“The convergence of the political and economic debates brings to memory a similar debate which dominated during the mid-1930s, between Friedrich Hayek and John Maynard Keynes. .... Hayek and Keynes disagreed on the nature of the crisis and, consequently, on the method of recovering from it. Keynes, broadly considered, supported the use of monetary and fiscal stimuli to put to use unemployed resources, thereby aiding the recovery of aggregate demand. Hayek rejected this approach, since it ignored many of the microfoundations which define the nature of the market process, and instead suggested a means to recovery which relied on the personalized economization of resources by the individuals which constitute the market.”In other words, Hayek favoured liquidationism. But what is left unsaid is that Hayek retreated from that stance and held views broadly the same as those of Keynes on monetary and fiscal stimulus in a depression by the late 1930s, as I have shown here:
“Did Hayek Advocate Public Works in a Depression?,” September 25, 2011. (this post is the second most read one on my blog, as a matter of interest).Furthermore, Catalán asserts that
“Sraffa convincingly critiqued a very limited portion of Hayek’s theory of capital, and the profession threw the baby out with the bath water. When Hayek finally finished the polished version of his thoughts nobody was there to listen.”That is not true: Nicholas Kaldor continued to attack Hayek’s business cycle theory in its later modified versions, in these articles:
Kaldor, N. 1939. “Capital Intensity and the Trade Cycle,” Economica n.s. 6.21: 40–66.And, while I think of it, does anyone know what happened to Robert P. Murphy’s blog?
Kaldor, N. 1940. “The Trade Cycle and Capital Intensity: A Reply,” Economica n.s. 7.25: 16–22.
Kaldor, N. 1942. “Professor Hayek and the Concertina-Effect,” Economica n.s. 9.36: 359–382.