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

PETER J.BOETTKE AND STEVEN T.SULLIVANframework is not merely a laundry list of engineering relationshipsbut knowledge of context— knowing how.Adding to this level of complexity, and generally raising the stakesof the intervention game, is another notion arising out ofheterogeneity—that of multiple specificity. Capital goods arecharacterised by joint use, and are capable of many alternativecombinations, but the scope for their alternative use is not unlimited.Some modes of joint use are not feasible—there only exist certain‘technically possible’ modes of complementarity; furthermore, theschedule of ‘economically significant’ and technically possiblecombinations is not given at once to the entrepreneur. Theentrepreneur must deploy resources (i.e. search) and be alert towardsthe discovery of such economical modes of complementarity, beingcareful all the while because specification mistakes are admitted intothe theory. Without multiple specificity, there would be no need toask why certain capital combinations are used and others are not—the problem facing the capital combination operator would be solvedex hypothesi. 6 Heterogeneity adds the possibility of mis-fits, or malinvestment,in the combinations of capital goods employed by agents.In a world of capital factor homogeneity, of course, each additionaldK of capital is exactly like the last, except that its expected marginalvalue product is different. In Lachmann’s world, an additional ‘dK’can cause the capital combination to become incoherent and requirecostly revision of the plan. Furthermore, mistakes are durable—thefailed combinations of the past may shape the current problemenvironment, therefore contributing a pronounced degree of pathdependency. 7 Investment is an undertaking on a higher plane ofuncertainty in Lachmann’s view of the world. This further adds tothe would-be planner’s problems.Heterogeneity and multiple specificity are not the end ofLachmann’s vision, however, but rather the beginning. Investmentplanning is not the computationally simple affair that emerges frommodels that assume homogeneity of capital goods. The problem ofthe maintenance of capital, and the role of signals employed by actorswithin the economy in forming and revising capital-using plans, areminimised in alternative models. 8 The Austrian analyticalcontribution to capital theory represents, rather, a way of looking atcapital that effectively denies the theoretical aggregation, which isoften employed to motivate interventionist arguments. Why? Lookingat the texts provides us with a revealing distinction. The differencebetween the outcome of plans as envisioned at the firm level andmanifested at the level of the market is reflected in the concepts of168