Men Do Not Really Act in the Ricardian World, They Merely Re-act to Their Circumstances

The main aim of the present-day Cambridge School appears to be an attempt to undo the results of the marginal revolution and to bring about a Ricardian counter-revolution. For a hundred years economists have taken it for granted that what happens in a market economy ultimately depends on the subjective preferences and expectations of millions of individuals finding expression in the supply and demand for goods, services and financial assets. If we accept this approach we are compelled to pay close attention to the differences between human preferences and the divergence of expectations. If not, we are presumably free to turn our attention to facts supposedly ‘socially objective’. In a world in which differences of preferences and divergence of expectations do not matter there is, of course, no room for entrepreneurs. . . .

For them economic action always means the response of a ‘typical agent’ to a ‘given’ situation. Men act exclusively in their capacity as ‘workers’, ‘capitalists’, or ‘landlords’. Spontaneous action does not exist. Men do not really act in the Ricardian world, they merely re-act to the circumstances in which they happen to find themselves. It is thus hardly surprising that the neo-Ricardian understanding of the ways in which a market economy functions is somewhat limited, and subjectivism is seen as nothing but an aberration from the true path of economic thought. Ricardo can be said to have thought essentially in long-run equilibrium terms. So it is not surprising to find that macro-economic formalism is a style of thought congenial to his latter-day disciples.

—Ludwig M. Lachmann, Macro-economic Thinking and the Market Economy: An Essay on the Neglect of the Micro-foundations and Its Consequences, Hobart Paper 56 (London: Institute of Economic Affairs, 1973), 18-19.