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

PETER J.BOETTKE AND STEVEN T.SULLIVANwith a minimum sacrifice of capital. Hence, a public worksprogramme has to be devised in such a way, the purchases ofconsumers goods and capital-goods have to be dosed so as tobring about reinvestment-equilibrium within the shortest timepossible.(Lachmann 1935:95–6, our italics)Note the constructivist language. These are rather odd things for anAustrian economist to advocate, especially an Austrian whoconsistently emphasises the subjective nature of knowledge and theattendant unpredictability of economic systems. In fact, the secondpassage was preceded by a warning against inflationary policies,shored up by a lengthy discussion of the unpredictable character ofdis-hoarding behaviour (Lachmann 1935:89ff). And the mostcompelling subjectivist argument conceivable for governmentactivism in times of massive plan disco-ordination, namely that suchactivism provides a signpost or strong signal for the reco-ordinationof individual means—ends frameworks, is nowhere to be found.The description of the crisis referred to in these passages iscertainly consistent with the Austrian theory of the structure ofproduction, with Lachmann’s view of complementarity, and withthe Austrian Trade Cycle Theory, but what are we to make of theLachmannian policy agenda?In trying to make sense of Lachmann on policy, we return to thechoices listed at the beginning of the chapter. The first of these isthat Lachmann’s economics are simply incorrect. Let us approachthe argument: Is Lachmann’s call for a reshuffling of capitalcombinations inconsistent with ending the crisis? Given that thecritical sectors can be identified and the proper path for theeconomy can be divined, it is conceivable that a set of incentives canbe formulated to redirect resources to their highest-valued use in there-engineered structure of production, and that bankruptcy andsufficiently well-developed ‘used capital’ markets can be used toreorganise capital combinations economywide. We find, then, thatas a matter of standard incentive-driven economic analysis,Lachmann’s prescription fits the diagnosis. 10 We can reject the firstalternative.We now turn to issues arising out of the second and the thirdalternatives. These are that Lachmann either provided us with acoherent analysis or failed to shore up his economics with a firmepistemic footing. If we grant that Lachmann’s economics aresound, and that his policy suggestions are valid in theory given the176