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

BRIAN J.LOASBYsomething for the better—then its extension from a single plan to aset of interacting plans must be problematic, and if this set isexpanded into a general equilibrium, especially so. This is why themodel of central planning, in which, by definition, there is only asingle plan, looks so plausible in comparison with a generalequilibrium of independently formulated plans, which seems onlytoo likely to be frustrated by the ‘wastes of competition’. ButMarshall offers ‘a restricted environment as regards time and space’in which an approximate compatibility of plans might beachievable—especially when we pay due attention to Marshall’sconcern for the pattern of continuing relationships within which thecriticism and testing of plans takes place.In his letter of 22 July 1990, Lachmann went on to agree with methat Marshall:was nearer to Menger than to Jevons. This is what hasimpressed me for some time. Why, then, did he stressequilibrium? I think there is this to consider. An economistespousing equilibrium need not do so because he believes thatin the real world equilibrating forces are overwhelming. Fewpeople hold this view. But if we are concerned with ‘wealth’and feel we must be able to ‘measure’ it we will sooner or laterfind out, as Wicksell did, that such measurement is possibleonly in equilibrium, hence the latter’s importance. Could it bethat here we have the real reason why Marshall espousedequilibrium, as he undoubtedly did?It seems to me that in this paragraph Lachmann illustrates a majortheme in the development of economic theory. Adam Smith’s initialthesis in the Wealth of Nations was that wealth could mosteffectively be increased through the division of labour, because thisled to the continuing development of specialised capabilities. But ifwe contrast individual self-sufficiency with specialisation, we canimmediately identify two problems. Our first thoughts nowadays goto the question of co-ordination; but we may also be concerned howto add up the outputs of all these specialists, in order to see whetherthe total really is greater than that achievable by self-sufficiency, orindeed by a different degree or pattern of specialisation. Much thebest solution to this problem of evaluation is an unvaryingmeasure—if it can be found; and, as we know, Adam Smith and hissuccessors tried hard to find one in costs of production. That anunvarying measure of value could also provide an anchor for the16