Liberty Matters

Lachmann’s Legacy: Naturalizing Weber to the Austrian tradition


Peter Lewin has captured well the spirit of Ludwig Lachmann with the words enigmatic and controversial. For most Austrians, Lachmann is a curious mixture of both the familiar and the strange. On the one hand, they assent readily to his rejection of standard neoclassical equilibrium analysis and formalism. His views on the central importance of ends and means as the signal feature of human action resonate very much with the Austrian tradition's understanding of purposefulness.
And yet, that said, there is an element that remains unfamiliar too. He seemed unnecessarily to complicate purposefulness with very specific purposes, and his understanding of the importance of time went further than most in stressing the dislocating consequences of change. Indeed, he went well beyond Menger, Böhm-Bawerk, and Mises, when they elaborated on the role of interest rates, the roundaboutness of production, or the place of malinvestment in the business cycle.
It is precisely at the intersection of time and purposes that we must seek to understand the Lachmannian difference, especially as it concerns the role of plans in purposeful action. It is right here that his legacy with regard to equilibrating tendencies of all forms, including the more general notion of the evenly rotating economy or Hayek's spontaneous order, sets Lachmann apart from most others in the tradition to which he laid claim. And it is exactly here that Professor Lewin has hit his mark with respect to Lachmann's focus on the problems of order and institutions, both of which revolve around Lachmann's incisive use of Max Weber.
Reacting to Lachmann
Austrians have reacted in different ways to Lachmann's interest in Weber. One way has been to deprecate his approach as a flirtation with nihilism. That was the charge of Murray Rothbard. Weber was, from this perspective, just another historicist in the ranks of the German Historical School. Rothbard found authority for his view in Mises's own Human Action, where Mises asserted that "Max Weber … was not sufficiently familiar with economics and was too much under the sway of historicism to get a correct insight into the fundamentals of economic thought." (Mises [1949] 2007, v. 1, 126) 
Others have tried a different tack, seeking to domesticate Weber by placing him closer to, if not actually within, the Austrian fold itself. Interestingly, these efforts are most often found among those who have been directly influenced by Lachmann. In the final analysis, however, both reactions are motivated by the desire to clearly differentiate the Austrian school of economics from its erstwhile rivals in the Methodenstriet, the German Historical School. (Maclachlan 2017, 1161-75) Lachmann was clearly aware of this desire, and proceeded carefully not to burden his analyses with unnecessary allusions to Weber's persistent claims of loyalty to the historical approach, though he did not try to hide those ties either. (Lachmann 1971, 54)
If we look then to Lachmann's treatment of Weber, he unpacks for us a more complicated perspective on that tradition out of which Weber's work arises.  What one discovers from Lachmann is that Mises's characterization of the Historical School as simply out "to deny the existence of economics and to substitute history for it," or later, "the radical condemnation of economics" driven by the endeavor "to substitute wirtschaftliche Staatswissenschaften (the economic aspects of political science) for economics" (Mises [1949] 2007, v. 3, 601, 761), is not entirely correct. There were in fact diverse perspectives, even possibly liberal ones, within the Historical School.
Hence we find, subtly understated, Lachmann's almost casual observation that "Weber's rejection of the Volksgeist, espoused by some, though not all, adherents of the Historical School, is emphatic." And Lachmann would then go on, without any apparent hesitation, to refer to "the economists of the Historical School." (Lachmann 1971, 126) Indeed, he even found interesting similarities in the ways both Menger and Weber conceived of social phenomena.
Weber had criticized the founder of his own tradition, Wilhelm Roscher, for misunderstanding the notion of a controlling spirit of a people. It had been a heuristic tool in the hands of legal historians, but Roscher had made it much too "organic," too mystical and metaphysical. What was needed was a more systematic and rational way of accounting for the variety of ends one might find in any given society and around which social action could be analyzed and understood.
