Salerno on Hayek

9 October 2008 at 3:13 pm Peter G. Klein Leave a comment

| Peter Klein |

Joe Salerno’s introduction to the Hayek collection mentioned earlier is now online. Writes Joe:

Hayek’s amazingly precocious intellect and creative genius are on full display in these works. Thus, before the age of thirty, Hayek already had fully mastered and begun to synthesize and build upon the major contributions of his predecessors in the Austrian tradition. These included, in particular: Eugen von Böhm-Bawerk’s theory of capital and interest; Knut Wicksell’s further elaborations on Böhm-Bawerk’s capital theory and his own insights into the “cumulative process” of changes in money, interest rates and prices; Ludwig von Mises’s groundbreaking theories of money and business cycles; and the general analytical approach of the broad Austrian school from Menger onward that focused on both the subjective basis and the dynamic interdependence of all economic phenomena.

There is something else about Hayek that becomes apparent when reading his contributions in this volume. The young Hayek was a great economic controversialist, perhaps the greatest of the twentieth century. His entire macroeconomic system was forged within the crucible of the great theoretical controversies of the era. His opponents were some of the great (and not so great) figures in interwar economics: Keynes, W.T. Foster and W. Catchings, Ralph Hawtrey, Irving Fisher, Frank Knight, Joseph Schumpeter, Gustav Cassel, Alvin Hansen, A.C. Pigou, Arthur Spiethoff to name a few. Hayek took on all comers without fear or favor and inevitably emerged victorious. As Alan Ebenstein notes, “Hayek came to be seen in Cambridge, as Robbins and LSE’s point man in intellectual combat with Cambridge.”

Hayek’s views are essential to understanding the current mess, though it’s hard to summarize Hayek’s business-cycle theory in a bumper-sticker slogan that, say, Barney Frank could understand.