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

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SUBJECTIVISM IN ECONOMICS AND THE ECONOMYEconomic analysis, serving for two centuries to win anunderstanding of the Nature and Causes of the Wealth ofNations, has been fobbed off with another bride—a Theory ofValue…economists for the last hundred years have sacrificeddynamic theory in order to discuss relative prices.(Robinson 1956: v)We have already seen why the rejection of cost-of-productiontheories should apparently evoke an urgent need to invent somealternative basis of value, and why utility-based measures should beinadequate unless anchored in a perfectly competitive generalequilibrium. We might now observe also that the centre ofgravitation provided by ‘natural values’ had to be replaced by someother principle of co-ordination if economists were to offer a formalsolution to the allocation problem in a decentralised economy.Unfortunately the chosen solution to these twin requirementsentailed a very high opportunity cost, as Joan Robinson (eventually)and Lachmann clearly realised.One of the first to recognise the problem was Alfred Marshall;and he was prepared to tolerate a good deal of ambiguity in order toexploit the advantages of mechanical metaphors in the (intendedly)first volume of his Principles while maintaining that, even in itsfoundations, the theme of economics must be ‘living force andmovement’. Moreover, Marshall believed that he saw an eventualprospect of combining a theory of growth with a theory of coordination:co-ordination is achieved, imperfectly and with cyclicallapses, by a combination of organisation and competitive selection,and this combination also provides both incentives andopportunities for the generation of new ideas.Lachmann became increasingly conscious of his affinity withMarshall: his own account (Lachmann 1986:16–17) of theintramarket processes of innovative variation and imitation, thattransform both products and technology by continuouscompetitive improvement, is thoroughly Marshallian, withChamberlinian touches. In a letter of 29 April 1990, he wrote:‘The Firm is very much Marshall’s child. Neither Walras/Paretonor the Austrians know it. Why? What did Marshall need it for?’The prime reason, I suggest, is that firms were the principal agentsof the intra-market processes to which Lachmann drewattention—in the British economy, which Marshall knew from hisfactory visits no less than in the pages of the Principles. A secondmajor reason is that his conception of the firm as a source of19
BRIAN J.LOASBYvariation allowed him to construct an industry equilibrium thatincorporated ceaseless change. We should never forget that thelong-run equilibrium model of the firm, which has become afamiliar textbook tradition, though often attributed to Marshall,is actually a rejection of Marshall’s theory, for it depicts theextinction of enterprise, and the end of hope.We should not accuse either Jevons or Walras of a lack of interestin the analysis of economic progress. Jevons died young, with agreat potential unrealised, and Walras declared that his eventualobjective was to construct a theory of change. But when Walrastried, as an important step towards that theory, to move fromequilibration in exchange to equilibration in production, and to doso by means of a theory of entrepreneurial action, he found thatdisequilibrium production entailed path-dependency, in whichequilibria derived from the original data were of doubtful relevance.He was unable to resolve this difficulty, and therefore fell back on aprior co-ordination of pledges to ensure that only equilibriumquantities were ever produced. But, as Lachmann (1986:118)pointed out, this is a false production economy, and it excludes themeans of progress that Walras had himself introduced:entrepreneurial conjectures. Marshall understood that generalequilibrium analysis would not allow him to handle creativity andturned in the opposite direction from Walras, in order to preservethe link with the classical tradition. In doing so he implicitly alignedhimself with Menger, who had no desire to construct a generalequilibrium, preferring the freedom to discuss knowledge,uncertainty and the unintended consequences of purposeful action.An affinity between Marshall and Lachmann, who is perhaps themost Mengerian of Austrian economists, is thus perfectly natural:for this most radical of subjectivists was no less anxious thanMarshall to conserve the wisdom of Adam Smith.Human actionLachmann shared Marshall’s conception of ‘the fundamentalcharacteristics of modern industrial life…. They are…a certainindependence and habit of choosing one’s own course for oneself…a habit of forecasting the future and of shaping one’s course withreference to distant aims’ (Marshall 1920:5). Action depends on theknowledge that the actor possesses at the time of action, and theway in which it is used. Even if, as in neoclassical practice, thisaction is triggered by some exogenous impulse, the actor’s20
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Page 9 and 10: CONTENTSNotes 57References 594 Lach
Page 11 and 12: CONTENTS10 Expectations and stock m
Page 14 and 15: 1INTRODUCTIONRoger Koppl and Gary M
Page 16 and 17: INTRODUCTIONdirection of Israel Kir
Page 18 and 19: INTRODUCTIONand revising plans, det
Page 20 and 21: INTRODUCTIONAs the language of Lach
Page 22 and 23: INTRODUCTIONits deep insight and me
Page 24 and 25: INTRODUCTIONthe frontispiece to thi
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Page 44 and 45: 3MISES AND LACHMANNON HUMAN ACTIONS
Page 46 and 47: MISES AND LACHMANN ON HUMAN ACTIONM
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Page 74 and 75: 4LACHMANN ON THESUBJECTIVISM OF ACT
