Remembrance and Appreciation Roundtable Professor Ludwig M. Lachinann - 1906-1990 - Obituary

American Journal of Economics and Sociology, The,  July, 2000  by Stephan Boehm,  Israel M. Kirzner,  Roger Koppl,  Don Lavoie,  Peter Lewin,  Christopher Torr,  Laurence S. Moss

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LAURENCE S. MOSS [*]

Scholar, Teacher, and Austrian School Critic of Late Classical Formalism in Economics

ABSTRACT. Ludwig M. Lachmann was born in Berlin in 1906 and died in Johannesburg in 1990. For more than forty years, until his retirement in 1972, Lachmann established himself as a prominent South African economist and for a time served as head of the economics department at the University of Witwatersrand. From 1974 to 1987, he worked with Professor Israel Kirzner in New York City to give new shape and life to the older Austrian school of economics. Lachmann influenced a small army of modern Austrians to discard the elaborate formalisms of orthodox economics for a "radical subjectivism" that had its roots in the teachings of the founder of the Austrian school, Carl Menger. Here a small platoon of scholars offer their thoughts about Lachmann, his contributions to economic reasoning, and his eccentric but engaging character. First hand reports explain what their mentor taught and what his students took away. Lavoie makes the case that Lachmann's "radical subjectivism" took a rhetorical turn toward the end of L achmann's career in New York City. In addition, Kirzner reports on his long and most productive relationship with Lachmann and provides additional insights about the seminal role of the Austrian Economics Seminar at New York University from 1985 to 1987 in giving shape to the modern Austrian revival. This article is the written version of a "Remembrance and Appreciation Session" held on June 28, 1999 at the History of Economics Society meeting at the University of North Carolina in Greensboro. It is one of an ongoing series that appears in the July issues of this journal.

I

Introduction

I.A. Moss on Lachmann's Vision

WHEN LUDWIG LACHMANN RETIRED from the University of Witwatersrand in 1972, he was 66 years old, in good health, and stubbornly refusing to be hung out on the clothesline to dry. In South Africa he was a highly regarded economist and his opinions on the leading issues of the day were solicited by high ranking officials, as Professor Torr makes clear in his section below (see Section II. A). But no one would suspect that this polite and in some ways humorous gentleman filled with old world charm, dignified manners, and eccentric beliefs would succeed in the last decades of his life in reshaping the modern Austrian school, especially among the young New York City faculty. By some accounts, Lachmann presided over a veritable revolution in Austrian economic thinking and gave the older Austrian school a new direction. The Lachmann I knew in the late 1970s was a "radical subjectivist" out to realign Austrian economics and wean its proponents from the older neoclassical economic styles of reasoning. By pursuing this singular mission, Lachmann insisted that he was steering the wandering ship of Austrian economics to its proper moorings. Those moorings were found in the writings of the nineteenth century founder of the Austrian School, Carl Menger.

With the strong endorsement of Israel Kirzner, Fritz Machlup, and others, Lachmann left his home in Johannesburg to travel to New York City and accept an appointment as Visiting Research Professor at New York University in 1975. He was in residence for at least four months each academic year for more than 12 consecutive years until 1987, when he retired a second time to his family home in Johannesburg. Lachmann passed away in December of 1990.

At New York University, Lachmann worked with the distinguished Austrian school economist Israel Kirzner. Together they built up the Austrian Economics Program at New York University, rivaled only by George Mason University in Fairfax, Virginia. [1] At the weekly seminars the graduates enjoyed the enlightening exchanges between these distinguished scholars. Professor Kirzner writes of his warm and sturdy relationship with Lachmann (Section IV. B. below ). And Professor Koppl explains how quite surprisingly, one by one, many of NYU's brightest students and professors with an interest in the Austrian school fell under the spell of the relentless Lachmann.

Lachmann envisioned a thoroughly subjectivist Austrian economics. As I understood his teachings, he wished to put stringent requirements on any proposed economic explanation. To make an explanation understandable in terms of human action, the proponent of that explanation had a duty to take into consideration what "the passing of time" might mean in a world where novelty is possible. That meant recognizing that new knowledge comes with the passing of time. New knowledge often demonstrates to the economic actors that their expectations about the future had been wrong and in need of revision. At any moment in time, some actors' plans are incompatible with others' and they come to understand this with each passing hour. Economizing behavior must take the form of plan revision. These insights made the general equilibrium model a tragically poor description of what the market system is all about. Because economics is about human action and because human action takes place always and without exception in historica l time, Lachmann questioned the relevance of orthodox (or neoclassical) economics. Lachmann challenged his students to tell him what scientific reason there was for believing that the forces toward the reconciliation of plans were strong enough to overcome the forces making for the divergence of plans. Absent such a demonstration, general equilibrium economics didn't have much explanatory power. Lachmann asked modern Austrians to rebel against the equilibrium models and logical formalisms of contemporary economic reasoning. He pointed to the older Austrian School as the source of an alternative economics--one that would take "subjectivism" seriously.