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Collection: IHS Studies in Economic Theory
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Some Notes on Economic Thought, 1933–1953 - Ludwig M. Lachmann, Capital, Expectations, and the Market Process [1940]

Edition used:

Capital, Expectations, and the Market Process: Essays on the Theory of the Market Economy, ed. with an Introduction by Walter E. Grinder (Kansas City: Sheed Andrews and McMeel, 1977).

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Some Notes on Economic Thought, 1933–1953

In commenting on the thought of an epoch immediately after its end, the commentator faces a task similar to that of the biographer of a contemporary. However intimate his acquaintance with his subject may have been, however copious the sources he can tap, sources which may no longer be available twenty or thirty years hence, he stands to lose by the lack of historical perspective. We all know that a biography written after fifty years will in many respects be different from one written soon after a man's death.

The problems of historical perspective are notoriously complex and intricate. No doubt, as time goes by author and readers gain a clearer view of their subject by being able to see it at a distance, but at the same time it becomes more and more difficult for them to appreciate the social climate, no longer their own, which prompted the actions of the men in whom they are interested.

There is of course no ready recipe for commenting on the recent past and not looking foolish in fifty years' time. But, unable as we are to forecast what future historians will have to say on our subject, we should probably not go far wrong if we—

first, endeavour to discount those events the influence of which is already visibly vanishing, i.e., clear our minds of what can already be seen to have been purely ephemeral; and

second, devote our effort primarily to discerning the major underlying trends of our epoch which will also shape the future, unless all of them are reversed or interrupted, which is unlikely.

Reprinted from South African Journal of Economics 22 (March 1954).

It goes without saying that reasons of space impose severe limitations on our endeavour. Of course there can be no question of our attempting anything even approaching a reasonably complete account of the ideas and discussions of the past twenty-one years. Nor is this all. All we can do here is to emphasize what appear to us to have been the “critical points” in the economic thought of our period. This means not merely that a good deal will have to be left out, but that the selection of these critical points for discussion in these pages will be highly subjective. The reader must bear in mind that, were somebody else to write this commentary, his selection of topics for discussion as well as his emphasis on the various topics selected, would necessarily differ from ours. In the present context this is inevitable, but it is in our view no serious sacrifice. All history is interpretation. The reader of what follows will be in a position to compare our interpretation of the thought of the period with his own, and thus to judge for himself.

As seen from the close proximity of 1954, three major events seem to characterise the economic thought of the past twenty-one years: the rise of the Keynesian economics, the evolution of various theories of mixed market forms, like monopolistic and imperfect competition, and the new developments in Welfare Economics associated with the names of Professor Hicks and Mr. Kaldor and their critics.1

Very little need be said here about the new Welfare Economics. In spite of its impressive name and the ingenuity shown by many of its protagonists, the subject matter is somewhat remote from reality. To be sure, this whole body of thought has been evolved ostensibly as a code to guide policy. But it is hard to see how in the world as it is it could ever be brought into operation. Its central concept, the “social welfare function,” is not exactly a plaything for politicians. And all policy after all is made by politicians. In reality, as every newspaper reader knows, politicians pursue power, not welfare. In fact, one eminent welfare economist has candidly admitted that “our arrangements may perhaps be more properly described as constituting a discussion of a theory of rational behaviour rather than a complete theory of the state: for we are very little concerned with what a government does in fact do in any particular case, and in no case have we considered the ethical question of what a state should do.”2

In the field of economic thought the rise of the Keynesian theory of employment and incomes was undoubtedly the most dramatic, as it was the most widely discussed event of the past twenty-one years. The products of both Keynesian and anti-Keynesian literature have by now reached mountain-size. To do justice to even a few of the problems raised is for us clearly impossible. To survey and assess the new doctrine, even were we to confine ourselves to the most hotly debated issues, would require a frame of discussion of at least the size of a book. Fortunately there is here no need for such an endeavour, as Professor Hutt will, elsewhere in this volume, deal with what is probably the most critical issue in the Keynesian doctrine, viz., the relationship between the scale of prices and the income level. But a few brief comments on the significance of the Keynesian economics as a whole will not be out of place.

