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

ROGER KOPPL AND GARY MONGIOVItheory of capital to criticise lingering elements of objectivism inLachmann’s account of institutions. We often recognise a kind ofhierarchy among institutions that puts some in the background ashigher-order and unchanging and others in the foreground as lowerorderand subject to change. This hierarchy, however, is entirely‘subjective’. Which institutions are background depends on theproblem at hand and the perspective adopted. No one ‘true’ hierarchyexists. Horwitz illustrates with the history of banking. Institutionalchanges have come about through a kind of dialectic between legaland market institutions. During this dialectic, each set of institutionshas been background to the other. The whole institutional structureis characterised by the kind of complementarities and multispecificitydiscussed in the Austrian theory of capital.Lachmann has sometimes been called an ‘Austro-Keynesian’. InChapter 9, Peter Boettke and Steven Sullivan ask if such a positioncan be maintained consistently. Can one advocate radical subjectivismin economic method and Keynesian interventions in economic policy?Drawing, in part, on Lachmann’s 1935 MSc thesis, ‘Capital Structureand Depression’, they show that such a position was adopted byLachmann. They argue, however, that a non-interventionist policypreference is more consistent with radical subjectivism.In Chapter 10, Jochen Runde and Jörg Bibow enrich Lachmann’sanalysis of the influence of expectations on share prices. Lachmann’stheory, as developed in Chapter 2 of his Capital and Its Structure(1956), concerns the role of divergent or convergent expectationsabout the value of a financial asset. Drawing on J.M.Keynes andE.M.Miller, Runde and Bibow distinguish between the expectationof a share’s future price and the appraisal of its ‘correct’ value.Liquidity, carrying costs, risk aversion and estimates of the riskaversion of others are just some of the complicating factors drivingthis distinction.Each chapter responds to Lachmann’s work in a different andchallenging way. We submit them to the reader in the hope that heor she will share our enthusiasm for them. We hope the reader willalso share our continually enriched appreciation of the ideas of oneof the most impressive scholars we have been privileged to know,Ludwig Lachmann.AcknowledgementsThe editors wish to express their gratitude to Don Lavoie, whoprovided the photograph of Professor Lachmann, which appears in10