I see that an anonymous user has taken what I have said and tried to make sense of it. Where he/she states:
Ok but what about the disequilibrium issue that Issac brings up? At least how I understood it, one cannot aggregate the price of a good in disequilibrium.
In a response to Lord Keynes’ (LK’s) comment here:
The problem was the neoclassical aggregate production function using homogeneous capital as an assumption. In essence, it is the aggregation of capital goods as though they are homogeneous that was the issue.
The aggregation of the sale price of consumer goods in money terms in one year is a different thing: we know such goods are heterogeneous.
If you couldn’t, say, meaningfully aggregate the value of sales of heterogeneous goods in one year for a firm, how could a firm calculate its total income from sales?
Which LK responds back:
This is about the expected future yield/value of a capital good being difficult to calculate ex ante, because that expected future value is subjective.
The value, in monetary terms, of the actually sold items – say, consumer goods – in a time period x is not subejctive, is it.
It is quite clearly an objective figure, which you can aggregate, say in aggregate consumption spending as in GDP.
The anonymous user is puzzled about objective value given what I said (although the credit goes to Lachmann). And he/she should be. LK is only half right in my opinion, or at least only looking at one side of Lachamann’s claim. While Lachmann, in Capital and It’s Structure, did put heavy emphasis on heterogeneity of capital, his argument goes much further than that since he talks about the disequilibrium aspect on prices. Lachmann challenged the idea that prices are meaningful in the real world. Relatively, they might serve a purpose to an individual, but it does not follow that aggregating these relative prices are meaningful as a whole. This is at least my interpretation of what Lachmann was saying, and the same interpretation as other Radical Subjectivists. As one pro-Lachmann blogger states:
It is impossible to measure capital because relative prices are incorrect in situations outside equilibrium. From this it follows that it is also impossible to measure a country’s GDP or the history of its productivity.
I recommend reading Chapter 2: “On Expectations” for a further explanation. This post is to show Lachmann’s position more than a post critiquing LK. I am just making it clear that Austrians do in fact think that overall, “our subject cannot be measured.” It has nothing to do with being ‘market apologetics,’ as ‘Hank’ claims, rather it about how we view economics.