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

PETER J.BOETTKE AND STEVEN T.SULLIVANThere also can be no doubt that Lachmann played a significantrole in the resurgence of Austrian economics in the late 1970s and1980s. He was the catalyst for much of the internal developmentof Austrian economics among the resurgence generation, and hisinfluence can be seen in the work of Gerald O’Driscoll and MarioRizzo, The Economics of Time and Ignorance (1985), KarenVaughn, Austrian Economics in America (1994) and Don Lavoie(ed.), Economics and Hermeneutics (1991) and Expectations andthe Meaning of Institutions (1994). Lachmann’s theoreticalchallenge to extend subjectivism from preferences to expectationshas had a deep and lasting influence among his Austriancolleagues, including Israel Kirzner, who, despite his seriousreservations about aspects of Lachmann’s research projectremained Lachmann’s closest intellectual ally in the Austrianrevival.Most scholars of Lachmann’s generation, as we know, had theirfaith in the operation of unhampered market economies shaken bythe Great Depression of the 1930s. The Great Depression left anindelible mark on Lachmann as well. While working as F.A. Hayek’sassistant, Lachmann wrote an M. Sc. thesis at the London School ofEconomics in 1935 entitled ‘Capital structure and depression’—inwhich, despite his use of the Austrian theory of crises to explain thedepression, he advocated a public works programme as a solution tothe depression problem (Lachmann 1935, esp. Chapter IV). Theinstability of the stock market and of speculative investment wererecurring themes throughout his long research career (see, e.g.,Lachmann 1937, 1988). Lachmann was one of the most articulatespokesmen for the Austrian notion of a time structure ofproduction, yet he was also a severe critic of any notion of adeterminate equilibrium as the outcome of economic processes(including the unhampered market economy). These two positionsare not unrelated, but it takes some teasing out of the issues torealise the implications for theory and application.Can Lachmann be both radical subjectivist and policy activist?Could it be, as Garrison suggests, that Lachmann was bothAustrian and Keynesian? And, if Lachmann’s influence on theAustrian revival is as deep as it appears, then are contemporaryAustrian economists Keynesians? Lachmann took subjectivismseriously—subjectivists, then, might best take Lachmann’ssubjectivism seriously. And so can we correctly infer from theactivist positions of subjectivism’s pre-eminent modern championthat the charge of ‘nihilism’ it so often faces is misplaced? 5164