Advertisement

The Review of Austrian Economics

, Volume 29, Issue 1, pp 85–92 | Cite as

Hayek’s monetary theory and policy: A note on alleged inconsistency

  • Martin Komrska
  • Marek Hudík
Article
  • 252 Downloads

Abstract

Challenging the dominant view, we claim that Hayek’s monetary views did not significantly change over his lifetime. The prevalent perception of early Hayek as a money stream stabilizer and late Hayek as a price level stabilizer is attributable to an unjustified normative interpretation of Hayek’s positive analysis. We argue that in his contributions to monetary theory, Hayek took the goals of monetary policy as exogenously given and analysed the efficiency of different means of achieving them. Hayek’s allegedly inconsistent transformation from a critic to an advocate of price level stabilization is explained by a change of issues under his focus, rather than by a change in his positive views. We also claim that Hayek was always aware that every practical monetary policy involves difficult trade-offs and that he was therefore reluctant to impose his own value judgments on what people should strive for.

Keywords

F. A. Hayek Positive economics Normative economics Monetary policy Austrian business cycle theory Price level stabilization Money stream stabilization 

JEL Classification

B22 B25 B31 B53 E32 E52 

Notes

Acknowledgments

We would like to thank Petr Bartoň, Pavel Potužák and two anonymous referees for their helpful comments on earlier drafts. Any mistakes are, of course, ours.

References

  1. Block, W., & Garschina, K. M. (1996). Hayek, business cycles and fractional reserve banking: continuing the de-homogenization process. The Review of Austrian Economics, 9(1), 77–94.CrossRefGoogle Scholar
  2. Caldwell, B. J. (1988). Hayek’s transformation. History of Political Economy, 20(4), 513–541.CrossRefGoogle Scholar
  3. Carilli, A., & Dempster, G. (2008). Is the Austrian business cycle theory still relevant? The Review of Austrian Economics, 21(4), 271–281.CrossRefGoogle Scholar
  4. Carilli, A., Dempster, G., & Rohan, J. (2004). Monetary reform from a comparative-theoretical perspective. Quarterly Journal of Austrian Economics, 7(3), 29–44.CrossRefGoogle Scholar
  5. Cochran, J. P. (2011). Hayek and the 21st century boom-bust and recession-recovery. Quarterly Journal of Austrian Economics, 14(3), 263–287.Google Scholar
  6. Foss, N. J. (1995). More on Hayek’s transformation. History of Political Economy, 27(2), 345–364.CrossRefGoogle Scholar
  7. Gustavson, M. (2010). The Hayek rule: a new monetary policy framework for the 21st century. Reason Foundation Policy Study, 389.Google Scholar
  8. Haberler, G. (1986). Reflections on Hayek’s business cycle theory. Cato Journal, 6(2), 421–435.Google Scholar
  9. Hayek, F. A. (1933). Monetary theory and the trade cycle. New York: Harcourt, Brace & Co.Google Scholar
  10. Hayek, F. A. (1934). Capital and industrial fluctuations. Econometrica, 2(2), 152–167.CrossRefGoogle Scholar
  11. Hayek, F. A. (1967). Prices and production (2nd ed.). New York: Augustus M. Kelley.Google Scholar
  12. Hayek, F. A. (1976). Choice in currency: a way to stop inflation. London: Institute of Economic Affairs.Google Scholar
  13. Hayek, F. A. (1984). On neutral money. In: Money, capital and fluctuations: Early essays (pp 159–162) London: Routledge.Google Scholar
  14. Hayek, F. A. (1990). Denationalisation of money: The argument refined. London: The Institute of Economic Affairs.Google Scholar
  15. Hayek, F. A. (1999). The future unit of value. In S. Kresge (Ed.), Good money, Part 2 (pp. 238–252). Liberty Fund: Indianapolis.Google Scholar
  16. Hayek, F. A. (2008). A free-market monetary system. Auburn: Ludwig von Mises Institute.Google Scholar
  17. Hutchison, T. W. (1981). The politics and philosophy of economics: Marxians, Keynesians, and Austrians. Oxford: Blackwell.Google Scholar
  18. O’Driscoll, G., & Rasmussen, D. (2012). Did Hayek have a monetary theory of business cycles? The Review of Austrian Economics, 25(3), 255–262.CrossRefGoogle Scholar
  19. Steele, G. (2005). Hayek’s theory of money and cycles: retrospective and reappraisal. Quarterly Journal of Austrian Economics, 8(1), 3–14.CrossRefGoogle Scholar
  20. White, L. H. (1999). Hayek’s monetary theory and policy: a critical reconstruction. Journal of Money, Credit and Banking, 31(1), 109–120.CrossRefGoogle Scholar
  21. White, L. H. (2008). Did Hayek and Robbins deepen the great depression? Journal of Money, Credit and Banking, 40(4), 751–768.CrossRefGoogle Scholar
  22. Witt, U. (1997). The Hayekian puzzle: spontaneous order and the business cycle. Scottish Journal of Political Economy, 44(1), 44–58.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of Economics, PraguePrague 3Czech Republic
  2. 2.Centre for Theoretical StudyCharles University, PraguePrague 1Czech Republic

Personalised recommendations