“For Austrian economists the third quarter of the … [sc. 20th century] was a bad time. To those who lived through them these were years in the wilderness. It is often thought that this eclipse of Austrian fortunes was brought about by the ‘Keynesian revolution’, but in fact this was only one of the misfortunes that befell Austrian economics in the 1930s, a decade of calamity. The promise of an Austrian theory of the trade cycle, which might also serve to explain the severity of the Great Depression, a feature of the early 1930s that provided the background for Hayek’s successful appearance on the London scene, soon proved deceptive. Three giants – Keynes, Knight and Sraffa – turned against the hapless Austrians who, in the middle of that black decade, thus had to do battle on three fronts. Naturally it proved a task beyond their strength.”Was it some “evil” Keynesian?
The author held that the promise of the Austrian business cycle theory was “deceptive.” Also, that Austrians in the 1930s failed to meet the challenge of Keynes, Sraffa and Frank Knight.
Curiously, it was none other than Ludwig M. Lachmann, in The Market as an Economic Process (Oxford, 1986), p. ix of his preface.
I am in the process of reading this book, and it looks like interesting reading indeed, not just because of Lachmann’s view that there is no tendency to general equilibrium in market systems, but because, by the end of the book, Lachmann appears to be endorsing the Post Keynesian theory of markup pricing (or what he calls “fixprice” [Lachmann 1986: 132]) in certain markets:
“... in our world the flexprice type prevails in financial asset markets and those for raw materials, industrial and agricultural, while in modern industry, except in secondhand markets, the fixprice type predominates.” (Lachmann 1986: 132).Lachmann is even willing to say that the concept of “market clearing prices” does not really apply to many markets where fixprices are set for other reasons (p. 134), and finds Austrian economics wanting for its failure to study markup prices or fixprices (Lachmann 1986: 130-131).
If you cannot get hold of Lachmann’s The Market as an Economic Process, one can read the following to get an overwiew:
Jonathan Finegold Catalán, “Notes to Lachmann’s ‘The Market as an Economic Process,’” Economic Thought, 21 April, 2012.BIBLIOGRAPHY
A set of reviews of the chapters by Jonathan Finegold Catalán.
Vaughn, K. I. 1994. Austrian Economics in America: The Migration of a Tradition. Cambridge University Press, Cambridge and New York. pp. 157-160.
A short but useful overview of the book by Vaughn.
Lachmann, L. M. 1986. The Market as an Economic Process. Basil Blackwell. Oxford.