Accounting for the Content of Purposes: The Plan
Thus, in Weber's usage, what Roscher and certain others of their school often called a Volksgeist was really "nothing but a 'resultant of innumerable cultural influences.'" (Lachmann 1971, 60) This was the reason, ultimately, behind Weber's conceptualization of the Ideal Type. (Lachmann 1971, 33-34) It was one way of accounting for the variety of ends to which individuals directed their actions in a culture by framing a picture of their moral conceptions. Here Lachmann also noted that Weber's expression "is similar to one sometimes found in Menger for example when he described institutions as 'resultants of social forces.'" (Lachmann 1971, 60)
Lachmann's key insight was to extend Weber's insight into the interpretation not only of ends but also to the interpretation of means, or as Lachmann stated, "To act at all, men have to make plans, comprehensive surveys of the means at their disposal and the ways in which they might be used, and let their actions be guided by them." (Lachmann 1971, 30) The important observation here is the focus on the "varying content of similar ideas" (emphasis added). This was not purposefulness as a category, but rather the ever-varying content of specific purposes.
"In social theory," Lachmann went on, "our main task is to explain observable social phenomena by reducing them to the individual plans (their elements, their shape and design) that typically give rise to them." (Lachmann 1971, 31) Here then is the link to Weber and the tradition out of which he came: to focus on the historical particulars of the intentions of human actors. This is what allowed Lachmann to claim "legitimate usufruct from Weber's legacy." (Lachmann 1971, 32) And here was the divide from Mises and the other Austrians of his day. Their use of purposefulness laid emphasis on its categorical form, and this was precisely Mises's problem with Weber's historical sociological form of verstehen.
Praxeology: Category or Content?
Lachmann, it is frequently noted, significantly downplayed Mises's distinction between conception and understanding. It is true, as Lachmann observed, that Mises thought the term understanding could have been applied to both the economists' conceptualization of purposes and that of the historians, and interestingly, Lachmann moved quickly to reclaim the word verstehen for the uses of both, noting simply, "I do not believe that today's usage demands this distinction," (Lachmann [1966] 1977, 49) Yet it is not exactly what Mises had in mind. By begreifen,or conception, Mises still meant the pursuit of apodictic truth through reasoned deduction from the universally valid category of purposefulness: "Understanding," he insisted in The Ultimate Foundations of Economic Science, "does not deal with the praxeological side of human action. It refers to value judgments and the choice of ends and of means on the part of our fellow men. It refers not to the field of praxeology and economics, but to the field of history." (Mises 1976, 50)
What Mises really meant in his earlier Epistemological Problems of Economics was not that Austrian economists should apply the historian's approach to understanding specific choices of ends and means, but simply to apply a different definitional aspect of the same term: "Where conception is at all applicable," he insisted, "it takes precedence over understanding in every respect. That which results from discursive reasoning can never be refuted or even affected by intuitive comprehension of a context of meaning." Or put another way, "the domain open to conception" is one of "strict logical rule." (Mises [1933] 2013, 121)
Thus Mises would persistently return in his writings, again and again, to the point that "praxeology is not concerned with the changing content of acting, but with its pure form and its categorial structure," for the "scope of praxeology is the explication of the category of human action. All that is needed for the deduction of all praxeological theorems is knowledge of the essence of human action." (Mises [1949] 2007, v. 1, 47, 64)
Lachmann, by way of contrast, worried about the tendency to take such deductive reasoning too far. This is why, as Roger Koppl has noted, he had a psychologically complex view of purposes. He worried that the problem of social order would be too easily dismissed as one of automatic, mechanical functionality if viewed only from the deductive standpoint of purposefulness in general. Thus he took up, as Weber did, the content of the category to ask specifically when and how variation in specific purposes, in the means and ends of different individual plans, might make a significant difference to market processes. It is also why institutional thinking looms larger in Lachmann's thought than most other Austrian economists of his day, with the possible exception of Hayek.
The last paragraph of Lachmann's justly famous essay "The Significance of the Austrian School of Economics in the History of Ideas" merits closer reading. It is a marvelous example of the gentle rhetorical redirection that was a hallmark of Lachmann's style of argument. It is not that Austrian theory always embraced the specific complexity of the "economic plan" of individuals, but rather that it should do so now "on account of its central significance for economic theory of Austrian character" (emphasis added). And thus he concluded, to such plans, to such content, "praxeology, for which until now the plan and its structure have understandably occupied the foreground of interest, will increasingly have to turn in time to come." (Lachmann [1966] 1977, 62)
That is to say, "Hey, you Austrians, look over here! Lift the hood on this action axiom of yours and see what makes it go…"