If we look at it simply as a theoretical model, the Keynesian system is sound enough. It is consistent in the sense that, if we grant the premises, the conclusions will follow: the “level of incomes and employment” will be determined by the well-known determinants. The real issue is precisely whether the premises can be granted: to what extent they reflect reality. In schumpeter's words, the realism of Keynes's “vision,” not the logical consistency of his system is at issue.

It has sometimes been said that the Keynesian economics, so far from providing us with a “General Theory,” reflects in its assumptions, explicit and implicit, the conditions of the Great Depression of 1929–1933 under the influence of which Keynes wrote his book. This is at best a half truth. It does less than justice to the great architect of the Allied economic war effort to whom we all owe so much, and to the man who devoted so much penetrating thought to the problems of the post-war world. Moreover, in “How to Pay for the War” (1940) Keynes showed with his usual brilliance how the “multiplier” technique can be used to describe inflationary processes. And in general we need not doubt that conditions of full and “over-full” employment, as we found them in the war and post-war years, lend themselves to description in Keynesian terms just as much as conditions of general unemployment do.

The truth appears to be that for the Keynesian model there lies the other limit of its validity. The Keynesian economics is an economics of extreme situations: it fits the circumstances of war and post-war inflation with the universal shortage of labour and material resources just as much as it did the world of the early 1930s with almost universal unemployment and “excess capacity.” In other words, the Keynesian model fits reasonably well any world in which we find the various classes of factors of production in approximately similar conditions, and where they therefore can be treated as thought they were homogeneous. In such a world the actual heterogeneity of factors may often be disregarded with impunity. It is here, but only here, that the famous “macro-economic” method works satisfactorily.

But by the same token our model can tell us little about what we may regard as the normal situation of a progressive economy. Where there is unemployment in some industries and labour shortage in others, where shortage of equipment in some rapidly expanding sectors coincides with excess capacity in others, the macro-economic notions are of little use. In such circumstances a “point of full employment” which we could hope to reach, but not to overshoot, by applying the familiar nostrums, does not exist. The assumption of universal homogeneity breaks down. Economists have to look round for other tools.

When we now turn to the theories of mixed market forms, of monopolistic and imperfect competition, to apply there, as we did in the Keynesian case, our twin tests of internal consistency and correspondence to reality, we see a very different picture. For one thing, the singleness of analytical purpose, the unity of structural design, which are such fascinating features of the Keynesian system, are here lacking. The theories of competition were not all cast in one mould. As a result we witness Professor Chamberlin loudly disclaiming an intellectual affiliation which Mrs. Robinson protests does exist.3

On the other hand, most of the attacks made on the new theories on the grounds of lack of realism have been defeated with surprising ease. In staving off what, for a time, looked like the most dangerous of these attacks, the onslaught of the “full-cost pricing” enthusiasts,4 the defenders have all shown considerable dexterity and usually a much better understanding of the actual circumstances in which business action has to be taken, in particular in the multi-product firm, than their opponents, for all their vaunted realism, could show.5

There are, nevertheless, some ominous cracks in the doctrinal edifice. Recently both Professor Chamberlin and Mrs. Robinson found it necessary to revisit the scenes of their earlier triumphs, a visit which, at least on Mrs. Robinson's part, seems to have led to considerable heart-searching, while Mr. Harrod has now submitted a revised version of the theory of imperfect competition.6 No major structural alterations were found necessary, but there seems to be a common tendency to reassess the part of the marginal revenue curve which twenty years ago was widely regarded as the very linchpin of the new doctrines. While Professor Chamberlin dismisses it as “a piece of pure technique unrelated to the central problem,”7 Mr. Harrod bases his rejection of the doctrine of excess capacity on a distinction between long-period and short-period marginal revenue of which, according to him, only the first determines price and output under imperfect competition.

