Joseph T. Salerno writes:
Friedrich A. Hayek was only thirty-two years old when he published this two-part article in Economica, at the time, the world’s leading English-language economics journal. The article is a review essay of John Maynard Keynes’s two-volume book, A Treatise on Money, published the previous year.
Hayek’s article is a positive thrill to read. Hayek relentlessly scrutinizes and exposes the weak and patchwork structure of Keynes’s theoretical arguments and then dismantles it brick by brick, leaving nothing standing. Keynes’s reaction reveals just how deeply Hayek’s review cut…. FULL ARTICLE
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This is a very difficult read for me, not being an economist. However I read as far as(see below) and had to stop at the word ‘mould’ which I believe should read ‘would’. This word alone tells me that poor if any proofreading of this article took place. Yes, it is a difficult read!
In any case I can’t help but wonder does it make any difference to cut Keynes to pieces (again) when Governments all over the world today are inflating their currencies at will and spending like drunken sailors and control the levers of the printing presses to suit the needs of the moment.
The chickens of course must come home to roost but hopefully not in OUR life time. Dishonest monetary policies have been around for many years,
theft is theft no matter what convoluted altruistic excuses are used to cover up that fact. If positive monetary change is to occur then those in the Ivory Towers should also speak and write for the public. But then there was only one Ludwig Von Mises.
M.Fett
“Mr. Keynes ignores completely the general theoretical basis of Wicksell’s theory. But, nonetheless, he seems to have felt that such a theoretical basis is wanting, and accordingly he has sat down to work one out for himself. But for all this, it still seems to him somewhat out of place in a treatise on money, so instead of presenting his theory of capital here, in the forefront of his exposition, where it mould have figured to most advantage, he relegates it to a position in Volume II and apologizes for inserting it (Vol. 11, p. 95).”
I lost interest when it became clear to me that Kaeynes was confusing profits and receipts.
Sorry about my own proofreading of my previous post; I meant “Keynes” instead of “Kaeynes.”
Another great article from LvMI!
I have few points I would like to ask. Also one could read my previous post on “Investment that Raises the Demand for Capital”.
Is question about the time distribution/capital intensity of production really resolved? (look for more about critiques of concept of round-aboutness or lenght of production processes by Knight, Hicks, Sraffa and Boulding)
Is claim increased production of consumption goods sector vs decreased new investment on capital goods sector really true? (look for more about this and related issues from Kaldor’s critique of Hayek’s theory
It’s difficult to understand claim that “increased demand for consumption goods is not demand for capital goods and labour” since economists nowadays are trained to think otherwise. Hayek once said that understanding this claim defines one to be a real economist. J.S Mill said similar things in “Essays on Some Unsettled Questions of Political Economy”.
Fantastic. This is exactly the type of material I need for my research. Great piece.
Hayek’s elaboration of Austrian Business Cycle Theory is perhaps his most important contribution to Austrian economics.
As has been noted by Professor Salerno (and others), Hayek’s intellectual demolition of Keynes’s “A Treatise on Money†is rigorous and complete. Despite the mounting intellectual and political tides against him and reason, Hayek’s opposition to Keynes’s non-science deserves our continual gratitude and appreciation.
After Hayek’s thorough destruction of Keynes’s arguments, it is a sad commentary on the state of economics, and the desire of economists and others to pursue accuracy and truth that Keynes’s “General Theory†could have so quickly and completely dominated the profession. The fundamental and egregious errors committed by Keynes in his “Treatise on Money†are taken even further in “The General Theory.†Keynes evidently learned little or nothing from Hayek’s criticisms of his “Treatise on Moneyâ€.
But this is not surprising, given Keynes’s limited economic knowledge and his goal to radically reshape society. As an example, in one of his more fantastic pronouncements, Keynes argued that through “enlightened†government monetary policy, guided, of course, by intellectuals of his persuasion, the scarcity of capital virtually could be eliminated.
Adi:
Have a look at (1)Hayek’s immediate response to Kaldor immediately after Kalsor’s article in Economica (2) Hayek’s response to Sraffa (repr. in the Coll. Wks.) (3) ‘The mythology of capital’ — Hayek’s response to Frank Knight in particular
I haven’t read Keynes. But I know everything about him that one need know, since in a variety of sources i have nreason whatever to question, Keynes himself is quoted as maintaining (as a benefit of inflation) that it helps to bring about a lowering of wages among workers as it lowers the purchasing power of those wages. In this wise, Keynes endorses deliberate fraudulent representation (and the criticism applies also with those same words to Friedman, though the object might differ),
That’s odd, but I don’t believe that I’ve ever read this paper. I have nearly all of Hayek’s books (Hayek even kindly signed most of them for me) and thought I had pretty much read every other paper not reprinted, but I just don’t remember reading this important paper of his. I don’t think it’s reprinted in any of his books.
Good Catch on republishing this paper!
Just a thought.
Just Ken
kgregglv@cox.net
http://classicalliberalism.blogspot.com
Hayek’s interchanges with Keynes and Sraffa are in Volume 9 of Hayek’s collected works. The complete reference is at the blog post linked to my name. Also there is a demonstration of Sraffa besting Hayek.
No, Hayek’s response to one of Kaldor’s criticisms doesn’t settle the issue with Kaldor.
And Keynes changed his mind, in the face of empirical evidence, on the relationship between real wages and the business cycle.
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