Subjectivism and Economic Analysis: Essays in memory of Ludwig ...

MAURIZIO CASERTAof profits is stated as such because the theorist is not proposingto answer the question why firms should do so.(Hahn 1984:6)Once this axiom is accepted, agents and theorists can develop atheory of the determination of the rate of profit. It is true that theassumption of profit maximisation may conflict with a differentobjective on the part of firms. Such an objective, however, is notcontemplated: one has to start somewhere. Hahn continues: ‘Myown position is that economists are at their most useful when theygive an account of the alternative scenarios which the present stateof our knowledge allows’ (ibid.: 8) This implies that economists dotheir job properly only when they set very clearly the limits of theiranalyses. Even when they perceive that something interesting couldbe said of what lies beyond those limits, they should confinethemselves only to what can be said with sufficient clarity. However,future developments of the subject are not ruled out. On thecontrary, they are sought and encouraged. In fact, the need forclarity is emphasised precisely in view of the future development: ‘Itis one of the great virtues of the way good economic theorizingproceeds that it allows us to pinpoint difficulties precisely and to beprecise about the difficulties’ (Hahn 1984:50–1).It is fair to say, therefore, that good economic theorists alwaysperceive the limits of the present state of their knowledge. Such aperception, however, is not preventing them from constructingsound logical arguments. They perceive the complexity of theworld, but nevertheless try to make some sense of it. Thus, they holdto a theory, but never rule out that a new development might putinto question the current state of their knowledge. In fact, theymight be even directly involved in pursuing such developments,which means that they might be learning.Thus learning is compatible with adherence to a theory. In fact,adherence to a good theory will facilitate the evolution ofknowledge, as it will mark clearly the boundaries of currentknowledge. This means that adherence to a theory is always donewith reservations. Theorists know that their theory may besupplanted by a new one but they do not know which theory willsupplant the old one. Now, if we want to treat economic analystsand economic agents equally, we must assume that agents, too, canadhere to a theory and carry on learning at the same time.The important implication of this equal treatment is that learningand equilibrium are no longer incompatible ideas. Agents can110