But the most interesting problems in the theory of mixed market forms arise in connection with the question whether, to what extent, and, if at all, in what sequence the various market forms can be said to succeed each other in time. In this context the “inevitability of monopoly,” or perhaps oligopoly, calls for particular attention. But these are questions to which it will be better to return after we have explored the wider issues of which they form part.

Thus far we have dealt with problems which loomed large in the discussions of the past two decades and occupied most of the literature. We must now turn to those wider issues which, though not recognised at the time, and even now perhaps barely visible, were in fact implied in, and underlay the questions which were currently discussed. But before we set out to plumb the depth of the stream of economic thought we have to deal with one issue which cannot be thus easily classified: a problem some aspects of which appeared on the surface and were widely discussed, but which had roots and ramifications that have not been laid bare. Throughout our two decades we notice a growing feeling of dissatisfaction with the traditional equilibrium methods of neoclassical economics, and a strong desire to make economic analysis “more dynamic.”

Equilibrium analysis was felt to be unrealistic. In reality, we were told, equilibria are hardly ever found. In this form, to be sure, the criticism need not be taken too seriously. No theoretical model of course can ever provide a completely adequate picture of reality. The merits of a particular model have to be judged by comparison with those of another model, actual or potential, not by comparison with “reality” which is, and must always remain, beyond our theoretical grasp. The common sense case for the equilibrium method is that if we wish to survey a constellation of diverse forces, the easiest method of doing so is to perform the mental experiment of imagining that state of affairs which would be reached when all these forces have unfolded all their implications. This is certainly much simpler than to have to go through the laborious business of describing and classifying each force separately. The method can, however, be applied only if, first, the unfolding of the forces can take place without interference from outside and, second, the mode of interaction of our forces is known and can be predicted. The first condition, usually stated in the familiar ceteris paribus terms, is of course simply a fundamental postulate of all scientific method. But the second condition raises an issue peculiar to the social sciences. Our forces after all reflect human action prompted by knowledge. The second condition therefore means that the individuals acting will during the process of interacting which leads to equilibrium, not acquire new knowledge: otherwise their actions cannot be predicted. There are many cases (arbitrage is an obvious example) in which the process of interaction is so swift that the second condition will be approximately fulfilled, but there are others where it is not. The real objection to the equilibrium method is that it must ignore the process by which men acquire and digest new knowledge about each others' needs and resources. But during our period the problem was rarely seen in this light, except by Professor Hayek whose penetrating studies of these problems broke much new ground and opened up entirely new vistas.8

The wish to give the prominent ideas of the time a more dynamic colour than that with which they made their original appearance, was strong throughout the period under review.9 In particular, Keynes's vision of the capitalistic economy bogged down in a morass of permanent unemployment clearly called for a theory of economic development to which the master himself had only contributed a few bare fragments. From Mr. Harrod's first “Essay in Dynamic Theory”10 through his later contribution “Towards a Dynamic Economics” to Mrs. Robinson's “Generalisation of the General Theory”11 there have been many attempts to “dynamise” the Keynesian doctrine. If none of these attempts has been very successful, this was, on the face of it, due to the fact that the model employed, that of an expanding economy, was somewhat too simple, just Cassel's “uniformly progressive economy” brought up to date to match the Keynesian background of the times, the “society making less than full use of its human and material resources.” But we need only probe a little beneath the surface to see that the real reason for their discomfiture was the neglect of the problems of time and knowledge.

This is not to say that the rôle of time in economics was neglected during our period. It certainly was not,12 but its implications were. Mrs. Robinson in a retrospective mood, has confessed: “In my opinion, the greatest weakness of the Economics of Imperfect Competition is one which it shares with the class of economic theory to which it belongs—the failure to deal with time.”13 As a generalisation about neoclassical economics this is hardly fair comment. Marshall after all had a good deal to say about time and its economic effects. But while time as a dimension of economic phenomena was by no means unknown to economists before 1933, its true economic significance was but tardily recognised.