Page 76 and 77: THE SUBJECTIVISM OF ACTIVE MINDSThe
Page 78 and 79: THE SUBJECTIVISM OF ACTIVE MINDSsho
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THE SUBJECTIVISM OF ACTIVE MINDSour
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THE SUBJECTIVISM OF ACTIVE MINDSor
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THE SUBJECTIVISM OF ACTIVE MINDSa p
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THE SUBJECTIVISM OF ACTIVE MINDSact
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THE SUBJECTIVISM OF ACTIVE MINDSexp
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THE SUBJECTIVISM OF ACTIVE MINDSLan
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SUBJECTIVISM AND IDEAL TYPESthis or
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SUBJECTIVISM AND IDEAL TYPESof Gott
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SUBJECTIVISM AND IDEAL TYPESIn the
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SUBJECTIVISM AND IDEAL TYPESsuffici
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SUBJECTIVISM AND IDEAL TYPESAccordi
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SUBJECTIVISM AND IDEAL TYPESto his
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SUBJECTIVISM AND IDEAL TYPESEconomi
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SUBJECTIVISM AND IDEAL TYPESanswer
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SUBJECTIVISM AND IDEAL TYPES1 B wan
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SUBJECTIVISM AND IDEAL TYPESconclus
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SUBJECTIVISM AND IDEAL TYPESOn the
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SUBJECTIVISM AND IDEAL TYPES——(
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ENDOGENOUS CHANGEIntroductionAmong
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ENDOGENOUS CHANGEconsequences. If,
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ENDOGENOUS CHANGEHahn’s notion of
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ENDOGENOUS CHANGEentertain theories
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ENDOGENOUS CHANGEwords, is it possi
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ENDOGENOUS CHANGEX=X (L*,X*) [1]w=X
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ENDOGENOUS CHANGEP=Wa 0+rP(K/X)wher
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ENDOGENOUS CHANGEThere is no room i
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ENDOGENOUS CHANGEmodel that Dutt ha
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ENDOGENOUS CHANGE3 The difficulty i
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7RADICAL SUBJECTIVISMAND AUSTRIANEC
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RADICAL SUBJECTIVISMdecisions under
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RADICAL SUBJECTIVISMconsidered as
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RADICAL SUBJECTIVISMnot simply enta
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RADICAL SUBJECTIVISMperformed by th
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RADICAL SUBJECTIVISMeconomic theory
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RADICAL SUBJECTIVISMAustrian resear
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RADICAL SUBJECTIVISMoutcomes of the
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RADICAL SUBJECTIVISM——(1990)
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8HIERARCHICALMETAPHORS IN AUSTRIANI
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HIERARCHICAL METAPHORScoordination
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HIERARCHICAL METAPHORSpioneering ef
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HIERARCHICAL METAPHORSbe understood
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HIERARCHICAL METAPHORSlegal order.
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HIERARCHICAL METAPHORSMany of these
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HIERARCHICAL METAPHORSBanking and t
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HIERARCHICAL METAPHORSdemand’, th
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HIERARCHICAL METAPHORS(eds) (1993);
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HIERARCHICAL METAPHORS——(1988)
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9LACHMANN’S POLICYACTIVISMAn Aust
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LACHMANN’S POLICY ACTIVISMLachman
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LACHMANN’S POLICY ACTIVISMcapital
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LACHMANN’S POLICY ACTIVISM‘plan
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LACHMANN’S POLICY ACTIVISMcapital
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LACHMANN’S POLICY ACTIVISMwithdra
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LACHMANN’S POLICY ACTIVISM…Supp
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LACHMANN’S POLICY ACTIVISMchain o
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LACHMANN’S POLICY ACTIVISMKnowled
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LACHMANN’S POLICY ACTIVISMinvestm
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10EXPECTATIONS ANDSTOCK MARKET PRIC
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EXPECTATIONS AND STOCK MARKET PRICE
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INDEXaction: individual 32-3, 38-9,
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INDEXefficient allocation/co-ordina
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INDEXmarket 119-20; theory of value
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INDEX19; stock market expectations1
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