NOTES
INTRODUCTION
1 Business Cycles, Part I, ed. Hansjoerg Klausinger, vol. 7 (2012) of The Collected Works of F. A. Hayek (Chicago: University of Chicago Press).
2 John Maynard Keynes, A Treatise on Money, 2 vols. (London: Macmillan, 1930), reprinted as vols. 5 and 6 (1971) of The Collected Writings of John Maynard Keynes, ed. Austin Robinson and Donald Moggridge (London: Macmillan; Cambridge: Cambridge University Press); and F. A. Hayek, Prices and Production (London: Routledge, 1931; 2nd ed. rev., 1935), reprinted in F. A. Hayek, Business Cycles, Part I. On the debate cf. the editor’s introduction and the respective chapters in Contra Keynes and Cambridge: Essays, Correspondence, ed. Bruce Caldwell, vol. 9 (1995) of The Collected Works of F. A. Hayek.
3 Cf. in particular Lionel Robbins, “Letters to the Editor: Monetary Policy”, Economist, May 14 and 28, June 11, 1932, pp. 1081, 1188–89 and 1295, and Roy F. Harrod, “Letters to the Editor: Monetary Policy”, Economist, June 4 and 18, 1932, pp. 1242–43 and 1358.
4 Cf. in particular the letters to the editor signed by Harrod et al. in the Times, July 5, 1932, p. 10, and March 10, 1933, p. 15. Another letter (“Private Spending—Money for Productive Investment. A Comment by Economists”) by D. H. Macgregor, Arthur Cecil Pigou, John Maynard Keynes, Walter Layton, Arthur Salter, and Josiah C. Stamp appeared in the Times, October 17, 1932, p. 13, and was followed by a critical comment (“Spending and Saving—Public Works from Rates”) by Theodore E. Gregory, F. A. Hayek, Arnold Plant, and Lionel Robbins (October 17, 1932, p. 13), and a reply by the former (“Spending and Saving—What Are National Resources? The Economists’ Reply”, October 21, 1932, p. 15).
5 On this debate see the editor’s introduction to F. A. Hayek, Business Cycles, Part I, p. 36.
6 Cf. Mark Blaug, “Commentary”, in Austrian Economics: Tensions and New Directions, ed. Bruce J. Caldwell and Stephan Boehm (Boston, Dordrecht and London: Kluwer, 1992), pp. 31–34.
7 Cf., e.g., John Hicks, “The Hayek Story”, in Critical Essays in Monetary Theory (Oxford: Oxford University Press, 1967), pp. 203–15; and George L. S. Shackle, “F. A. Hayek, 1899–”, in Pioneers of Modern Economics in Britain, ed. D. P. O’Brien and John R. Presley (London: Macmillan; Totowa, NJ: Barnes and Noble, 1981), pp. 234–62. Indeed, Shackle in his specific brand of Keynesianism combined a Hayekian concern with the role of knowledge in economic affairs with Keynes’s emphasis on uncertainty.
8 The following draws on Hansjoerg Klausinger, “Hayek and Kaldor: Close Encounter at LSE”, History of Economic Ideas, vol. 19, no. 2 (2011).
9 Jointly with Georg Tugendhat, published as “The ‘Paradox’ of Saving”, Economica, no. 32, May 1931, pp. 125–69, reprinted as chapter 2 of F. A. Hayek, Contra Keynes and Cambridge.
10 Cf. Hayek to Kaldor, December 1, 1930, in the Nicholas Kaldor Papers, section 3, box 4, King’s College Archive Centre, Cambridge. Eventually the translation became a joint effort by Kaldor and Honoria Croome, another of Robbins’s students (see Monetary Theory and the Trade Cycle [London: Cape, 1933], reprinted in F. A. Hayek, Business Cycles, Part I).
