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

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HIERARCHICAL METAPHORS(eds) (1993); and Rutherford (1994), among others. Explorations ofthe relationship between Austrian economics and the OldInstitutionalism (from each side) can be found in Boettke (1989) andSamuels (1989).4 For my own partial attempts at such work, see Horwitz (1992a,1993, 1994).5 Philosophically this question is also at the bottom of modernphenomenology. As the Austrian philosopher Alfred Schutz put it:‘What makes my behavior social is the fact that its intentional object isthe expected behavior of another person’ (Schutz 1967:149).6 On Schutz and the Austrians, see Prendergast (1986). On Simmel andthe Austrians, see Horwitz (1992b).7 There is also a parallel here to Michael Polanyi’s (1958) distinction between‘focal’ and ‘subsidiary’ awareness. I shall return to this issue later.8 This phenomenon is frequently referred to as a ‘network effect’, as in atelephone network. With any network or other communicationprocess (like language), the more users there are, the more attractive isthe process to potential participants. A phone network with only threeusers is not very attractive compared to one with millions.9 Indeed, note my use of the phrase ‘generally accepted’, which isnormally associated with the definition of money as a ‘generallyaccepted medium of exchange’. One can extend that definition to othersocial institutions by changing the practice that is being generallyaccepted. For example, one might define law as a ‘generally acceptedset of rules for interpersonal interaction’. For more on the parallelsbetween money and law, see Horwitz (1993).10 Lachmann’s capital theory is seeing a bit of a revival. See Horwitz(1994) and Lewin (1994 and 1997).11 Of course one could argue that my bread is capital too, in that thesandwich is a ‘capital’ good that produces utility. Although that insightis in some sense true, it is also trivial. A better way of conceiving theissue is in terms of trade on a market. Capital goods have marketprices, as do the items they produce. The ham sandwich I make and eatis, in Marxian terms, not a commodity; the restaurant sandwich is. Thecommodity status of the product confers capital status on the inputs. Itis neither accidental, nor incorrect, that Marx started Capital with adiscussion of the commodity.12 See, for example, Chamlee (1993).13 The analogies to evolutionary biology are obvious here. For more seeHorwitz (1992a: Chapter 2) and Hodgson (1992). Darwin himselfunderstood that existing biological species will not meet criteria ofperfection: ‘We cannot doubt that each structure is of use to each kindof squirrel in its own country…[b]ut it does not follow from this factthat the structure of each squirrel is the best that it is possible toconceive under all possible conditions’ (Darwin 1859:129).14 This section draws on the work of Selgin and White (1987) andextensions of that work in Horwitz (1992a: Chapter 4).15 The two criteria necessary for fractional reserve banking are that themedium of exchange is fungible and that withdrawal patterns aresufficiently random so that the law of large numbers can be said to159
STEVEN HORWITZhold. If the law of large numbers holds, then the chance of anysignificant amount of withdrawals on any given day is small, enablingbanks to hold fractional reserves.16 See Rothbard 1983: Chapter 1.17 One of the ironies of the 100 per cent reserve position is that itsadherents correctly recognise the historicity of the particular goodsthat get used as media of exchange, but forget the importance ofhistorical evolution when discussing the legal standing of fractionalreserve notes. They wish to impose a legal/ethical theoretical positionby fiat, despite the historical evolution of case law on that practice. Tothis extent, the more ‘traditional’ Austrian view on banking was verymuch non-institutional, and a more subjectivist and institutionalistview would stress the complementary evolution of financialinstitutions and legal practices.18 One interesting issue here is whether the bank has a legal obligation tomaintain the purchasing power of the specie while it is in its custody.Some Austrian defenders of 100 per cent reserve banking argue thatfractional reserve banks by definition depreciate the value of specie,thus violating the bank note contract. The validity of this argumentdepends on one’s definition of inflation/depreciation and the role ofthe demand for money, issues which are beyond the scope of this paper.See Horwitz (1988) for more.19 A good overview and defence of this practice is in Dowd (1991).20 Interestingly enough, option clauses were eventually outlawed inScotland in 1765. Various players in the banking industry were willingto give up the right to the option clause in exchange for differingpolitical favours. Provincial banks wanted full legal recognition andthe chartered banks wanted to politically eliminate their competition.The provincial banks eventually won and the option clause and smalldenomination notes were the price. See the accounts in Dowd (1991)and White (1984).ReferencesBoettke, P.J. (1989) ‘Evolution and economics: Austrians asinstitutionalists’, Research in the History of Economic Thought andMethodology 6:73–89.Chamlee, E. (1993) ‘Indigenous African institutions and economicdevelopment’, Cato Journal 13:1, Spring/Summer.Darwin, C. (1859) The Origin of Species, New York: Modern Library edn.Dowd, K. (1991) ‘Option clauses and bank suspension’, Cato Journal 10:3,Winter.Hayek, F.A. (1937) ‘Economics and knowledge’, in Individualism andEconomic Order, Chicago: University of Chicago Press, 1948.——(1945) ‘The use of knowledge in society’, in Individualism andEconomic Order, Chicago: University of Chicago Press, 1948.——(1952) The Sensory Order, Chicago: University of Chicago Press.——(1960) The Constitution of Liberty, Chicago: University of ChicagoPress.160
