, time, etc.). The condition of fixity in certain natural phenomena makes it propitious for the physicists and theoreticians of the various natural sciences to conduct scaled experiments and make testable predictions.

However, the state of affairs is different in the field of human action, the subject matter of the social sciences and economics. Here, the full conditions warranting measurement are not present. Phenomena in the domain of human action are outcomes of complex interplay of factors whose specific quantitative relationships are not easily accessible to the inquirer. Put simply, we are not able to discern the constant relations that would make measurement feasible within the domain of human action. And, even if constant relations are apparent under certain conditions, they are merely historical and not theoretical.