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

LACHMANN’S POLICY ACTIVISMchain of events that has led us to the crisis, then we might concludethat the second alternative is satisfactory and our task is finished.Lachmann’s policy activism results from sound economic reasoningand would be a reasonable response for an Austrian given thesituation so described. But to take Lachmann’s system seriously, it isinsufficient to establish the validity of the theoretical mechanics andconsider the problem of feasibility solved. Lachmann’s book was asmuch or more a statement about economic knowledge as it wasabout the hard empirics of the trade cycle, and it is the problem ofeconomic knowledge that will not let us rest with the secondalternative. 11 Feasibility, it seems, is a more troubling problem thanLachmann appreciated. When we ask ourselves such questions as‘What rationale exists for the policy maker in deciding which sectorsare critical to the recovery? What is the meaning of the proper pathin an openended economy? How do we distinguish normal projectfailures from those brought about by the crisis?’ we realise that thesecond alternative does not finish telling the story because it is notfully informed by Lachmann’s view of ‘who knows what’ in theeconomy. The ‘critical sectors’ lie ‘in the path of expansion’—butthe economy is in crisis in the Lachmannian story precisely becauseagents’ expectations about the time profile of productive activitiesare in disarray. Why is the theorist-as-policy-maker’s positionepistemically privileged?Our third alternative suggests that the problem is one of internalinconsistency. Lachmann calls for a reshuffling of complementaryresources to the ‘critical sectors’, which are supposedly simple toidentify—this is a result of the use of what is undeniably a macrooraggregate construct. It is an example of how Austrian economistssometimes find it meaningful to talk about broad categories, heresurrounding capital goods’ functional character in the structure ofproduction. But because one can stylise the structure of productionto understand individual acts of choice and specification does notmean one can understand well enough the entire and concreteeconomy on the operating table in order to diagnose the concreteproblem and target specific policy—the two are potentiallyinconsistent acts of mind. One involves the theorist’s understandingof the structure of production from within, from the point of view ofthe individual agents shaping its particulars, while the otherinvolves a view of this structure from without—from the point ofview no single agent or group of agents possesses. Lachmann’sactivism, as most interventionist arguments implicitly do, conflatesthe two perspectives. The categorical rejection of such a conflation177