Time brings change, and change brings the need for adjustment to new conditions. But a ready response to this need cannot be taken for granted. In a society based on division of labour men have to know each other's needs and resources in order to achieve their aims.

In a stationary economy, in a world in which to-day is as yesterday was and to-morrow will be like to-day, the question how men got the knowledge by which they live, offers no particular problem. We need ask it no more than we need ask, in general, how the stationary economy came to be stationary. Here it is not unreasonable to assume, as classical and neoclassical economists did, that all men have the knowledge requisite to go about their daily business.

But in a changing world the question cannot be eschewed. Here change implies that part of yesterday's knowledge is to-day no longer up to date. Men have to fight a running battle with the forces of change and ignorance, since every day that passes turns former knowledge into present ignorance. Here the economic problem begins to consist largely, if not exclusively, in “catching up” with the stream of change. He will be master who understands better, and more quickly, than the next man what recent change “means” in terms of needs and resources. Moreover, there now emerges the task of guessing accurately to-day what to-morrow's change will bring. It becomes clearly impossible to assume that new knowledge is acquired by everybody with the same speed with which conditions change, or even that, if there is a lag, it will be the same for all people. Change brings the need for adjustment to new conditions, but few people will at first understand what these new conditions are, or what they require, and the few who do profit at the expense of the others. (The typical reaction of the saving public to the secular inflation of our age provides ample illustrations for this.) Time thus entails changes in knowledge and its distribution, and thus also changes in the resources of the various individuals, a conclusion hardly congenial to equalitarians.14

This problem, which any serious attempt to bring time into economic theory has to face, has as a rule been hitherto ignored. The “dynamic models” of Messrs. Harrod and Hicks are prominent examples of this tendency, while the most ingenious attempt so far made to evade the problem openly, by assuming “perfect foresight,” was soon seen to entail too many absurdities to find ready acceptance. Yet, during our period, again and again the problem came to the surface. This fact was reflected in the growing interest in expectations.

It would of course be quite wrong to think that expectations did not exist for economists before 1933. No economist who had to deal with concrete problems could ever permit himself to forget that in an uncertain world men base their actions not on what is, but on what they think will be. It remains true nevertheless that the introduction of expectations into economic theory was one of the major events of our period. We believe that future historians of economic thought will rank it as the outstanding event of our period.

We must first briefly outline the position as it existed in 1933. As early as 1912 Schumpeter15 drew the distinction between the “entrepreneur,” the man who has the mental power to imagine that to-morrow will be different from to-day and who is able to act accordingly, and the “static individual” who lacks this power and can only adapt himself to existing circumstances. Professor Knight, by a different route, reached virtually the same conclusion, viz., that in an uncertain world uncertainty-bearing becomes a function of specialists. In Sweden, by the late 1920s, the pupils of Wicksell had encountered the problem, and Professor Myrdal wrote the first book explicitly devoted to it.16 Even in England Keynes, though probably unwittingly, had introduced expectations in 1930 when he discussed the influence of the “bullishness” and “bearishness” of the public.17

It remains true that only in the General Theory were expectations officially introduced into Anglo-Saxon economics. It is to be regretted that it was done in such a haphazard fashion. Thus the marginal efficiency of capital and liquidity preference are expectational magnitudes, but the all-important marginal propensity to consume is not, though it is hard to see why consumers' decisions should not be influenced by expectations of future prices. Moreover, in a world in which most durable, and semi-durable consumer goods, from television sets to clothes, can be bought on credit, consumers' expenditure is not limited to current income, and the consumer is in a position not really different from that of those who make investment decisions. It is difficult to avoid the impression that Keynes introduced expectations whenever it suited his argument, and left them out when it did not. Furthermore, in his Chapter 12 on “The State of Long-Term Expectation,” the famous diatribe against the Stock Exchange, it becomes painfully evident that Keynes failed to grasp the nature of the problem posed by the existence of inconsistent expectations. Instead of studying the process by which men in a market exchange knowledge with each other and thus gradually reduce the degree of inconsistency by their actions, he roundly condemned the most sensitive institution for the exchange of knowledge the market economy has ever produced!

