Review of Austrian Economics, 13: 101–107 (2000)
2000 Kluwer Academic Publishers
(1998) Subjectivism and Economic
Analysis: Essays in Memory of Ludwig M. Lachmann, Routledge Frontiers of
Political Economy #21 (London and New York: Routledge, 1998). pp. 208
In their introduction, Koppl and Mongiovi observe that
Lachmann’s patient exposition of his radical subjectivist views ﬁnally received the sort
of attention it deserved. Young Austrians were not the only students coming under his
inﬂuence. Post Keynesians and other opponents of neoclassical orthodoxy also dis-
covered him. By the time Lachmann died in December 1990 he had ensured a future
for his ideas by leaving behind him a large and heterogeneous group of young scholars
strongly inﬂuenced by his work (p. 3).
Subjectivism and Economic Analysis offers evidence of the growing and heterogeneous
group carrying forward, critically, Lachmann’s project. It’s a wonderful addition to the
previous compilations published by Grinder, Kirzner, and Lavoie, one that will appeal not
only to Austrians but to others working outside the mainstream. While a number of articles
lean heavily on methodological concerns, the volume also contains methodical and more
substantive papers, as well as a reﬂective paper on Lachmann’s call for policy activism. I
shall raise several questions in this review, but I hope that some of my critical remarks do
not cast a negative tone over the entire project, nor dissuade scholars from reading this book.
I’m only exploiting the luxury of being a review writer—transferring the critical comments
I wrote in the book’s margins to this essay.
In “Ludwig M. Lachmann: Subjectivism in Economics and the Economy” (chapter 2),
a catallactic and radically subjectivist approach to understanding the market system. Loasby
then compares Lachmann’s criticisms with those of Alfred Marshall. Although Marshall,
of course, is considered a father of partial equilibrium theory, Loasby sees in Marshall more
Mengerian elements, stressing knowledge, uncertainty and the unintended consequences
of human action (p. 20). Loasby draws from private correspondence between himself and
Lachmann to help substantiate this view of Marshall. This is not to say that Marshall
successfully teased out the Mengerian features; for the most part they remained implicit.
Most students of Marshall would squeeze these features out of the partial equilibrium
framework in the standard theory of the ﬁrm under perfect competition. Only later, in the
workofPenrose, Richardson, Shackle, and Loasby himself, would Marshall be reinterpreted
more in the subjectivist tradition.
Loasby argues that Lachmann’s work in capital theory, particularly his emphasis on
capital heterogeneity, and the entrepreneurial faculty that combines capital in complemen-
tary and productive ways, places Lachmann as a “founder of the modern capability-based
theory of the ﬁrm” (p. 25). This literature challenges the more popular theories of the ﬁrm