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

THE SUBJECTIVISM OF ACTIVE MINDSthat Lachmann would say Shackle, not Mises, had ‘extended thescope of subjectivism from tastes to expectations’ (Lachmann1976:58). Lachmann claims that ‘Mises hardly ever mentionsexpectations’ (ibid.: 58). And a look at the index of Mises’s magnumopus, Human Action (1963), shows no entry under ‘expectations’.Though Mises was a subjectivist, his system of thought does notpermit the development of a subjectivist theory of expectations.J.M.Keynes and the Lachmann problemLachmann gave Keynes a mixed review. He clearly disliked the‘diatribe against the Stock Exchange’ to be found in Chapter 12 ofKeynes’s General Theory (Lachmann [1969] 1977:142). But hequotes G.L.S.Shackle favourably to the effect that the ‘whole spirit’of Keynes’s 1936 book was subjectivist and laudable (ibid.: 159).This is a more positive view of J.M.Keynes than many otherAustrians take today. It is striking when put in its context: Thearticle originally appeared in a 1969 festschrift for F.A.Hayek! Inthis same essay Lachmann credits Keynes with introducingexpectations to ‘Anglo-Saxon economies’ in 1930 (ibid.: 157–8).The subjectivism of Keynes has inspired more than one author topropose a synthesis of the ideas of Keynes and the Austrians (seeButos and Koppl 1997). But Butos and I have argued against that, atleast for the Hayekian strand of Austrian economics. Thephilosophical differences separating the thought of Keynes andHayek make any synthesis of them difficult (Butos and Koppl1997). The basic philosophical ideas of Keynes drove him to viewexpectations as disconnected from any aspect of the market processexcept the self-referencing process of mass psychology that createsobjectively baseless waves of optimism and pessimism.Butos and I argue, in agreement with O’Donnell and others,that Keynes was a rationalist. Keynes believed that knowledgeproperly speaking was philosophically grounded andepistemologically certain. But he also believed that the conditionsthat permit induction and, therefore, knowledge of the future donot apply to the social world. As Butos and I put it, ‘Keynes was aCartesian rationalist who saw about him a non-Cartesian socialworld.’ The impossibility of applying philosophical reason to thepractical problems of investment and business forecasting ledKeynes to emphasise ‘animal spirits, a spontaneous urge to actionrather than inaction’ (see Keynes, Collected Writings [1936] 1972,vol. VII:161).67