It cannot be said that the theory of expectations has made much progress since Keynes wrote. To be sure, we now have a set of impressive-looking tools of analysis. The Hicksian “elasticity of expectations,”18 Dr. Lange's “practical range,”19 and Professor Shackle's “potential surprise function”20 all testify to the large amount of ingenuity that has been devoted to the subject during our period. If, for all the efforts made, the results have been rather meagre, the reason has to be sought in the mechanistic nature of the tools and the theories in which they are employed. None of these theories came to grapple with the central fact of a dynamic world: the human acts of interpretation by which men try to keep abreast of the changes in needs and resources. All these authors disregard the fact that man casts the material of his knowledge in the mould of expectations.

The dissatisfaction with the shortcomings of the equilibrium method mentioned earlier gave, during our period, rise to the first experiments with a new method of analysis which has come to be known as “Swedish Process Analysis.” The common sense of this new method is, briefly, that while each individual, producer or consumer, at the moment at which he makes a plan, may reasonably be expected to co-ordinate his resources in such a way as to use them to his best advantage (so that “he is in equilibrium”), these various plans need not, and probably will not, be consistent with each other. Hence, from time to time, these plans will have to be revised in the light of the new knowledge prompted by their failure. In other words, Process Analysis takes account of the fact that in a changing world men only gradually and imperfectly acquire knowledge about each other's needs and resources.

The new method made its first appearance in the Anglo-Saxon world in 1937 in Professor Lundberg's Studies in the Theory of Economic Expansion. Its rationale was lucidly explained by Professor Lindahl in 1939.21 It was used with dexterity by Professor Hicks in Parts III and IV of Value and Capital. Though it has not been without its critics,22 it was perhaps one of the most hopeful departures of our period.23 In the postwar years it proved most useful in the study of processes of inflation, open or suppressed.24

Dynamics has also invaded the theory of market forms during our period. With oligopoly this became inevitable as soon as it was realised that, for better or worse, oligopolists have to act on what they expect their rivals to do in the future. But here again, the real issue goes much deeper, and certainly passes the precincts of oligopoly. As long as competition was regarded as the principal market form, with monopoly as an exception, it was sufficient to ask what peculiar circumstances caused monopoly. But in the last two decades we have learned that most actual market forms are hybrids of monopoly and competition. The question arises now whether all these various market forms have to be regarded as alternative, though permanent types of market organisation, or as successive stages of a process. If the latter, we have to ask what is the typical sequence of this process, and also whether there is only one such type of process or whether there are several.

The problem finds its crudest expression in the neo-Marxists' assertion that “competitive Capitalism” is inevitably followed by “Monopoly Capitalism.” But even outside the orbit of Marxism the problem is important enough to merit discussion. It is one of those issues which the discussions of the last two decades have raised without giving a conclusive answer to them.

Thus far the problem was as a rule discussed in the context of Increasing Returns. It has always been known that perfect competition is incompatible with increasing returns. This fact of course provided the original starting point for the Economics of Imperfect Competition. But do increasing returns necessarily lead in the end to monopoly or oligopoly? At the end of our period we find the problem by no means solved. Mr. Harrod thinks that “increasing returns are compatible with any kind of imperfect competition, but not with perfect competition.”25 Mrs. Robinson, on the other hand, has arrived at the conclusion that: “The chief cause of monopoly (in a broad sense) is obviously competition. Firms are constantly striving to expand, and some must be more successful than others.”26

The inevitability of oligopoly is here inferred from the existence of increasing returns. To the extent to which the latter are due to “technical indivisibilities” the argument is plausible enough: the bigger firm has the advantage over the smaller firm. But, as Mr. Harrod has shown, increasing returns are also often a function of time. And time, as we saw, entails the diffusion of knowledge. It is hard to see why the knowledge acquired by one firm during the course of its expansion should for ever remain its exclusive possession, unless we assume that each firm's position at any moment is of such a unique character that no one else can learn from it anything to his profit, an assumption which would of course destroy most generalisations in our field and, in any case, make competition impossible.