11 Cf. Gunnar Myrdal, “Der Gleichgewichtsbegriff als Instrument der geldtheoretischen Analyse”, in Beiträge zur Geldtheorie, ed. F. A. Hayek (Vienna: Springer, 1933; reprinted, Berlin, Heidelberg, and New York: Springer, 2007), pp. 361–487; see for an English translation Monetary Equilibrium (London: Hodge, 1939; reprinted, New York: Kelley, 1965). On the Swedish influence see Nadim Shehadi, “The London School of Economics and the Stockholm School in the 1930s”, in The Stockholm School of Economics Revisited, ed. Lars Jonung (Cambridge: Cambridge University Press, 1991), pp. 382–83.
12 Cf. Nicholas Kaldor, “Market Imperfection and Excess Capacity”, Economica, n.s., vol. 2, February 1935, pp. 33–50, reprinted as chapter 4 of Essays on Value and Distribution, vol. 1 of Collected Economic Essays (London: Duckworth, 1960; 2nd ed., 1980), and the correspondence between Hayek (“A Note on Kaldor”, typescript [1935?]) and Kaldor (“Reply to Hayek”, typescript [1935?], both in the Friedrich A. von Hayek Papers, box 105, folder 18, Hoover Institution Archives, Stanford University).
13 John Maynard Keynes, The General Theory of Employment, Interest and Money (London: Macmillan, 1936), reprinted as vol. 7 (1971) of The Collected Writings of John Maynard Keynes.
14 Cf., respectively, Nicholas Kaldor, “Annual Survey of Economic Theory: The Recent Controversy on the Theory of Capital”, Econometrica, vol. 5, July 1937, pp. 201–33, reprinted as chapter 9 of his Essays on Value and Distribution; “Capital Intensity and the Trade Cycle”, Economica, n.s., vol. 6, February 1939, pp. 40–66, and “Stability and Full Employment”, Economic Journal, vol. 48, December 1938, pp. 642–57, reprinted as chapters 6 and 5, respectively, of his Essays on Economic Stability and Growth, vol. 2 of Collected Economic Essays.
15 Cf., respectively, F. A. Hayek, “Profits, Interest and Investment”, chapter 1 of Profits, Interest and Investment. And Other Essays on the Theory of Industrial Fluctuations (London: Routledge and Sons, 1939), reprinted as chapter 8 of this volume; Tom Wilson, “Capital Theory and the Trade Cycle”, Review of Economic Studies, vol. 7, June 1940, pp. 169–79; and F. A. Hayek, “The Ricardo Effect”, Economica, n.s., vol. 9, May 1942, pp. 127–52, reprinted as chapter 9 of this volume.
16 Nicholas Kaldor, “Professor Hayek and the Concertina-Effect”, Economica, n.s., vol. 9, November 1942, pp. 359–82, reprinted as chapter 10 of this volume.
17 F. A. Hayek, “A Comment”, Economica, n.s., vol. 9, November 1942, pp. 383–85, reprinted in this volume, pp. 313–15. He eventually returned to this topic with “Three Elucidations of the Ricardo Effect”, Journal of Political Economy, vol. 77, March/April 1969, pp. 274–85, reprinted as chapter 11 of this volume.
18 Cf., e.g., Lionel Robbins, The Great Depression (London: Macmillan, 1934; reprinted, Auburn, AL: Ludwig von Mises Institute, 2007).
19 On the related issue of stable prices versus neutral money in the presence of technical progress cf. the editor’s introduction to F. A. Hayek, Business Cycles, Part I, pp. 34–39.
