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In this chapter, we present fragments of previously unpublished correspondence between Ludwig Lachmann and G. L. S. Shackle on the nature of institutions.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.

Ludwig Lachmann looked to the Austrian School of economics as an intellectual space of refuge from the sterile formalism that constituted the academic work of the mainstream economics establishment. From an early interest in capital theory, he moved to broader epistemological, methodological, and institutional concerns – specifically from the subjectivism of values to the subjectivism of expectations and the implications thereof for human action. Human action in disequilibrium was his central focus. This chapter examines the relationship of Lachmann’s views to the Austrians, those who preceded him, those of his time, and those who have come after him. During his lifetime, his views sometimes provoked controversy. I examine this from the perspective of 2017 and the concerns of the modern Austrian intellectual community and find that Lachmann’s views are surprisingly much more complementary to those of his contemporary Austrians than have perhaps hitherto been realized.

The Symposium on “The Legacy of Ludwig Lachmann: Interdisciplinary Perspectives on Institutions, Agency and Uncertainty” stood out also because of a plenary session organized as a roundtable discussion on “Reminiscences of Lachmann” with the participation of Martin Fransman, Peter Lewin, Jochen Runde and Christopher Torr, and Giampaolo Garzarelli as moderator. The text that follows reports the interesting views about Lachmann’s public as well as private persona that emerged from the roundtable.

In this work, I deal – based on my memories and reflections on Lachmann’s teaching and the ideas that I discussed with him as my dissertation supervisor and member of his weekly departmental seminar – with the following two topics: first, what Lachmann understood by his subjectivist approach to economics and some of its consequences, including the use of the concept of equilibrium in economics; and second, my understanding of Lachmann’s intellectual relationship with Schumpeter. The work also raises questions about the absence in Lachmann’s work of an examination of the role of innovation in the economic process that he analyzed.

The Austrian economist Ludwig Lachmann claimed that Keynes was a lifelong subjectivist. To evaluate this, we start by distinguishing Keynes’ writings on probability theory from his writings on economics. In the General Theory (1936), Keynes’ treatment of expectations provides the basis for Lachmann’s view that Keynes was a subjectivist at heart. In his Treatise on Probability (1921), Keynes refers explicitly to the subjectivism–objectivism divide in probability theory and pins his colors to the objectivist mast. In this essay, we present the objectivist slant in Keynes’ earlier writings on probability theory. Thereafter, we evaluate the criteria Lachmann employed to cast Keynes as a subjectivist.

Ludwig Lachmann’s Capital and Its Structure ([1956] 1978) is a classic in the literature in Austrian economics. It is mainly discussed in relation to the Austrian contributions to the macroeconomics debates of that time – from Hayek’s dispute with Keynes to the capital controversies of Cambridge UK and Cambridge US. Among Lachmann’s many ideas developed in that work, critical is his idea that the capital structure of an economy consists of heterogeneous capital goods that have multiple specific uses. This fact of the world makes the intertemporal coordination of economic plans a complex phenomenon and not a simple phenomenon. In the standard macroeconomic account, the coordination failure results from a distortion to the interest rate which miscommunicates to economic actors the underlying savings and consumption pattern in the economy at that time. This results in a boom/bust cycle, as the malinvestments in production projects are revealed in time and must go through a costly correction. But this discussion is simply an illustration of a much broader set of problems of relative prices as guides to productive activity in an economy and the problem of economic calculation. Our chapter explores the capital theoretic side of the socialist calculation debate and highlights the importance that an understanding of the capital-using economy consisting of production plans made up of heterogeneous goods with multiple specific uses is to the argument about the calculation problem being the lynchpin argument against the feasibility of socialist economic planning.