It is, however, possible to feel that the whole discussion rests on a fundamental misconception of the nature of competition. Almost invariably it has been assumed that competition, perfect or otherwise, is one market form among others. In the discussion just mentioned the question at issue was merely whether it was a “stable” market form. In reality, however, as Professor Hayek put it, “competition is by its nature a dynamic process whose essential characteristics are assumed away by the assumptions underlying static analysis.”27

In other words, competition is not a market form, but the very process by which one market form evolves into another. And this process is identical with the spreading of knowledge, not only from producers to consumers, but also from producers to their rivals. The “state of perfect competition” which in the last two decades has so often been made to serve as the standard model of the text books is, if at all, conceivable only as the end-product of this process of competition. For a situation in which all consumers are completely indifferent between the products of the various sellers must be a situation in which each consumer knows already all there is to be known about all goods on the market, and has nothing further to learn from it. On the other hand, all new knowledge, technical or otherwise, is at first necessarily the possession of a few on whom it will probably confer a temporary monopoly position. Gradually, as the new knowledge is tested in the workshop as well as in the market, more and more people come to know about it, and thus the spreading knowledge of it gradually undermines the erstwhile monopoly. In the course of progress we may expect that as one “wave of knowledge” reaches the periphery of the system, becomes “common knowledge,” a new wave will emanate from somewhere else, and the process starts all over again. This, we need not doubt, is the real meaning of Schumpeter's “process of creative destruction.”

A “state of perfect competition” in the text book sense would require therefore that this process has come to an end. In other words, it denotes a state of stagnation. In reality knowledge is always unequally distributed though at every moment forces are operating to widen its distribution. There is no reason to believe that these forces cease to operate under oligopoly. In order to understand what happens in a market it is not sufficient to count the number of sellers. What one has to establish is the existing degree of differentiation of knowledge, and whether and why it has recently increased or decreased.

As a final example of the misinterpretation of market forces likely to occur when elements of the competitive process are forced into the Procrustean bed of static analysis, we may choose the notion of Product Differentiation which has occupied a prominent place in the discussions of our period. Product differentiation is usually conceived as the result of deliberate attempts by entrepreneurs to protect themselves against the forces of competition. They are supposed to do this by spreading misleading information, by advertising and other means, among consumers who have no means of obtaining better knowledge. No doubt, if we look at a market at a given moment, we may often get this impression: but it is nevertheless likely to be a misleading impression. When set against the background of the process of economic progress, the assertion that product differentiation is practised by wily producers on an unsuspecting public appears absurd. Quality improvement is one of the hallmarks of economic progress. It is clearly impossible without product differentiation. Can anybody imagine how the aeroplanes, motor-cars, typewriters, etc., of fifty years ago could have evolved into their present forms without product differentiation? The view of product differentiation here criticised thus appears to fall into the class of illegitimate generalisations.

We need not doubt that a producer will often attempt to hide a particular bit of information from the public, and for a time he may well succeed. But in this case he has to pay the penalty of not being able to utilise his own knowledge by testing it, and to improve it by utilising it. Sooner or later new waves of knowledge will sweep over him. The process of diffusion of knowledge is inherent in a society of specialists who exchange goods and services with each other. It is a concomitant of the division of labour. Even politicians cannot stop it altogether, though they may well slow it down.

NOTES

[[1]]N. Kaldor, “Welfare Propositions of Economic and Interpersonal Comparisons of Utility,” Economic Journal 49 (September 1939): 549–52; J. R. Hicks, “The Foundations of Welfare Economics,” Economic Journal 49 (December 1939): 696–712. For criticism of the Hicks-Kaldor view see I. M. D. Little, A Critique of Welfare Economics (London: Clarendon Press, 1950), especially Chapters VI and VII.