20 Hayek’s concern with deflation started in 1931, when he began discussing it with Gottfried Haberler, Fritz Machlup, and Wilhelm Röpke in a correspondence of which unfortunately only a single letter survived (Hayek to Haberler, December 20, 1931, Gottfried Haberler Papers, box 65, Hoover Institution Archives, Stanford University; an excerpt is reprinted in this volume as an appendix to chapter 5). He had not dealt before with deflation in his two monographs, Geldtheorie und Konjunkturtheorie (Vienna: Springer, 1929; reprinted, Salzburg: Neugebauer, 1976) and Prices and Production (1st ed., 1931), yet he added short passages to the prefaces of the respective English and German versions, Monetary Theory and the Trade Cycle (1933) and Preise und Produktion (Vienna: Springer, 1931; reprinted 1976), both prefaces reprinted in F. A. Hayek, Business Cycles, Part I. Next, some reflections on deflation and the policies directed at it are to be found in a contribution to Der Deutsche Volkswirt (“Das Schicksal der Goldwährung”, vol. 6, February 12 and 19, 1932, translated as “The Fate of the Gold Standard” and reprinted as chapter 3 of Good Money, Part I: The New World, ed. Stephen Kresge, vol. 5 (1999) of The Collected Works of F. A. Hayek), and in a comment on the current monetary policy of the Federal Reserve System in a Viennese daily (“Die Bedeutung der New-Yorker Börsenhausse. Konjunkturumschwung?”, Neues Wiener Tagblatt, August 21, 1932, p. 16). In 1933 Hayek devoted a section of his “Der Stand und die nächste Zukunft der Konjunkturforschung” (in Festschrift für Arthur Spiethoff, ed. Gustav Clausing (Munich: Duncker and Humblot, 1933), pp. 110–17, translated as “The Present State and Immediate Prospects of the Study of Industrial Fluctuations” and reprinted as chapter 4 of this volume) to the problem of secondary deflation. He dealt with reflation in a short paper, “Restoring the Price Level?”, intended for a London publisher (reprinted as chapter 5 of this volume), but appearing instead the following year in Italian as “Una politica errata: il rialzo artificiale dei prezzi” (in the biweekly La Borsa – Quindicinale dei mercati finanziari, no. 25, March 3, 1934, pp. 3–4). The issue was once again taken up in some detail in “Capital and Industrial Fluctuations” (Econometrica, vol. 2, April 1934, pp. 152–67, reprinted as chapter 6 of this volume), later on included as an appendix in the revised second edition of Prices and Production (1935), which otherwise contained no modifications of his views on the mechanism of depression. After discussing the limits set for monetary policies within a framework of an international monetary system in Monetary Nationalism and International Stability (Geneva: Longmans, 1937; reprinted as chapter 1 of Good Money, Part II: The Standard, ed. Stephen Kresge, vol. 6 (1999) of The Collected Works of F. A. Hayek), Hayek for a last time returned to the topic of deflation in connection with the Ricardo effect (in “Profits, Interest and Investment”).
21 “The Present State and Immediate Prospects”, this volume, p. 175, and “The Fate of the Gold Standard”, p. 165. The first use of ‘secondary deflation’ is in the preface to Preise und Produktion, reprinted, p. 184; cf. also Monetary Theory and the Trade Cycle, reprinted, p. 54, and “Capital and Industrial Fluctuations”, this volume, p. 200–205.
22 The ‘circulation of money’ refers to MV, the ‘left-hand side’ of the quantity equation.
23 Cf., e.g., Joseph A. Schumpeter, Theorie der wirtschaftlichen Entwicklung, 2nd ed. (Munich and Leipzig: Duncker and Humblot, 1926), p. 348, translated as The Theory of Economic Development, trans. Redvers Opie (Cambridge, MA: Harvard University Press, 1934), p. 236. Keynes used the terms ‘primary’ and ‘secondary’ in A Treatise on Money (reprinted, vol. 1, pp. 254–59), and a similar notion had been present in Robertson’s distinction between ‘appropriate’ and ‘inappropriate fluctuations in output’ (Dennis H. Robertson, Banking Policy and the Price Level: An Essay in the Theory of the Trade Cycle [London: King, 1926], reprinted as vol. 3 of The Development of Monetary Theory, 1920s and 1930s, ed. Forrest Capie and Geoffrey E. Wood [London: Routledge, 2000], chapters 2 and 4).
24 Wilhelm Röpke used it in his monograph Krise und Konjunktur (Leipzig: Quelle and Meyer, 1932), translated as Crises and Cycles (London: Hodge, 1936; reprinted, Auburn, AL: Ludwig von Mises Institute, 2007); cf. also Röpke, “Trends in German Business Cycle Policy”, Economic Journal, vol. 43, September ...