Part IV of Hayek’s _The Pure Theory of Capital_

Part IV of Hayek’s The Pure Theory of Capital is the chimeric “unwritten” 2nd “volume” of Hayek’s Pure Theory, the monetary part that goes beyond the “barter economy” and considers the phenomena of interest and production coordination and dis-coordination when money and credit and other “non-barter” market phenomena are brought into the picture.

In several places Hayek makes all of this very clear.  In the beginning of Part IV, Hayek plainly marks out the difference between the “pure barter” economics of Parts 1,2 & 3 and the “money economy” economics of Part IV.

“THE task of the first three Parts of this book has been to show, by the same general method as is used by equilibrium analysis to explain the prices of different commodities at a given moment, why there be certain differences between the expected prices of the products, and why these differences will stand in a certain uniform relationship to the time intervals which separate the dates when these prices are paid .. Although a full discussion of the monetary problems to which the existence of the” real” rate of interest gives rise lies outside the scope of the present book, it would hardly be appropriate to leave our subject without giving a somewhat more definite indication of how the rate of interest we have been discussing and the money rate of interest are related. At this point we can give no more than an outline of the answers to the main problem.  A full discussion of the whole complex of problems involved would require another book of about the same size as this one .. As has been explained earlier in this volume, its task is to lay the foundations for the treatment of these problems, not to discuss them in any detail. And we shall confine ourselves in this final Part to the task of showing how these theoretical foundations can be used for the elucidation of certain salient points in the discussion of these more complex problems. We shall not attempt to follow all the possible complications or to explore the consequences of the different possible assumptions with any microscopic accuracy.”

And Hayek makes it plain that a draft of his Part IV (i.e. the spuriously presumed “missing 2nd volume”) was produced well before the final completion of the The Pure Theory of Capital in late 1939 / early 1940.  The onset of the war and the difficulty of securing paper and access to a printer during war-time placed serious constraints on the size of publication Hayek could hope to see into print, his draft already constituted a very long book with lengthy specialized appendices, including a extensive mathematical appendix.  And, indeed, the mathematical appendix and most all of the rest of the appendices were cut in order to satisfy the resource-use restrictions demanded for war-time publication.  Hayek explains this in the Preface of his book, giving an account of how the war-time situation shaped the final form of the “money economy” economics section of his book:

“The circumstances of the time have now enforced a further curtailment of the original plan of the book. The final draft was in an advanced state of completion when the war broke out, and it became clear that, if I could hope to publish the book at all, I must not delay too long nor make it unduly large. The result of this is that Part IV has become rather more condensed and sketchy than I had intended .. ”

Up Next:  More on Part IV of Hayek’s The Pure Theory of Capital.

This entry was posted in Tweets. Bookmark the permalink.

One Response to Part IV of Hayek’s _The Pure Theory of Capital_

  1. Roger McKinney says:

    Great Book! Thanks!

Comments are closed.