In this chapter, we present fragments of previously unpublished correspondence between Ludwig Lachmann and G. L. S. Shackle on the nature of institutions. This correspondence allows us to rationally reconstruct a theory of institutions, which extends Lachmann’s theoretical work. Shackle pointed out to Lachmann that institutions might be inputs into economic activities and that they themselves may be reproduced and transformed by these activities. Lachmann in turn contended that institutions consist of “instruments of interpretation.” We develop the concept of “instruments of interpretation” as a subset of institutions. These instruments are mental models and cognitive tools which are (1) inputs complementary to capital goods (2) jointly produced, reproduced, and transformed through economic activity. We suggest that in contrast to privately produced capital goods, parts of the institutional infrastructure are produced jointly as shared goods because the use of certain institutional elements is non-exclusive and non-subtractable; these elements – instruments of interpretation – are produced and reproduced by sharing and contributions through a process of joint production. This chapter explicitly connects two different but essential themes in Lachmann’s work: capital, and institutions. By combining these two strands of Lachmann’s work, we are able to demonstrate that there is a cross-complementarity between institutional orders and capital structures. This connection in turn provides a thicker understanding of the workings of markets.
The previous versions of this chapter were presented at the WINIR Symposium on the Legacy of Ludwig Lachmann (April 11–13, 2017, Johannesburg, South Africa), at the 2018 Annual Meeting of the History of Economics Society (June 14–17, 2018, Chicago, IL), and at the 50th Annual Conference of The History of Economic Thought Society (August 29–31, 2018, Balliol College, Oxford). We are grateful to the University of the Witwatersrand for allowing us to research the Lachmann Archives; in particular, we thank Ntibi Maepa, Elizabeth Marima, Shobhna Morar, Denise Nicholson, Maryna Van Den Heever, Paiki Muswazi, Jannie Rossouw, Imraan Valodia, and Zeblon Vilakazi. We appreciate the help of Nobantu Mbeki in double checking the references. For helpful suggestions, we thank Giampaolo Garzarelli, Marek Hudík, Peter Lewin, and John Davis. All errors are our own.
Dekker, E. and Kuchař, P. (2019), "Lachmann and Shackle: On the Joint Production of Interpretation Instruments", Including a Symposium on Ludwig Lachmann (Research in the History of Economic Thought and Methodology, Vol. 37B), Emerald Publishing Limited, Bingley, pp. 25-42. https://doi.org/10.1108/S0743-41542019000037B005
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