Garrison and Lachmann have a great many ideas in common. However, they differ in significant manners that allow us to investigate and deduce their most core understandings of the emergent factors involved in the “microfoundations” of “the macroeconomy.” Garrison sees the economy, really the collection of individuals interacting in various trades, as essentially something that can only hope to be doing what “it” wants to do best; staying at the periphery of the production possibilities frontier, while Lachmann argues that there is no stability of such a guns-or-butter paradigm due to the increasing complexity of human society and the simple (and implicitly) nihilistic capitulation to entropy: that there is no frontier in any sense. Lachmann was a radical subjectivist in the same vein as Shackle: our expectations are entirely imperfect and hence preclude any form of macroeconomic coordination in any typical sense.
However, both Garrison and Lachmann are statists. They have vastly different reasons for being so; Garrison intends to have government provide a base of support for the capital structure, while Lachmann thinks that the state is just a part of the current slice in time of the kaleidoscope, perhaps inefficient at times, perhaps useful, but the market is too, and really is nothing to describe in and of itself, as “it” is ultimately composed of all human interaction. Garrison argues that government is only more efficient than the market in a few rare circumstances, ones that do not include the money supply, such as the military or highway systems (as any typical but honest minarchist might). Interestingly, Garrison himself does not argue that these are functions better-enough performed by markets, but rather, that government has the ability to guide society towards greatness (!)
This is the part where you might be shaking your head in dismay while reading my dumbass blog on your phone while mildly crossfaded at a bar after work on a Tuesday afternoon. I am not saying that Garrison is a socialist. I merely submit that both he and Lachmann agree that the state is, at bare minimum, a part of the structure of a society that can be ultimately beneficial at times.
Not much further, they diverge. As mentioned, Lachmann could not conceive of any type of long-run equilibrium in terms of coordination between macroeconomic factors, under any system, because systems themselves always evolve when it comes to human interaction. Garrison instead argues that, despite wherever we may be at right now, in terms of low-to-high consumption, low-to-high investment, low-to-high savings, low-to-high interest rates, ad infinitum, there is still a PPF that can be understood as simply the outer boundary of what can be produced with the available resources at any given time.
The above diagram comes from Garrison’s article Overconsumption and Forced Saving wherein he analyzes the difference in Mises’ and Hayek’s formulations of the expansion and collapse of the business cycle. Garrison, here as in many of his writings, posits that a tumble inside the PPF can only be viewed as an inevitable result of an artificial credit expansion (as opposed to market-based alterations in interest rates, as denoted by the Production Possibilities Frontier). The “secondary depression” is what is commonly referred to as a deflationary spiral: Austrians, monetarists, Keynesians, and so on all agree that deflationary forces can suck the economy inside the PPF. The difference between the Austrians and the rest is that they start before the collapse in analyzing its causes; hence the model above.
Like Wicksell, Garrison argues that a miscombination of investment and consumption can “pluck” us away from the PPF, once such malformations come to a close. Unlike Garrison, Wicksell argued that such mistakes often form due to normal market functions: Lachmann agreed. Lachmann saw that there is no real or definable PPF beyond a completely theoretical representation of investable resources available at any given static moment, something that not only cannot be measured (as Garrison would agree) but actually provides a distinction without a difference: if an economy can temporarily move beyond the PPF, or flounder within it for a myriad of reasons, then how can one truly say that there is a PPF? If at any given moment the sustainability of any combination of resources can be said to be in flux, then how can there be a definable boundary between what is possible to produce throughout time without interruption by capital reallocation, and what is not? Is not all production essentially a reforming of consumption and investment, constantly and throughout time?
Garrison writes much about Lachmann and his kaleidic ideas. In his review of Lachmann’s article The The Market as an Economic Process, Garrison describes kaleidism as such:
The kaleidoscope’s intricate pattern of colored glass represents the pattern of prices that are determined by buyers and sellers in commodity markets and by bulls and bears in asset markets. The pattern has order and beauty, but not longevity; no given pattern can last for long. The passage of time is necessarily marked by the discovery of new information in the form of fulfilled or disappointed expectations of investors. This is the nature, according to Lachmann, of the market process. Such discoveries can change bulls into bears or bears into bulls. The resultant shuffling about of capital assets jars the kaleidoscope. A new pattern of prices emerges, but the particulars of the new pattern could not have been predicted solely from the former pattern or from the sum total of knowledge that underlay it.
That does it justice, as far as I understand it. It is a narrow description but an accurate one. Garrison understands that kaleidism has its philosophical merits, but argues that economists in the hermeneutic vein like Lachmann eschew economics in favor of philosophy. ”
In a lecture titled “The Future of Austrian Economics,” Garrison talks about Karen Vaughn’s writings on the divide between Kirznerian equilibrium and entrepeneurial understandings as a supplement to neoclassical thought, and Lachmannian bomb-chucking hermeneutic philosophical nihilism that hacks at the branches and roots of the neoclassical paradigm. Garrison finds such a distinction frightening.
“‘It’s the economy, stupid.’ Study the economy and not the peripheral philosophy.” Garrison jokingly references Bill Clinton in this quip but hits the nail on the head, as far as his own opposition to the research program that acid-fried nihilists that attempt, like Nagarjuna, to use to destroy any understanding of ontology (standard austrian, neoclassical, or otherwise) by supplanting it with the radically subjectivist epistemology. He pokes fun at Lachmann repeatedly in this lecture, but not out of malice. He is actually warning that viewing the Austrians as merely supplementing or annihilating neoclassical thought is to dangerously discount the idea that Austrian economics can be built up into a school of economics that still makes attempts to describe and understand ontology, while retaining epistemological humility:
I intended this to be a short article, so I will leave it there for now. Garrison and Lachmann are on a collision course here, and we must either reconcile their ideas or discard some while retaining others. Stay tuned.