Hayek on the Role of Money Liquidity … Another Idea Keynes Did _Not_ Originate

“In view of the apparently widespread impression that the influence of liquidity considerations on the rate of interest is a new discovery, the present author may perhaps be excused for pointing out that more than ten years ago he described cyclical fluctuations as largely due to the fact that the rate of interest is in the short term ‘determined by considerations of banking liquidity‘ (Hayek, Geldtheorie and Konjunkturtheorie (Vienna: Holder-Pichler-Tempsky, 1929, p. 103).

– F. A. Hayek, The Pure Theory of Capital, 1941/2007, p. 326.

2 comments to Hayek on the Role of Money Liquidity … Another Idea Keynes Did _Not_ Originate

  • [...] Greg Ransom finds one of those market monetarist-sounding quotes from Hayek. I wish there was a clearer narrative regarding why he said silly things early in the 30s as Glasner documents and later changed his mind. I don’t think that appears in one of the volumes that Caldwell edited, but please prove me wrong if so. I mean, I saw material suggesting that DeLong understands it better than I do, and that scares me. It certainly didn’t appear in Contra Keynes and Cambridge. Did this appear in one of the volumes of Good Money, or somewhere else? [...]

  • And of course, though he (Hayek) did not create the wheel (Mises invented the parts), he did assemble it.

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The problem I had first identified in studying industrial fluctuations — that false price signals misdirect human efforts — I then followed up in various other branches of the discipline [of economics]. — F. A. Hayek

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