Limits of Apriorism

As I have stated in at least one previous post, there is some question as to whether or not empirical methods can be used in social science in general and economics in particular.  However, in order for an argument of the sort used by the Austrian school of Economics to hold, it must be the case that the assumptions on which it is based are such that it would be unreasonable to withhold assent.  I had a few thoughts on redistribution of income that might cause some doubt here.

The basic argument here is that in order to produce things we need labor and capital.  Redistribution, it is argued, will be counterproductive in the long term because it will tend to take money from those who are most likely to invest.  It will have the long term impact of reducing the capital stock, hence causing a shortage of capital compared to labor, which will in turn have the impact of reducing wages.

The problem with the argument is that we cannot be certain that output will depend only on labor and investment.  It might also depend on how much creativity there is within a given population.  A society with more innovation might be able to make up for lower investment to produce the same economic growth, or even more.  So in order for an a priori argument to be valid, it would need to be the case that there would be no increase in creativity as a result of having a social safety net.  I don't think that's something we can rule out.

Do people tend to be more creative when there is a risk that they could suffer serious loss?  Leftists could contend that when placed in that sort of situation people are overcome with fear, and that isn't exactly the sort of environment that's conducive to creativity.  Richard Wiseman suggests ways that you can make your environment less stressful so as to increase creativity.  In fact there's some evidence that when the stakes are too high, performance can suffer as a result even on tasks that don't require creativity.  Dan Airely collected some evidence to that effect and gave an account in his book.

Of course this falls well short of an argument in favor of socialism or even the social welfare state.  Redistribution will have the impact of reducing the capital stock.  This will have a negative impact on output and wages.  If we can't be certain that this will result in lower wages than would be prevalent had there been no social welfare state, we can't be certain that it will result in higher wages either.  What this leads us to is uncertainty.