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

PETER J.BOETTKE AND STEVEN T.SULLIVANrepresents one of the substantive implications of the Austriancriticism of aggregate macroeconomics.Ironically, Lachmann’s mistake in Capital and Its Structure(and elsewhere on this topic) is in being insufficiently subjectivist.On the one hand, capital combinations are outwardmanifestations of subjectively perceived relationships and objects,and on the other hand they are functionally categorised by theeconomist according to a view of their place within the structure ofproduction. This second aspect is perfectly valid for understandinghow a crisis might occur in theory, but its extension to diagnosisand economic policy in an actual crisis puts the economist in thegrip of an epistemic contradiction. Lachmann’s policy maker isbeing asked to ‘bite off more than she can chew’. Lachmann forgothis own analysis in framing the policy maker’s problem and inmoving from generalised classes of strong and weak boomproblems to an actual instance of the ‘post-strong boom economy’type, with an objective knowledge requirement as large as thateconomy and a contextual knowledge requirement policy makerscannot begin to address from their standpoint. The problem of aradical subjectivist macroeconomics is this: The theorist hasmerely to think about how agents think; the policy maker mustknow what they think.ConclusionIf the market process, as Lachmann has stressed, is bestunderstood as ‘a pattern of meaningful utterances of the humanmind’, then economists must focus their theoretical attention onproblems of information acquisition and how institutionsprovide signals to guide our actions within the economic world(Lachmann 1986:165). This also means that we can never dropthe issue of knowledge from our attention for either modellingpurposes or policy-making convenience. As he put it in anothercontext:The market process is the outward manifestation of anunending stream of knowledge. This insight is fundamental toAustrian economics. The pattern of knowledge is continuouslychanging in society, a process hard to describe. Knowledgedefies all attempts to treat it as a ‘datum’ or an object in timeand space.(Lachmann 1976:127)178