Prices and Production and Other Works On Money, the Business Cycle, and the Gold Standard (Hardcover)

by F.A. Hayek (Author), Joseph T. Salerno (Author)

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Hayek was not only a leading champion of liberty in the 20th century. As this massive book reveals, he was also a great economist whose elaboration on monetary theory and the business cycle made him the leading foe of Keynesian theory and policy in the English-speaking world. Here are collected his most important works on these topics: re-typeset, indexed for the first time, and beautifully bound in a 536- page hardbound book for the ages.

These works have been tragically out of print for many years. Together they constitute a complete presentation of Hayekian money and business cycle theory. Even more, they work together as an excellent elucidation of Austrian macroeconomic theory, which is why this book has already been adopted in some classrooms.

The timing could not be better. The entire world economy is now suffering from the effects of bad monetary policy, and with results that Hayek explains in great detail. With "counter-cyclical" policy again revealed as unworkable, and while the politicians plot to make matters worse, the contents of this book has direct bearing on present and future of monetary policy.

Hayek was barely out of his twenties in 1929 when he published the German versions of the first two works in this collection, Monetary Theory and the Trade Cycle and The Paradox of Saving." The latter article was a long essay that was to become the core of his celebrated book and the third work in this volume, Prices and Production, the publication of which two years later made him a world-renowned economist by the age of thirty-two.

But the young Hayek did not pause to savor his success. He was already hard at work on "Reflections on the Pure Theory of Money of Mr. J.M. Keynes," a lengthy critical review of John Maynard Keynes s two-volume Treatise on Money, which had been published in 1930. Hayek s two-part review appeared in late 1931 and 1932.

There followed within a few years the other three works collected in this volume. "The Mythology of Capital" appeared in 1936 and was a response to Frank Knight s hostile criticisms of the Austrian theory of capital. A short article on "Investment That Raises the Demand for Capital" and the monograph Monetary Nationalism and International Stability were published in 1937.

These seven works taken together represent the first integration and systematic elaboration of the Austrian theories of money, capital, business cycles, and comparative monetary institutions, which constitute the essential core of Austrian macroeconomics.

These works have profoundly influenced postwar expositions of Austrian or capital-based macroeconomics down to the present day. The creation of such an oeuvre is a formidable intellectual feat over an entire lifetime; it is an absolute marvel when we consider that Hayek had completed it in the span of eight years (1929 1937) and still well shy of his fortieth birthday. Hayek s amazingly precocious intellect and creative genius are on full display in these works.

"The re-publication of these works in a single volume is a magnificent event that fills a yawning gap in the Austrian macroeconomic literature and provides modern Austrians with a model of how to advance economic theory through reasoned debate and criticism." Joseph T. Salerno, from the Introduction

"I congratulate the Ludwig von Mises Institute for bringing back into print Hayek s writings on business cycles. This collection will be a critical touchstone for future thinking in the area." Danny Quah, London School of Economics, from the Preface.

Product Details

• Hardcover: 564 pages
• Publisher: Ludwig von Mises Institute (July 21, 2008)
• Language: English
• ISBN-10: 1933550228
• ISBN-13: 978-1933550220
• Product Dimensions: 9.4 x 6.6 x 1.5 inches
• Shipping Weight: 1.8 pounds (View shipping rates and policies)
• Average Customer Review: 5.0 out of 5 stars See all reviews (1 customer review)
• Amazon.com Sales Rank: #277,167 in Books (See Bestsellers in Books)

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7 of 7 people found the following review helpful:

5.0 out of 5 stars Underrated Classics, November 14, 2008

By	D. W. MacKenzie (New London CT) - See all my reviews (REAL NAME)

Prices and Production is a book of great significance. The historic significance of this book stems mainly from the fact that it established Austrian Business cycle theory as the leading explanation of the Great Depression prior to the publication of Keynes' General Theory. Prices and Production is the written form of lectures that Hayek delivered in early 1931. When Hayek returned to Vienna he ran into Oscar Morgenstern in the Vienna Chamber of Commerce. They joked about how "We are going to enter the office, you are going to look through your mail, and you will find a letter inviting you to be a professor at the London School of Economics". They entered the office and found a letter offering Hayek the position of Tooke Professor of Economic Science and Statistics at the LSE.

Hayek then published his Monetary Theory of the Trade Cycle in 1933, which is also reproduced in this book. Several years later professional opinion shifted in favor of JM Keynes. The shift from Hayek to Keynes is an interesting episode in the history of economic thought. Both Keynes and Hayek recognized that the business cycle originates in capital markets. Hayek blamed governmental intervention in capital markets. Keynes blamed investors in capital markets. Keynes also noted that Hayek influenced him by showing the significance of money in capitalism: "I am in full agreement, also, with Dr. Hayek's rebuttal of John Stuart Mill's well-known dictum that 'there cannot, in short, be intrinsically a more insignificant thing, in the economy of society, than money (JM Keynes 1931). Keynes won over professional opinion, at least for the mid twentieth century, but Hayek's influence was still great. Decades later the Nobel Prize Committee recognized the importance of Hayek work on business cycles by awarding him the Nobel Prize in Economics for Prices and Production.

The theoretical significance of this book is in how it developed the idea of Knut Wicksell and Ludwig von Mises on money and capital further. According to this theory artificially low interest rates move investment in the direction of longer term projects. These projects are well out of sync with actual consumer demands through time, so these projects latter prove to be uneconomic and unfeasible. Critics of Hayek often characterize his theory as an over-investment theory. In reality Hayek explains the business cycle in terms of mal-investment rather than over investment.

Some scholars continue to develop and promote the Mises-Hayek theory of business cycles. Of course, most economists now think in terms of New Keynesian/Monetarist explanations of the business cycle. But the validity of ideas is not determined by popularity among professionals. The case for Austrian Business Cycle Theory is ignored rather than disproven, so the reprinting of Prices and Production constitutes a good opportunity. Economists should reconsider Hayek's work on cycles, especially during this time of economic crisis. While it seems unlikely that most economists will take this opportunity anytime soon, the reprinting of Hayek's work will keep his ideas available for some time.