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

ROGER KOPPLcorrelate observable market conditions with certain properties ofeconomic expectations. It may help us learn when economicexpectations will be more prescient and when less. It may help uslearn when markets are driven mostly by fundamentals and whenthey are more subject to fads and fashion. To anticipate, myproposal for solving the Lachmann problem puts Schutz and Hayektogether. (Alfred Schutz was a sociologist notable for his use ofHusserl’s phenomenology. F.A.Hayek, of course, was one of theleading figures of Austrian economics.)I will argue for an integration of Schutz and Hayek in thepenultimate section. First though, I wish to review some ofLachmann s radical subjectivist ideas about expectations and toexplain the ‘Lachmann problem’. Lachmann drew on Keynes andMises. It may be of some interest, then, to briefly indicate whyneither Keynes nor Mises is likely to lead us to a solution of theLachmann problem. After making that argument, I will turn to myproposed integration of Schutz and Hayek. The integration ofSchutz and Hayek, I will argue, may let us solve the Lachmannproblem. To make my case I will need to distinguish between twomeanings of ‘expectations’. On the one hand, economic‘expectations’ are what the word most naturally suggests, namely,ideas about the future. These are the sorts of ‘expectations’ radicalsubjectivists have generally been talking about. On the other hand,the ‘expectations’ of many economic models are really dispositionsor propensities to act in certain ways. I ‘expect’ inflation if I raise myoutput price. I will call expectations in the first sense ‘psychologicalexpectations’. I will call expectations in the second sense‘dispositional expectations’. If the argument of the latter part of thischapter is right, integrating Schutz and Hayek to solve theLachmann problem means explaining both psychological anddispositional expectations and correlating the two explanations.The Lachmann problemIn his 1943 essay ‘The role of expectations in economics as a socialscience’ ([1943] 1977), Lachmann mapped out a position fromwhich he never deviated. It is this same position, for instance, thathe adopted in an important essay for the Journal of EconomicLiterature, ‘From Mises to Shackle: an essay on Austrian economicsand the Kaleidic Society’ (Lachmann 1976). Lachmann calls for atheory of expectations that goes beyond the efforts proposed bymainstream economists.62