Mises and Schutz on ideal types

Ludwig von Mises's fundamental epistemological ideas regarding 'conception' and 'understanding' prevented him from constructing a theory of economic expectations. Building on different philosophical foundations, his student Alfred Schutz discovered the importance of 'anonymity' in economic analysis and was thus able to make a fundamental contribution to the theory of economic expectations. This difference between Mises and Schutz is of interest for several reasons. First, it shows that Mises did indeed fail to provide a theory of expectations and why. Second, it shows that the great lacuna in Mises's theory cannot be filled without changing the philosophical basis of his theory. Third, it helps us to sort out two more varieties of subjectivism in economic theory. Finally, it helps to clarify a leading problem in economic theory, namely, the problem of expectations.