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

EXPECTATIONS AND STOCK MARKET PRICESanalysis by limiting each investor to one share, thereby avoidingquestions about the relative size of each individual investor’s holdingof the share. This assumption does not substantially affect theargument.12 Save for a few special cases discussed below.13 Short selling would of course also shift the supply curve to the right byincreasing the effective supply of the share.14 This may often, but not necessarily, be the consequence of expectationsabout future prices or yields converging in Lachmann’s sense (see thesection on own rates of interest below).15 In fact this is a limiting case in which trade occurs at an unchangedprice and the diversity of opinion, though changing at the individuallevel, is neither decreasing nor increasing in the aggregate. Moregenerally, trading at an unchanged price could also occur in all casesin which the slope and the position of the demand curve change in anexactly offsetting way. This includes cases where opinion is eitherconverging (the demand curve flattening out while shifting upwards)or diverging (the demand curve steepening while shiftingdownwards).16 Much of what we have said about risk and risk aversion applies in thesame way in the case of ambiguity.17 Modern futures and options exchanges can be subsumed withoutmuch difficulty.18 Readers familiar with the emerging literature on Critical Realism willrecognise this as an example of the retroductive mode of argument thatit advocates (see Lawson 1994b).ReferencesBibow, J. (1998) ‘On Keynesian theories of liquidity preference’, TheManchester School, 66:238–73.Keynes, J.M. (1971) Treatise on Money, vol. 1. The Collected Writings ofJohn Maynard Keynes, vol. V, London: Macmillan.——(1973) The General Theory. The Collected Writings of John MaynardKeynes, vol. VII, London: Macmillan.Kreps, D.M. (1990) Game Theory and Economic Modelling, Oxford: TheClarendon Press.Lachmann, L.M. (1976) ‘From Mises to Shackle: an essay on Austrianeconomics and the Kaleidic Society’ , Journal of Economic Literature,14: 54–62.——(1977) Capital, Expectations, and the Market Process, Kansas City:Sheed Andrews and McMeel, Inc.——(1978) Capital and Its Structure, 2nd edn, Kansas City: SheedAndrewsand McMeel, Inc. (1st edn 1956).Lange, O. (1944) Price Flexibility and Employment, Bloomington:Principia Press.Lawson, T. (1994a) ‘Tendencies’, unpublished manuscript, Cambridge:Cambridge University.199