Mises here establishes the foundational axiom from which all economic reasoning must proceed. The axiom of action is self-evident—to deny it requires action, thus proving it. From this axiom, combined with a few subsidiary postulates, the entire body of economic theory can be deduced through logical reasoning. This is the essence of praxeology: it is an a priori science, not dependent on empirical testing but on logical deduction from the axiom of action. The attempt by positivist economists to treat economics as an empirical science like physics fundamentally misunderstands the nature of human action and economic reality.

The crucial distinction Mises makes is between passive preference and active choice. Action involves not merely selecting from clearly perceived alternatives, but noticing opportunities and seizing them. This entrepreneurial element—the alertness to previously unnoticed possibilities—is implicit in all action. The acting man doesn't simply choose between given ends and means; he discovers what ends are achievable and what means are available. This discovery process is what drives the market forward. The equilibrium models of neoclassical economics, which assume perfect knowledge of ends and means, miss this essential characteristic of action.

Mises correctly identifies purposeful action as the starting point for economic science, but the implications go further than he explicitly develops. Action requires knowledge—knowledge of ends to be pursued and means to pursue them. But this knowledge is inherently limited and dispersed across different individuals. Each person knows some things that others don't, especially local knowledge of particular circumstances of time and place. The economic problem arises not just from scarcity, but from dispersed knowledge. The price system's function is to communicate knowledge that enables individuals to coordinate their actions despite this dispersal.

Mises's analysis of uneasiness as the motive for action is psychologically accurate and analytically powerful. All action aims at substituting a more preferred state for a less preferred state. This is true whether we're discussing a worker seeking higher wages, an entrepreneur investing in production, or a consumer purchasing goods. The concept of uneasiness is more general than the hedonic calculus of earlier economists—it doesn't require that we can measure or compare utilities, only that we can rank states of affairs. This ordinal conception of value is essential for making economics a rigorous science independent of questionable psychological assumptions.

The requirement that action presupposes the belief that one can improve one's circumstances connects to the entrepreneurial element in all action. Pure Robbinsian economizing—allocating given means among given ends—would occur even without uneasiness if preferences and constraints were already perfectly known. But Mises's uneasiness drives discovery. The dissatisfied individual doesn't just optimize within known constraints but searches for better opportunities. This search, this alertness to improvement possibilities, is what entrepreneurship consists in. Every acting person is an entrepreneur to the extent that they seek out better options rather than passively accepting circumstances.

The image of a more satisfactory state that Mises describes involves knowledge creation, not just application of existing knowledge. The acting individual must imagine a better state—they must conceive of possibilities that don't currently exist. This imaginative element is crucial. Economic progress doesn't come from better allocation of given resources to given ends, but from discovering new ends and new means. The decentralization of action means that this imaginative discovery occurs throughout society, not just in centralized planning agencies. This is why central planning fails—it concentrates the imaginative function in a few minds, losing the creative contributions of millions.

This is the methodological heart of the Austrian approach. Economics is not physics—it cannot rely on empirical testing because human action involves free will and purpose, not mechanical causation. The positivist attempt to test economic theories through statistical studies fundamentally misunderstands the nature of economic law. Economic principles are deduced from the axiom of action, and their truth is apodictic—necessarily true given the axiom. Empirical studies may illustrate economic principles or show their application in particular historical circumstances, but they cannot validate or invalidate the principles themselves. This is what Mises means by the a priori character of praxeology.

Mises's distinction between praxeology and history is essential but can be misunderstood. Praxeology provides the logical structure of action—the categories necessary for understanding any purposeful behavior. History applies these categories to understand particular sequences of events. But history is not merely applied praxeology—it requires judgment about which praxeological principles are relevant and how they combine in specific circumstances. The entrepreneur, too, must apply general economic principles to particular situations, using judgment to assess which opportunities are genuine. In both history and entrepreneurship, there's an art that goes beyond pure theory.

While I share Mises's skepticism about positivist methodology in economics, we must be careful about claiming a priori knowledge. The danger is that we might mistake contingent assumptions for necessary truths. Better to say that economic theory provides a framework for interpreting historical events rather than laws that can be applied mechanically. The test of economic theory is not statistical prediction but whether it provides coherent explanations of complex phenomena. When theory helps us understand the unintended consequences of actions and the emergence of spontaneous orders, it has proven its value, even without quantitative predictions.

Time preference is indeed a categorical feature of action, and from it we can deduce the entire theory of interest. Interest is not a monetary phenomenon or a return to capital in a physical sense—it is the manifestation of time preference, the universal preference for present goods over future goods. The originary rate of interest reflects this time preference and explains why capital yields a return. Those who save and invest are forgoing present consumption in exchange for greater future consumption, and the interest rate is the premium that induces this postponement. Central banks that manipulate interest rates through monetary expansion distort these time preference signals, leading to boom-bust cycles.

While time preference is indeed categorical, Mises's formulation here might be misunderstood as implying that individuals have given time preference schedules that they simply consult when acting. In reality, time preference involves entrepreneurial judgment about future possibilities. The decision to save or consume reflects not just a pure preference for present over future, but expectations about future opportunities and constraints. Higher expected returns make future consumption more attractive, effectively lowering the revealed time preference rate. Thus interest rates reflect both pure time preference and entrepreneurial expectations about productivity.

The concept of time preference is valuable, but we must be careful about treating it as purely psychological. Time preference is revealed through action in specific institutional contexts—property rights, contract enforcement, banking systems. These institutions shape how time preferences translate into saving and investment. Moreover, individual time preferences aggregate into a social rate of time preference through the capital market, but this aggregation depends on monetary stability. Inflation distorts the signals that coordinate intertemporal decisions, making it appear that more real saving is available than actually exists. This is the root of the business cycle.