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SUBJECTIVISM ANDECONOMIC ANALYSISTh
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SUBJECTIVISM ANDECONOMICANALYSISEss
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CONTENTSNotes 57References 594 Lach
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CONTENTS10 Expectations and stock m
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1INTRODUCTIONRoger Koppl and Gary M
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INTRODUCTIONdirection of Israel Kir
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INTRODUCTIONand revising plans, det
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INTRODUCTIONAs the language of Lach
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INTRODUCTIONits deep insight and me
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INTRODUCTIONthe frontispiece to thi
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SUBJECTIVISM IN ECONOMICS AND THE E
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3MISES AND LACHMANNON HUMAN ACTIONS
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MISES AND LACHMANN ON HUMAN ACTIONM
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MISES AND LACHMANN ON HUMAN ACTIONm
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MISES AND LACHMANN ON HUMAN ACTIONA
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MISES AND LACHMANN ON HUMAN ACTIONt
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MISES AND LACHMANN ON HUMAN ACTIONH
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MISES AND LACHMANN ON HUMAN ACTIONa
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MISES AND LACHMANN ON HUMAN ACTIONa
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MISES AND LACHMANN ON HUMAN ACTIONc
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MISES AND LACHMANN ON HUMAN ACTIONH
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MISES AND LACHMANN ON HUMAN ACTION2
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MISES AND LACHMANN ON HUMAN ACTIONW
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MISES AND LACHMANN ON HUMAN ACTIONT
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MISES AND LACHMANN ON HUMAN ACTIONA
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MISES AND LACHMANN ON HUMAN ACTIONc
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4LACHMANN ON THESUBJECTIVISM OF ACT
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THE SUBJECTIVISM OF ACTIVE MINDSThe
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THE SUBJECTIVISM OF ACTIVE MINDSsho
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THE SUBJECTIVISM OF ACTIVE MINDSor
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THE SUBJECTIVISM OF ACTIVE MINDSa p
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THE SUBJECTIVISM OF ACTIVE MINDSact
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THE SUBJECTIVISM OF ACTIVE MINDSexp
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THE SUBJECTIVISM OF ACTIVE MINDSLan
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SUBJECTIVISM AND IDEAL TYPESthis or
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SUBJECTIVISM AND IDEAL TYPESof Gott
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SUBJECTIVISM AND IDEAL TYPESIn the
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SUBJECTIVISM AND IDEAL TYPESsuffici
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SUBJECTIVISM AND IDEAL TYPESAccordi
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SUBJECTIVISM AND IDEAL TYPESto his
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SUBJECTIVISM AND IDEAL TYPESEconomi
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SUBJECTIVISM AND IDEAL TYPESanswer
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SUBJECTIVISM AND IDEAL TYPES1 B wan
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SUBJECTIVISM AND IDEAL TYPESconclus
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SUBJECTIVISM AND IDEAL TYPESOn the
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SUBJECTIVISM AND IDEAL TYPES——(
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ENDOGENOUS CHANGEIntroductionAmong
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ENDOGENOUS CHANGEconsequences. If,
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Page 124 and 125: ENDOGENOUS CHANGEentertain theories
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Page 130 and 131: ENDOGENOUS CHANGEP=Wa 0+rP(K/X)wher
Page 132 and 133: ENDOGENOUS CHANGEThere is no room i
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Page 136 and 137: ENDOGENOUS CHANGE3 The difficulty i
Page 138 and 139: 7RADICAL SUBJECTIVISMAND AUSTRIANEC
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Page 148 and 149: RADICAL SUBJECTIVISMeconomic theory
Page 150 and 151: RADICAL SUBJECTIVISMAustrian resear
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Page 156 and 157: 8HIERARCHICALMETAPHORS IN AUSTRIANI
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Page 160 and 161: HIERARCHICAL METAPHORSpioneering ef
Page 162 and 163: HIERARCHICAL METAPHORSbe understood
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Page 166 and 167: HIERARCHICAL METAPHORSMany of these
Page 168 and 169: HIERARCHICAL METAPHORSBanking and t
Page 170 and 171: HIERARCHICAL METAPHORSdemand’, th
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Page 176 and 177: 9LACHMANN’S POLICYACTIVISMAn Aust
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Page 194 and 195: LACHMANN’S POLICY ACTIVISMinvestm
Page 196 and 197: 10EXPECTATIONS ANDSTOCK MARKET PRIC
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Page 216 and 217: INDEXefficient allocation/co-ordina
Page 218 and 219: INDEXmarket 119-20; theory of value
Page 220 and 221: INDEX19; stock market expectations1
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