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

ROGER KOPPL AND GARY MONGIOVIstudies with Sombart and Kauder was hardly welcome or natural inGerman academic circles. The German historical school had alwaysbeen hostile to the Austrians. Moreover, Lachmann was a liberaland, in his own words, ‘support for, and understanding of, themarket economy, never very strong in these circles, had almostvanished’ by the late twenties (Lachmann 1981). Lachmann was tospend most of his professional life defending positions that weredismissed out of hand by academic orthodoxy.Lachmann, twice damned as both Jew and liberal, left Hitler’sGermany for England in 1933. There he studied under Hicks andHayek at the London School of Economics. In London, he metanother student of Hayek, George Shackle. But it was not Shacklewho taught him the importance of expectations in economics. It wasthrough his contacts with another refugee scholar, Paul Rosenstein-Rodan, that Lachmann learned the importance of expectations.Rosenstein-Rodan had been an assistant to Hans Mayer, who heldMenger’s chair in the University of Vienna. ‘It was Rosenstein-Rodan’, Lachmann once explained, ‘who in discussing Austriantrade cycle theory with me said, “Ah yes, but whatever happens inthe business cycle is in the first place determined by expectations”’(Lachmann 1978). The subjectivism of expectations was to becomea peculiarly Lachmannian theme.In the 1930s, Hayek’s thought dominated discussion at the LSE.The Great Depression put an end to that. Keynes had the rightmedicine. Or so it seemed. Hayek and the Austrians were eclipsed.Hicks, Kaldor, Lerner, and Shackle were all carried along in theKeynesian tide. Even Robbins quietly distanced himself from hisearly indiscretion, the Mises-Hayek theory of the trade cycle. AsWalter Grinder (1977) has put it, by the time the war began, ‘theonly consistent and thoroughgoing Hayekians left were Lachmannand Hayek himself. Lachmann found himself in considerableintellectual isolation once again, just as in Berlin before.After a fellowship which permitted him to visit many schools inthe United States including the University of Chicago where heparticipated in Frank Knight’s seminar, Lachmann taught at theUniversity of London and then the University of Hull. In 1949, hewas appointed to the chair in Economics and Economic History atthe University of Wittwatersrand in South Africa. During theseyears he developed his radical subjectivist position with a constancyof purpose that never flagged in the face of mainstream indifference.The renaissance of the Austrian school began in the 1970s andsoon came to be centred at New York University. Under the2