From: starr@genie.slhs.udel.edu (Tim Starr)
Subject: Re: Keynes VS Hayek
Organization: UDel, School of Life & Health Sciences
Date: Sun, 22 Nov 1992 08:35:23 GMT

In article <1992Nov22.025535.5341@samba.oit.unc.edu> Robert.Vienneau@launchpad.unc.edu (Robert Vienneau) writes:
}As I understand it, Hayek's Nobel Prize was more for methodological
}ideas than any specific theory.

I'll check on it.

}This theory of business cycles was not original with Hayek, but grew out
}of earlier work by von Mises, and more originally, Wicksell. It was
}criticized I think convincingly by the "Stockholm School," especially
}Gunnar Myrdal in his _Monetary_Equilibrium_, which had something to do
}with Myrdal sharing the Nobel Prize in 1974. Interestingly enough,
}Myrdal's theory is very Keynes-like, and Hayek edited the volume that
}Myrdal's theory first appeared in.

My understanding is that Hayek extended Mises' theory of trade cycles to
business cycles.  I don't know about Wicksell or Myrdal or the Stockholmers.

}One problem is that Hayek's capital theory has problems. There's no
}reason to assume that a lower rate of interest will cause investors to
}undertake more roundabout production processes. Hayek's defense might be
}that he changed the theory of equilibrium to be a short-run theory in a
}revolutionary way. Perhaps under his notion of equilibrum, Hayek's
}capital theory works.

No.  If credit is expanded, interest rates go down.  If interest rates go
down, borrowers think that lenders' time-value of money has decreased.  If
this were true, then they'd be willing to lend for higher-order stages in
the structure of production.  I don't know what you mean about equilibrium,
except that equilibrium theory is highly criticized in Austrian theory.

}But the problem Hayek's contemporaries focused on was something else.
}One can describe an equilibrium in a barter economy. The question is
}whether the introduction of monetary institutions changes that
}equilibrium in any essential way. This was Hayek's stated problem, but
}he entirely forgets to deal with it.

I don't understand this.  Will you please elaborate?

}And even those who most remained Hayek fans later decided his political
}influence on British policy during the depression was a hindrance. Hayek
}developed these ideas while at the London School of Economics (LSE).

No he didn't, he was at the Institute for Business Cycle Research in Vienna
with Mises at the time.

}Of course, those who are arguing here for the Austrian business cycle
}theory don't derive their politics from the theory. Rather they accept
}the theory because they think it supports their politics. Thus, they are
}uncritical anyways. 

Fuck you, too!  This is pure prejudice.  You have no basis from which to
judge whether or not I'm critical of business cycle theory.  I don't know
much about it, and am trying to learn.  Nor have I ever pretended otherwise.
I'm a layman interested in economics.  You, sir, are a bigot.  If only I
could challenge you to a duel...

Tim Starr - Renaissance Now! - Think Universally, Act Selfishly
starr@genie.slhs.udel.edu

"True greatness consists in the use of a powerful understanding to enlighten
oneself and others." - Voltaire
Newsgroups: alt.politics.economics