Abstract. Stemming from dissatisfaction with the methodology in mainstream neoclassical economics, scholars in heterodox economics call for an alternative approach in explaining human behavior. This chapter iterates the importance of understanding the role of human agency in political economy. It attempts to integrate the subjectivist method in political economy and interpretive approach in sociology to arrive at a new framework to understand human action and social phenomena. To do so, this chapter begins with an introduction of the two approaches, namely interpretive approach in sociology and subjectivism in Austrian economics. This chapter shows that there is a coevolution of the two approaches. In other words, the Austrian School of Economics and Weber– Schutz's sociological phenomenology influence each other in the course of development. This study concludes with a formulation of a subjective interpretive framework by integrating Austrian subjectivism, interpretive sociology and phenomenology to achieve a fruitful theory of human action.

Subjectivism versus Positivism

Ever since the success of Isaac Newton's “experimental method of reasoning” in dealing with physical phenomena in science, scholars in social science explore the possibility of applying the scientific method to explain and predict human action and social process (Levison 1974: 1). Auguste Comte (1798–1857), the father of sociology, applied positivism to sociology. Comte's work presented many positivist principles that are used today. In economics, Milton Friedman (1953), in his compelling essay on economic methodology, claims that given assumptions and careful investigation, positive economics can be an exact and objective science, in precisely the same sense as any of natural science. Since then, positivism or logical empiricism becomes the mainstream method in economics. Today, we apply positivist methods in a wide range of disciplines including sociology, marketing research, policy analysis, politics, psychology and management (Neuman 2000). In economics, positivism is adopted in government regulations, poverty alleviation, project appraisal, funding and so on. Each time when policy makers compile information and interpret quantitative data, they reinforce the significance of positivism in their research (Weston 2013/ 2014: 5).