Ludwig Lachmann on expectations in his early writings: an aborted theory?

Loïc Sauce

Cambridge Journal of Economics, 2014, vol. 38, issue 5, 1115-1131

Abstract: This article investigates how Ludwig Lachmann introduced the question of the endogenous formation of expectations in his 1943 and 1945 papers, a theoretical issue that remained at the heart of his research program throughout his career. After presenting the methodological and theoretical characteristics of the question he identified in 1943, I consider the embryonic causal analysis of expectations he tried to develop in 1945 by borrowing from Oskar Lange’s concept of the practical range. I then expose the methodological and theoretical flaws that may explain why he did not develop this analysis further in his subsequent works. Despite these flaws, I show that some insights of his aborted theory may nevertheless be of some usefulness to explain the causes of economic fluctuations. A possible reorientation of how to tackle the question of expectations is proposed in the conclusion.

Date: 2014
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