A note on Lachmann's radical subjectivism

Abstract

Lachmann’s ideas have been harshly rejected by “orthodox” Austrian economists. For them, following Lachmann would lead the Austrian school to theoretical nihilism and the social scientists to rehabilitate state intervention. The paper sets out to analyse critically a single argument put forward by Lachmann, probably the one most intuitive and apparently sensible. The nature of this argument is ontological in kind. For Lachmann, expectations concerning the social world cannot converge to a single probability distribution because there is no law underlying social phenomena. The social world is ruled by freedom, not by causal laws. The paper shows why this argument is wrong, though it is wrong in an interesting way. Through the critical analysis of this argument, a different notion of equilibrium will be proposed. Furthermore we will realise from a different angle the role played by institutions in allowing people to coordinate their actions.