“I first met Ludwig M. Lachmann on February 4, 1982 at the first spring semester meeting of the Colloquium in Austrian Economics at New York University. … Though we had not been introduced, as soon as the goateed man with the twinkling eyes spoke I knew who he was. He started slowly, even haltingly. At first he appeared to ramble, but as he went on an argument unmistakably began to take form. The crucial juncture was signalled by a long, overtly dramatic pause. Then came the main point, spoken forcefully and rapidly, with all r’s rolled, his eyes scanning the seminar table, case established, who could disagree?While that story does in fact seem to tacitly accept that there is an equilibrium structure of prices and wages that would clear all markets (something that can be doubted), the point of the story is well taken: the belief in the market’s tendency to any such state in rapid price adjustments is mostly “a metaphysical assumption.”
During that first meeting I had an exchange with Mario Rizzo about the concept of market-clearing. I argued that though the speed of adjustment problem was an empirical issue, it was not something that could be tested as a general proposition. I drew the implication that one’s view of the rapidity of clearing was a matter of faith, nothing more than a metaphysical assumption, though obviously a crucial one. Lachmann nodded his head vigorously as I was finishing up, which pleased me immensely.” (Caldwell 1991: 140).
The lesson is also this: those Austrians who posit an equilibrium price structure (with flexible wages clearing the labour market) as the state towards which an economy naturally moves have much more in common with mainstream neoclassicals than they think they do.
Caldwell, Bruce J. 1991. “Ludwig M. Lachmann: A Reminiscence,” Critical Review 5.1: 139–144.