[[2]]W. J. Baumol, Welfare Economics and the Theory of the State (Cambridge: Harvard University Press, 1952), p. 140.

[[3]]“I have never been able to grasp the nature of the distinction between imperfect and monopolistic competition to which Professor Chamberlin attaches so much importance.... It appears to me that where we dealt with the same question, in our respective books, and made the same assumptions we reached the same results (errors and omissions excepted). When we dealt with different questions we naturally made different assumptions” (Joan Robinson, “Imperfect Competition Revisited,” Economic Journal 63 [September 1953]: 579n).

[[4]]See P. W. S. Andrews, Manufacturing Business, 1949.

[[5]]E. A. G. Robinson: “The Pricing of Manufactured Products,” Economic Journal 60 (December 1950): 771–80; and “The Pricing of Manufactured Products and the Case against Imperfect Competition,” Economic Journal (June 1951): 429–33; R. F. Harrod, Economic Essays (London, 1953), pp. 157–74; E. H. Chamberlin, “‘Full Cost’ and Monopolistic Competition,” Economic Journal (June 1952): 318–25.

[[6]]E. H. Chamberlin, “Monopolistic Competition Revisited,” Economica 18 (November 1951): 343–62; Joan Robinson, “Imperfect Competition Revisited,” Economic Journal (September 1953): 579–93; R. F. Harrod, “The Theory of Imperfect Competition Revised,” in Economic Essays, pp. 139–87.

[[7]]Economic Journal 62 (June 1952): 321.

[[8]]“Economics and Knowledge” and “The Use of Knowledge in Society” reprinted in Individualism and Economic Order (London: Routledge & Kegan Paul, 1949), pp. 33–56 and pp. 77–91.

[[9]]For fairly obvious reasons this feeling found its strongest expression in business cycle theory. But as Professor Schumann deals with this field elsewhere in this volume we can neglect it here.

[[10]]R. Harrod, “An Essay in Dynamic Theory,” Economic Journal 49 (March 1939): 14–33.

[[11]]Joan Robinson, The Rate of Interest and Other Essays (London: Macmillan & Co., 1952), pp. 69–142.

[[12]]See e.g. P. N. Rosenstein-Rodan, “The Role of Time in Economic Theory,” Economica 1 (February 1934) 77–97.

[[13]]“Imperfect Competition Revisited,” Economic Journal 63 (September 1953): 579–93.

[[14]]On this whole problem see Ludwig von Mises, Human Action: A Treatise on Economics (New Haven: Yale University Press, 1949), especially pp. 308–11, and pp. 580–83. This important book has so far not met with the attention it deserves.

[[15]]In the original German version of his Theory of Economic Development [English ed., Cambridge: Harvard Economic Studies Series, 1934].

[[16]]Gunnar Myrdal, Prisbildningsproblemet och föränderligheten (Uppsala: Almquist & Wiksells, 1927).

[[17]]Treatise on Money, vol. 1, Chapters 10 and 15.

[[18]]J. R. Hicks, Value and Capital (Oxford: Clarendon Press, 1939), p. 205.

[[19]]Oscar Lange, Price Flexibility and Emloyment (Bloomington, Ind.: Principia Press, 1944), p. 30.

[[20]]G. L. S. Shackle, Expectation in Economics (Cambridge: Cambridge University Press, 1949), p. 4.

[[21]]Studies in the Theory of Money and Capital (London: Allen & Unwin, 1939), Part 1.

[[22]]See for instance A. P. Lerner, Essays in Economic Analysis, pp. 215–241.

[[23]]See also Karl Bode, “Plan Analysis and Process Analysis,” American Economic Review 33 (June 1943): 348–54.

[[24]]ee Bent Hansen, A study in the Theory of inflation (London: Allen & Unwin, 1951).

[[25]]Economic Essays, p. 186.

[[26]]“Imperfect Competition Revisited,” p. 592.

[[27]]Individualism and Economic Order, p. 94.