This chapter provides a comprehensive survey of the contributions of the Austrian school of economics, with specific emphasis on post-WWII developments. We provide a brief history and overview of the original theorists of the Austrian school in order to set the stage for the subsequent development of their ideas by Ludwig von Mises and F. A. Hayek. In discussing the main ideas of Mises and Hayek, we focus on how their work provided the foundations for the modern Austrian school, which included Ludwig Lachmann, Murray Rothbard and Israel Kirzner. These scholars contributed to the Austrian revival in the 1960s and 1970s, which, in turn, set the stage for the emergence of the contemporary Austrian school in the 1980s. We review the contemporary development of the Austrian school and, in doing so, discuss the tensions, alternative paths, and the promising future of Austrian economics.

Perspective-taking is a social competency to consider the world from other viewpoints (Galinsky, Maddux, Gilin, & White, 2008); it “allows an individual to anticipate the behavior and reactions of others” (Davis, 1983, p. 115) and helps to balance attention between self- and other-interests (Galinsky et al., 2008). Though often used interchangeably with the term empathy – “an other-focused emotional response that allows one person to affectively connect with another” (Galinsky et al., 2008, p. 378), clear evidence exists that demonstrates that the two concepts are distinct (Coke, Batson, & McDavis, 1978; Davis, 1983; Deutch & Madle, 1975; Hoffman, 1977; Oswald, 1996). Although both concepts refer to a social competency of taking another's perspective, empathy tends to be more affective while perspective taking leans toward the cognitive (Galinsky et al., 2008). For example, perspective taking is associated with personality characteristics such as high self-esteem and low neuroticism as opposed to emotionality (Davis, 1983). Perspective-takers are more capable of stepping outside the constraints of their own immediate, biased frames of reference (Moore, 2005) to reduce egocentric perceptions of fairness in competitive contexts (without it being at the expense of their own self-interest; Epley, Caruso, & Bazerman, 2006). Perspective taking has also been shown to be a more valuable strategy than empathy in strategic interactions because it helps negotiators find the necessary balance between competition and cooperation, between self- and other-interest (Galinsky et al., 2008). Achieving such a balance facilitates creative problem-solving (Pruitt & Rubin, 1986). For instance, in negotiation, a focus only on self-interests is associated with excessive aggression and obstinacy whereas a focus only on other-interests encourages excessive concession making to the detriment of one's own outcomes (Galinsky et al., 2008). In contrast, perspective takers have the capacity to uncover underlying interests to generate creative solutions when an obvious deal is not possible (Galinsky et al., 2008). Consequently, the cognitive appreciation of another person's interests is capable of facilitating economically efficient outcomes by acting as a discovery heuristic that reveals hidden problems or solutions and as a tool that enables individuals to capture more value for themselves (Galinsky et al., 2008).

The purpose of this paper is to develop an original six-phase model describing entrepreneurial learning in the transition of place-based enterprises toward a sustainable exploitation of natural common resources (commons).

The six-phase model proposed by this study explains the learning processes involving place-based enterprises through two important existing theories: adaptive co-management and Lachmann’s evolutionary, embedded theory of entrepreneurship. The proposed model integrates these two theories on the basis of a longitudinal case study on the fishing enterprises in an Italian marine protected area (MPA).

In the case study, the success factors identified by the adaptive co-management literature proved important in enabling an embedded entrepreneurial learning process consistent with Lachmann’s view. The case analysis allowed the authors to cluster these learning processes around six phases. Further, even if traditional fishing is not knowledge-intensive, this case shows the transition to a sustainable business model required intense efforts of educated institutional work and scientific research. Interestingly, the key learning processes were enabled by the emergence of a larger, networked social entity (a network form of organization) including the community of fishermen, the MPA management and a network of scientists studying the marine area ecosystem.

This study is explorative and relies on a single case study. Despite this limitation, it opens up new research paths in the fields of entrepreneurship, institutional work, network organizations and adaptive management of the commons.

This study is strongly interdisciplinary; it proposes an original model based on a theoretical view that is highly innovative for organization and management studies; and addresses a relevant but overlooked issue with important societal implications.