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

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SUBJECTIVISM IN ECONOMICS AND THE ECONOMYbelieved to be indispensable, the discovery that it requiresequilibrium has been used to justify the claim that all situationsmust necessarily be rational choice equilibria.Now Lachmann recognised the necessity of abstraction, for everyinterpretation is an abstraction. Economists and economic agents,all human beings, use models. But the choice of model is notinnocuous: It does matter which features of reality we accentuate inour schemes, and which we abstract from’ (Lachmann 1986:42). Itmatters for the management of General Motors just as much as for amonetary theorist; indeed it is characteristic of Lachmann’sperspective that the central issues of economic method are thecentral issues of human action. In neither is there any sure route tosuccess; in both there are many opportunities for failure. Onecommon principle is that the single-minded pursuit of any model, orfamily of models, will eventually lead one astray. The art is knowingwhen to stop. This, I suggested in a letter to him, is the central issuein appraising Marshall, who was acutely conscious of the problem;and we can now see, in counterpoint to the standard complaint thatMarshall failed to pursue the logic of his models, the occasionalsuggestion that he pursued that logic too far, and should have givenmuch more emphasis to evolutionary concepts.Marshall and equilibriumLachmann was very sympathetic to Marshall, and to myinterpretation of Marshall. In a letter of 22 July 1990 hecommented that:I know less about Marshall than I should. Moreover some ofwhat I did learn in 62 years has turned out to be wrong. E.g. Ilearned from Schumpeter that there is no real differencebetween him and Pareto. This is surely wrong. On the otherhand, Schumpeter used to praise Marshall’s Book V as theseeds of everything worth studying in economics. The validityof this view now seems to turn on how important equilibriumwas to Marshall.He had earlier (Lachmann 1986:142–3) praised Marshall’s partialequilibrium analysis as ‘a model within the framework of whichequilibrium and interaction between (a somewhat limited numberof) individuals can be reconciled’. If equilibrium entailsconsistency—because otherwise there is the possibility of changing15
BRIAN J.LOASBYsomething for the better—then its extension from a single plan to aset of interacting plans must be problematic, and if this set isexpanded into a general equilibrium, especially so. This is why themodel of central planning, in which, by definition, there is only asingle plan, looks so plausible in comparison with a generalequilibrium of independently formulated plans, which seems onlytoo likely to be frustrated by the ‘wastes of competition’. ButMarshall offers ‘a restricted environment as regards time and space’in which an approximate compatibility of plans might beachievable—especially when we pay due attention to Marshall’sconcern for the pattern of continuing relationships within which thecriticism and testing of plans takes place.In his letter of 22 July 1990, Lachmann went on to agree with methat Marshall:was nearer to Menger than to Jevons. This is what hasimpressed me for some time. Why, then, did he stressequilibrium? I think there is this to consider. An economistespousing equilibrium need not do so because he believes thatin the real world equilibrating forces are overwhelming. Fewpeople hold this view. But if we are concerned with ‘wealth’and feel we must be able to ‘measure’ it we will sooner or laterfind out, as Wicksell did, that such measurement is possibleonly in equilibrium, hence the latter’s importance. Could it bethat here we have the real reason why Marshall espousedequilibrium, as he undoubtedly did?It seems to me that in this paragraph Lachmann illustrates a majortheme in the development of economic theory. Adam Smith’s initialthesis in the Wealth of Nations was that wealth could mosteffectively be increased through the division of labour, because thisled to the continuing development of specialised capabilities. But ifwe contrast individual self-sufficiency with specialisation, we canimmediately identify two problems. Our first thoughts nowadays goto the question of co-ordination; but we may also be concerned howto add up the outputs of all these specialists, in order to see whetherthe total really is greater than that achievable by self-sufficiency, orindeed by a different degree or pattern of specialisation. Much thebest solution to this problem of evaluation is an unvaryingmeasure—if it can be found; and, as we know, Adam Smith and hissuccessors tried hard to find one in costs of production. That anunvarying measure of value could also provide an anchor for the16
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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
Page 26 and 27: SUBJECTIVISM IN ECONOMICS AND THE E
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
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THE SUBJECTIVISM OF ACTIVE MINDSsho
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THE SUBJECTIVISM OF ACTIVE MINDStha
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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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