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

LACHMANN’S POLICY ACTIVISM…Suppose our critical sub-ceiling is in mineral mining. It issurely unnecessary to deprive existing coal mines of theirmining equipment. Our purpose of moving mobile resourcesto the critical area may be as well served by the heavyengineering industries switching their plants from producingequipment for coal-using industries to producing mining (or‘mineral-economizing’) machinery. In this way existingcombinations may be moved bodily to ‘another stage ofproduction’ without the painful need for disintegration.(Lachmann 1956:120–4)These passages reflect an undeniably activist bent to Lachmann’sanalysis. The policy maker is charged with selecting which capitalcombinations must be dissolved and perhaps manipulating a‘selective’ credit policy in order to break apart those capitalcombinations possessing resources useful to the ‘critical sectors’. Ina later passage on the dynamics of the post-‘weak boom’ economy,Lachmann states that the excess capacity generated by plan discoordination,even in the absence of ceilings, might be combated bymeans of a budget deficit combined with the aforementionedselective credit policy (Lachmann 1956:125–6).This is not the only occurrence of Lachmann’s advocacy ofgovernment activism. In his 1935 Master’s thesis at the LondonSchool of Economics, Lachmann advocates public works to arrestthe process of cumulative depression:But, once the cumulative process of destruction is swaying theeconomic system, what shall we do? For this case ofemergency we propose a Public Works Programme somewhaton the following lines:The great advantage a public works programme has over amere stabilization policy of the kind just described consists inthat it would affect both consumers good industries (via thepurchases of the workmen now in employment) and producersgoods industries (via the purchases of the necessary raw- andbuilding-materials) at one and the same time: We are, so tosay, arresting the cumulative process with hand-brake andfoot-brake. Its main disadvantage, as has often been pointedout, lies in the necessity to invest capital for, at the existing rateof interest, unproductive purposes, i.e. in the net capitalconsumption it implies. From this it follows that the object ofsuch a policy has to be the stopping of the cumulative process175