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

RADICAL SUBJECTIVISMeconomic theory cannot help in showing ‘which kind of tendenciesdominate the system’ (160). Lachmann’s most fruitful suggestion isthus to abandon the search for alternative equilibrium constructs,and to pursue the analysis of those institutional settings that favourthe market’s order. But Lachmann’s drawback is that he failed toprovide a ‘clearly articulated theory of institutions’ (157). As aconsequence, in order to move forward in the development of anAustrian alternative to the mainstream, it is necessary to address thequestion of how institutions can evolve, persist and justify thedesirability—if not the efficiency—of the market order. 6The upshot of Vaughn’s assessment of the Austrian paradigm isclearly summarised in the following:Economics is a social science that by definition is concernedwith understanding order in human society. As human beingswe recognise many recurrent patterns of behaviour that resultin orderly social processes—customs, manners, laws,institutions and relationships. In addition, often what seemsdisorderly and chaotic at first glance, upon furtherinvestigation, can be shown to reflect some deeperunsuspected principles of order, usually some purposefulresponse to perceived constraints…. The question is, how dowe explain this social order that goes beyond our immediateperceptions while remaining true to our recognition thathumans act not only to make themselves better off, but they doso in a world of limited resources, incomplete knowledge andradical uncertainty?(164)In their continuous search for an alternative theoretical structurethat would provide a better explanation of economic order thanneoclassical economics, the Austrians have provided a number ofinteresting equilibrium constructs, including Mises’s notion of anevenly rotating economy, Hayek’s notion of plan co-ordination andO’Driscoll and Rizzo’s notion of pattern co-ordination. These threenotions are all carefully examined by Vaughn, but the one she seemsmost supportive of is O’Driscoll’s and Rizzo’s. Their approach is anattempt to develop a definition of co-ordination that is intended todescribe an economic system in which new endogenous knowledgeis fostered by the actions of individual agents and thus toaccommodate endogenous and unpredictable change.But even though pattern co-ordination has its attraction for135