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

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