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

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LACHMANN’S POLICY ACTIVISMLachmann presents us with quite a set of puzzles, and it seems onlyfitting that we should apply the principle of charitableinterpretation to this subset of the writings of its main adherent inorder to solve them.In his 1956 book Capital and Its Structure, Lachmann providedhis readers with a vision of the morphology of capital as an orderin an exposition that was the clearest of its time. Drawing on aview of capital as physically and functionally heterogeneouscombinations operated by planning acting human minds,Lachmann traced out his vision and catalogued its implications forthe state of capital theory and macroeconomic policy. Hisinterpretive and distinctly ‘Austrian’ system, thoroughly adheredto, would seemingly deny interventionist macroeconomic policies.Yet in the final analysis, Lachmann’s vision of the economy as asystem that does not necessarily possess a tendency towardsequilibrium, and in particular, his view of the operation of theprice system, led him to call for policy activism in times of generaleconomic distress. This is something of a curiosity within theAustrian camp.The purpose of this chapter is to trace out Lachmann’s vision ofcapital as an order, stressing along the way those aspects of hisvision (and the Austrian concept of spontaneous order) that mosteffectively deny interventionist macroeconomics in order todetermine whether Lachmann ultimately leaves us with a set ofpolicy prescriptions that (despite whatever theoretical validity theymay be said to possess), could not rationally be carried out byanyone. We first present Lachmann s vision of capital as an order,and note those aspects that are most at odds with aggregatemacroeconomics—the view constituting the problem environmentof the interventionist policy maker. We then emphasise a second setof arguments extant in Capital and Its Structure (1956) (andelsewhere in Lachmann’s writings) concerning the functioning ofthe price system, and in particular its role in any self-correctingtendency in the economy, in order to develop the setting forLachmann’s policy advocacy in times of massive plandiscoordination. Finally, we survey the possibility of reconciliationand explore the following possibilities: That Lachmann: (1)contradicted himself in establishing the validity in principle of thepolicy positions he takes; (2) presented us with a fully coherent set ofpolicy arguments; (3) established the validity in theory of the policypositions he takes but left no basis for their rationalimplementation.165
PETER J.BOETTKE AND STEVEN T.SULLIVANUnderstanding the capital-using economyThe concepts Lachmann employed to understand the industrialstructure of a contemporary economically developed society,namely functional heterogeneity, complementarity as joint use,multiple specificity, the individuals production plan and itsphysical manifestation in the capital combination, are rooted inthe Austrian tradition. At the core of Lachmann’s system is theproduction planthis is the means-ends framework of the individualin the capitalusing economy. In other words, Lachmann sunderstanding of the ‘macroeconomic’ world was thoroughlychoice-theoretic. The plan is a logical structure where objects andthe causal relationships among objects are subjectively perceived;this focuses theoretical attention on how the planning individualorganises the means of production at his disposal in order togenerate output. The plan is shaped by the individual’s subjectiveassessment of the economic environment, and its success or failureis judged by signals provided by the market process and filteredthrough that agent’s perceptions. The individual’s plan determinesthe relationship between already existing capital goods andprospective new capital goods-Lachmann viewedcomplementarity as joint use of items within the context of anexisting plan, and substitution as a fundamental element of planrevision contingent on that plan’s failure as perceived by itscreator.Capital heterogeneity in Lachmann’s system, then, provides adifferent view of the investment relationship from that found in theaggregate macroeconomics or growth theory literature. Theassumption of homogeneity, in light of the Lachmannianalternative, can thus be seen to generate some analytical costs interms of lost categories of capital relationships. It misleads theeconomist into presuming that new capital is a substitute for oldcapital, as Lachmann notes:As long as we cling to the view that all capital is homogeneous,we shall only see, as Keynes did, the unfavourable effects ofinvestment on the earning capacity and value of existingcapital goods, since all the elements of a homogeneousaggregate are necessarily perfect substitutes for each other.The new capital competes with the old and reduces theprofitability of the latter. Once we allow for heterogeneity wemust also allow for complementarity between old and new166
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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 ACTIONc
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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 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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ENDOGENOUS CHANGEHahn’s notion of
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ENDOGENOUS CHANGEentertain theories
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ENDOGENOUS CHANGEwords, is it possi
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Page 136 and 137: ENDOGENOUS CHANGE3 The difficulty i
Page 138 and 139: 7RADICAL SUBJECTIVISMAND AUSTRIANEC
Page 140 and 141: RADICAL SUBJECTIVISMdecisions under
Page 142 and 143: RADICAL SUBJECTIVISMconsidered as
Page 144 and 145: RADICAL SUBJECTIVISMnot simply enta
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Page 148 and 149: RADICAL SUBJECTIVISMeconomic theory
Page 150 and 151: RADICAL SUBJECTIVISMAustrian resear
Page 152 and 153: RADICAL SUBJECTIVISMoutcomes of the
Page 154 and 155: RADICAL SUBJECTIVISM——(1990)
Page 156 and 157: 8HIERARCHICALMETAPHORS IN AUSTRIANI
Page 158 and 159: HIERARCHICAL METAPHORScoordination
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Page 162 and 163: HIERARCHICAL METAPHORSbe understood
Page 164 and 165: HIERARCHICAL METAPHORSlegal order.
Page 166 and 167: HIERARCHICAL METAPHORSMany of these
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Page 172 and 173: HIERARCHICAL METAPHORS(eds) (1993);
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Page 176 and 177: 9LACHMANN’S POLICYACTIVISMAn Aust
Page 180 and 181: LACHMANN’S POLICY ACTIVISMcapital
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Page 194 and 195: LACHMANN’S POLICY ACTIVISMinvestm
Page 196 and 197: 10EXPECTATIONS ANDSTOCK MARKET PRIC
Page 198 and 199: EXPECTATIONS AND STOCK MARKET PRICE
Page 214 and 215: INDEXaction: individual 32-3, 38-9,
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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