Keynes And Hayek: The Money Economy (foundations Of The Market Economy)

RECTO RUNNING HEAD Keynes and Hayek In the recent history of economics: Who are the most significant economists? What are the most significant events? Which are the biggest theoretical and policy issues? Prime candidates are: John Maynard Keynes and Friedrich Hayek The New York Stock Exchange crash and the Great Depression Capital theory and problems of the money economy Keynes and Hayek inspired the economic controversy of the twentieth century: the role of the state, and of money and interest rates in an advanced capitalist industrial economy. In his work, Keynes points to high interest rates, low asset values and a negative wealth effect as the principal causes of a slump. By contrast, Hayek points to a system extended beyond its full capacity by low interest rates and high investment yields. Where Keynes argued that under-used capacity is symptomatic of deficient aggregate demand, Hayek viewed under-used capacity as symptomatic of inappropriate investments and of a demand for consumption goods that is too pressing to allow the completion of investments in current gestation. This book relaunches Alex Leijonhufvud’s controversial critique of Keynes’s General Theory, examining it in conjunction with Hayek’s work on capital theory and business cycles. The monetary issues discussed in this book remain both complex and contentious. In contrasting the broad features of Austrian economics with postKeynesian economics, the book also discusses points raised by more recent protagonists in the debate. Against this background, arguments and events of the twentieth century are examined for economic policy guidance. G.R. Steele is Lecturer in Economics at Lancaster University. He is the author of Monetarism and the Demise of Keynesian Economics (1989) and The Economics of Friedrich Hayek (1993) Foundations of the market economy Edited by Mario J. Rizzo, New York University and Lawrence H. White, University of Georgia A central theme in this series is the importance of understanding and assessing the market economy from a perspective broader than the static economics of perfect competition and Pareto optimality. Such a perspective sees markets as causal processes generated by the preferences, expectations and beliefs of economic agents. The creative acts of entrepreneurship that uncover new information about preferences, prices and technology are central to these processes with respect to their ability to promote the discovery and use of knowledge in society. The market economy consists of a set of institutions that facilitate voluntary cooperation and exchange among individuals. These institutions include the legal and ethical framework as well as more narrowly ‘economic’ patterns of social interaction. Thus the law, legal institutions and cultural and ethical norms, as well as ordinary business practices and monetary phenomena, fall within the analytical domain of the economist. The Meaning of Market Process Essays in the development of modern Austrian economics Israel M. Kirzner Prices and Knowledge A market-process perspective Esteban F. Thomas Keynes’ General Theory of Interest A reconsideration Fiona C. Maclachlan Laissez-faire Banking Kevin Dowd Expectations and the Meaning of Institutions Essays in economics by Ludwig Lachmann Edited by Don Lavoie Perfect Competition and the Transformation of Economics Frank M. Machovec Entrepreneurship and the Market Process An enquiry into the growth of knowledge David Harper Economics of Time and Ignorance Gerald O’Driscoll and Mario J. Rizzo Dynamics of the Mixed Economy Toward a theory of int