Economics as a Social Science

This file is a single-author inaugural lecture, first delivered in 1950 and reprinted in 1977. Lachmann’s argument is explicitly tripartite: economics is a science, a social science, and an analytical social science. Its unity lies in treating economic phenomena as intelligible outcomes of human choice under scarcity, not as value questions or as physical regularities.

By saying that Economics is a Science I mean that economists endeavour to establish systematic generalisations about observable phenomena.

To call economics a science is, for Lachmann, to make it systematic and value-free. The economist studies “the World as it is,” leaving ultimate judgments of the good to philosophy. Yet the object of this science is human action, so determinism cannot be assumed in the manner of physics. Lachmann’s solution is the means–ends distinction: ends are freely chosen, but scarce means impose limits, incompatibilities, and consequences.

The nature of economic activity lies in that we have some choice, to the extent to which the means at our disposal have alternative uses.

The second movement of the lecture defines economics as a social science. Lachmann rejects the materialist view that sciences are divided by the objects they study; what matters is the kind of question asked. Economics asks how decisions, plans, and purposes generate observable phenomena such as prices, output, and employment.

The difference between natural and social sciences therefore lies in the nature of the questions they ask.

Because means and ends are mental categories, economics must interpret social facts as manifestations of mind. This does not make it psychology. Lachmann sharply separates the causes of preferences from the implications of choices once made.

In fact the business of the economist consists in very little else but asking what human choices have caused a given phenomenon, say a change in price, or output, or employment.

Purpose, causality, and final explanation therefore remain indispensable in social science. Behaviorism cannot explain action, because social events are not merely sequences; they are outcomes of plans, often rival and often unsuccessful. Even failure is intelligible only by reconstructing the plans that failed.

The social scientist, we may conclude, not merely describes but explains social phenomena by reducing them to acts of the mind.

This account also fixes the limits of social science. It cannot predict and control as natural science does, because social actors learn, communicate, and alter their conduct in response to knowledge. Lachmann allows chiefly “negative prediction”: economists can expose contradictions in proposed policies and show that mutually inconsistent aims cannot be jointly realized.

The third part presents economics as analytical rather than descriptive. Its method is “compositive”: complex phenomena are traced back to their elements in action and plan. Here Lachmann’s Austrian conception is clearest: action has a logical structure, and successful plans must be internally coherent.

The Logic of Action is essentially a Logic of Success.

This is not a denial of habit, passion, custom, or inertia. Lachmann’s point is that whatever motivates a choice, economics analyzes what follows from it. The rationalism is logical, not psychological.

Not the psychological causes of human decisions, but their logical consequences form the subject-matter of the analytical social sciences.

The final section clarifies the relation between theory and history. History is not a mere collection of facts; it too explains action causally. But historians deal with concrete constellations, while theory supplies general frames of reference and rules out impossible causal imputations. Lachmann criticizes pseudo-explanations that personify abstractions such as “Capitalism,” “Industrialization,” or “culture patterns,” and he insists that statistics require historical interpretation. Likewise, there is no single invariant “Trade Cycle”; each crisis must be studied historically with theory as guide.

The chief task of the analytical social scientist is to tell the historians what factors will not bear a causal imputation.

The lecture’s lasting relevance is its defense of economics against both moralism and physics-envy. Economics is rigorous because action has logical implications; it is social because its causes are choices and plans; it is analytical because it supplies historians and citizens with disciplined limits on explanation. Lachmann closes by suggesting that economics is the most advanced instance of a broader analytical social science, one that could also illuminate political and social action wherever people pursue success through fallible plans.