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

PETER J.BOETTKE AND STEVEN T.SULLIVANprojects, some of whose failure is based upon the lack ofcomplementary resources, others failing because of the normal courseof market activity. Bottlenecks have occurred and ceilings have beenhit in crucial sectors of industry—say, primary materials. The mainproblem is one of malinvestment or mistaken allocation, and theprima facie solution would seem to be to reallocate the misallocatedresources. This is what Lachmann suggests:The situation the economy faces on the morrow of the collapseof a strong boom clearly calls for capital regrouping on a largescale…. Plans have gone astray, hopes have been disappointed;capital combinations have to be dissolved and reshuffled…Some planned combinations cannot come into operationbecause of lack of complementary factors; these factors haveto be created now…. Something might be done by shiftingresources to where they are most needed. The critical sectorsare those sub-ceilings which lie in the path of expansion. Heremore investment is required in order to ‘lift the ceiling’. To thisend not merely must investment in other sectors be curtailed;additional factors able to help in lifting the ceiling must berecruited from wherever they happen to be, and this means asa rule that they must be withdrawn from those combinationsof which they form part. Mobile resources from everywhere,even from the consumption goods industries, will have to bedrawn to the critical sectors…. These mobile resources have tobe detached from the specific and non-mobile resources withwhich so far they have co-operated, and this will lead todissolution and reshuffling of existing combinations…In all probability mobile resources cannot be withdrawnand capital combinations will not be reshuffled withoutpressure being brought to bear on owners and managers ofspecific resources. In some cases it may not be possible at allwithout actual bankruptcy. To this end a ‘severe’ credit policyis required. But a credit policy sufficiently severe to ‘crackopen’ the tougher kind of unsuccessful capital combinationsmay discourage investment in the critical sectors of theeconomy.…In such a situation there is much to be said for a‘selective’ credit policy which need not be arbitrary if it merelyreflects the degree of imperfection of the capital market whichis the natural product of the past record of success and failureof individual firms.174