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

PETER J.BOETTKE AND STEVEN T.SULLIVANNotes1 Here we must be careful with our labels—the central issue of the paperis the juxtaposition of Lachmann’s subjectivism with his policyactivism. The fact that Keynes favoured activist policy (and inparticular, public works) should not lead us to the (false) conclusionthat all policy activism is somehow Keynesian. Lachmann’s advocacyof public works programmes in his LSE thesis predates the GeneralTheory, for example. Yet given the tendency of discussions ofLachmann to flow into discussions of Keynes, the policy comparisonsto Keynes are an irresistible temptation and ‘Keynesian’ positionsshould here be narrowly interpreted as those ‘adhered to most notablyby Keynes’.2 See, e.g., Garrison (1986 and 1994) where he carefully distinguisheshis own Austrian approach from either the extreme subjectivism ofKeynes, Shackle and Lachmann and the extreme determinism of Lucasand Sargent.3 L.Lachmann, ‘John Maynard Keynes: A view from an Austrianwindow’, in D.Lavoie (ed.) Expectations and the Meaning ofInstitutions, London: Routledge, 1994.4 D.Lavoie (ed.) ‘Introduction’, in Expectations and the Meaning ofInstitutions, London: Routledge, 1994.5 Clearly there are ‘varieties’ of both subjectivisms and subjectivists—e.g. Keynes, Shackle, Lachmann, Hayek. To some extent, the proprietyof subjectivist calls for policy activism is always (rightly) in question.This is particularly true, we think, for Lachmann. As Lavoie notes inhis ‘Introduction’ to Expectations and the Meaning of Institutions,subjectivism was for Lachmann more than a minor point ofmethodology in value theory. Many economists can and do refer tothemselves as ‘subjectivists’ and yet ultimately base their predictions(as they must) on objectivist or mechanical-intersubjectivist techniquesthat ultimately wring the subjectivism (and hence the fundamentalunpredictability) out of human systems. Yet from Lachmann we wouldexpect something different.As for the obvious follow-up question about Keynes, our argumentbelow to the effect that Lachmann bestows an unjustifiable epistemicprivilege on the position of his policy maker can be extended toKeynes with no difficulty, despite the clear differences in the twoeconomists’ particular brands of subjectivism. Here we must leavethe argument about Keynes so as to avoid getting too far afield of ourfocus, namely Lachmann’s activist views. For more on Keynes’ssubjectivism, see Butos and Koppl, ‘The varieties of subjectivism:Keynes and Hayek on expectations’, History of Political Economy,29 (2):327–59 (1997).6 This is true for both the assumption of homogeneity and for a world ofunique specificity. The importance of economic calculation as a guidefor the allocation within production plans of scarce capital goods isonly highlighted in the world of heterogeneity and multiple specificity.7 Though not always for the worse in terms of economic allocations.Lachmann notes in Capital and Its Structure that ‘A number of180