Subjectivism and Economic Analysis: Essays in memory of Ludwig ...
Subjectivism and Economic Analysis: Essays in memory of Ludwig ...
Subjectivism and Economic Analysis: Essays in memory of Ludwig ...
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ROGER KOPPLbus<strong>in</strong>essman who knows the monetary theory <strong>of</strong> the trade cycle islike a man with two heads: He is a monster <strong>and</strong> ruled out <strong>of</strong> court.A monster is a counterexample to your theory. When you call thecounterexample a monster, you deny that it counts as acounterexample. This is how Mises h<strong>and</strong>led Lachmann’s commenton the elasticity <strong>of</strong> expectations. The case Lachmann mentions,accord<strong>in</strong>g to Mises, is the one <strong>in</strong> which the bus<strong>in</strong>essman is also aneconomist. Mises takes his ‘pure a priori’ theory to discuss thebehaviour <strong>of</strong> bus<strong>in</strong>essmen <strong>and</strong> not economists. Thus, Lachmann’sexample br<strong>in</strong>gs <strong>in</strong> someth<strong>in</strong>g that doesn’t perta<strong>in</strong> to the theory. Themonster is barred, no mention <strong>of</strong> him may be made <strong>in</strong> futurediscussions <strong>of</strong> the subject.Such monster-barr<strong>in</strong>g might seem so ad hoc that Mises wouldhave been forced to confront the subjectivism <strong>of</strong> expectations. ButMises’s epistemological views led him to see the problems <strong>of</strong>subjective <strong>in</strong>terpretation as radically divorced from economictheory <strong>and</strong> the canons <strong>of</strong> scientific reason.In an essay published orig<strong>in</strong>ally <strong>in</strong> 1933, Mises dist<strong>in</strong>guishedbetween ‘Conception <strong>and</strong> Underst<strong>and</strong><strong>in</strong>g’ (Mises 1933a).Conception is rational; it is ‘discursive reason<strong>in</strong>g’. Underst<strong>and</strong><strong>in</strong>g isthe English translation <strong>of</strong> the German word ‘Verstehen’.‘Underst<strong>and</strong><strong>in</strong>g seeks the mean<strong>in</strong>g <strong>of</strong> action <strong>in</strong> empathic <strong>in</strong>tuition <strong>of</strong>the whole’ (ibid.: 133). When both apply, conception ‘takesprecedence over underst<strong>and</strong><strong>in</strong>g <strong>in</strong> every respect’ (ibid.: 133). Butunderst<strong>and</strong><strong>in</strong>g can penetrate to someth<strong>in</strong>g conception cannot reach:‘the apprehension <strong>of</strong> the quality <strong>of</strong> values’ (ibid.: 134). It is whenunderst<strong>and</strong><strong>in</strong>g enters that ‘subjectivity beg<strong>in</strong>s’ (ibid.: 134). ForMises, ‘[c]onception is reason<strong>in</strong>g; underst<strong>and</strong><strong>in</strong>g is behold<strong>in</strong>g’(ibid.). Mises would later call underst<strong>and</strong><strong>in</strong>g ‘the specificunderst<strong>and</strong><strong>in</strong>g <strong>of</strong> the historical sciences <strong>of</strong> human action’ (Mises1957:264).The ‘underst<strong>and</strong><strong>in</strong>g’ Mises dist<strong>in</strong>guishes from ‘conception’ ishistorical, he thought, not scientific. <strong>Economic</strong> theory is scientific,not historical. Thus, any knowledge we might have about the‘subjectivity’ <strong>of</strong> others is historical, not theoretical. (Mises’sdist<strong>in</strong>ction <strong>and</strong> its relation to the problem <strong>of</strong> expectations isdiscussed by Butos 1997 <strong>and</strong> Koppl 1997.)It is very significant that Mises equates underst<strong>and</strong><strong>in</strong>g with thesubjective. It relegated the issue raised by Lachmann to theextratheoretical categories <strong>of</strong> ‘historical underst<strong>and</strong><strong>in</strong>g’ <strong>and</strong>‘<strong>in</strong>tuition <strong>of</strong> the whole’. It neatly immunised economic theory fromthe issue that so occupied Lachmann. It is thus with good reason66