Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

386 Money, Bank Credit, and Economic Cyclesable to totally eliminate this uncertainty. 92 The open, permanentand ineradicable nature of the uncertainty we are referringto makes both traditional notions of objective and subjectiveprobability, and the Bayesian conception of the latterinapplicable to the field of human interaction. In fact Bayes’stheorem requires a stable, underlying stochastic structureincompatible with the human capacity for entrepreneurialcreativity. 93 This is so for two reasons: first, it is not even possibleto know all of the potential alternatives or cases; andsecond, the actor only possesses certain subjective beliefs orconvictions—termed by Mises case probabilities (of uniqueevents) 94 —which as they are modified or broadened tend tochange by surprise, i.e., in a radical, divergent manner, theactor’s entire map of beliefs and knowledge. Thus the actorcontinually discovers completely new situations of which previouslyhe had not even been able to conceive.This concept of uncertainty, which corresponds to singleevents in the field of human action and hence of economics,differs radically from the notion of risk applicable within thesphere of physics and natural science. Table V-7 provides asummary.Clearly the events related to customers’ more or less massiveand unexpected withdrawal of deposits from a bankcorrespond to the sphere of human action and are immersedin uncertainty, which by its very nature is not technically92 On this topic see Huerta de Soto, Socialism, Economic Calculation andEntrepreneurship, pp. 17 and 38.93 “The Bayesian approach rules out the possibility of surprise.” J.D.Hey, Economics in Disequilibrium (New York: New York UniversityPress, 1981), p. 99. Along the same lines, Emiel F.M. Wubben, in hisarticle, “Austrian Economics and Uncertainty,” a manuscript presentedat the First European Conference on Austrian Economics (Maastricht,April 1992, p. 13), states:the conclusion to be drawn is the impossibility of talkingabout subjective probabilities that tend to objective probabilities.The dimensions are not on the same footing but coverdifferent levels of knowledge.94 Mises, Human Action, pp. 110–18.