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Contra Keynes and Cambridge: Essays, Correspondence
In 1931, when the young F. A. Hayek challenged the economic theories of John Maynard Keynes, sixteen years his senior, and one of the world's leading economists, he sparked a spirited debate that would influence economic policy in democratic countries for decades. Their extensive exchange lasted until Keynes's death in 1946, and is reprinted in its entirety in this latest volume of The Collected Works of F. A. Hayek.
When the journal Economica published a review of Keynes's Treatise on Money by Hayek in 1931, Keynes's response consisted principlally of an attack on Hayek's own work on monetary theory, Prices and Production. Conducted almost entirely in economics journals, the battle that followed revealed two very different responses to a world in economic crisis. Keynes sought a revision of the liberal political order—arguing for greater government intervention in the hope of protecting against the painful fluctuations of the business cycle. Hayek instead warned that state involvement would cause irreparable damage to the economy.
This volume begins with Hayek's 1963 reminiscence "The Economics of the 1930s as Seen from London," which has never been published before. The articles, letters, and reviews from journals published in the 1930s are followed by Hayek's later reflections on Keynes's work and influence. The Introduction by Bruce Caldwell puts the debate in context, providing detailed information about the economists in Keynes's circle at Cambridge, their role in the acceptance of his ideas, and the ways in which theory affected policy during the interwar period.
Caldwell calls the debate between Hayek and Keynes "a battle for the minds of the rising generation of British-trained economists." There is no doubt that Keynes won the battle during his lifetime. Now, when many of Hayek's ideas have been vindicated by the collapse of collectivist economies and the revival of the free market around the world, this book clarifies Hayek's work on monetary theory—formed in heated opposition to Keynes—and illuminates his efforts to fight protectionism in an age of economic crisis.
F. A. Hayek (1899-1992), recipient of the Medal of Freedom in 1991 and co-winner of the Nobel Memorial Prize in Economics in 1974, was a pioneer in monetary theory and the principal proponent of classical liberal thought in the twentieth century. He taught at the University of London, the University of Chicago, and the University of Freiburg.
When the journal Economica published a review of Keynes's Treatise on Money by Hayek in 1931, Keynes's response consisted principlally of an attack on Hayek's own work on monetary theory, Prices and Production. Conducted almost entirely in economics journals, the battle that followed revealed two very different responses to a world in economic crisis. Keynes sought a revision of the liberal political order—arguing for greater government intervention in the hope of protecting against the painful fluctuations of the business cycle. Hayek instead warned that state involvement would cause irreparable damage to the economy.
This volume begins with Hayek's 1963 reminiscence "The Economics of the 1930s as Seen from London," which has never been published before. The articles, letters, and reviews from journals published in the 1930s are followed by Hayek's later reflections on Keynes's work and influence. The Introduction by Bruce Caldwell puts the debate in context, providing detailed information about the economists in Keynes's circle at Cambridge, their role in the acceptance of his ideas, and the ways in which theory affected policy during the interwar period.
Caldwell calls the debate between Hayek and Keynes "a battle for the minds of the rising generation of British-trained economists." There is no doubt that Keynes won the battle during his lifetime. Now, when many of Hayek's ideas have been vindicated by the collapse of collectivist economies and the revival of the free market around the world, this book clarifies Hayek's work on monetary theory—formed in heated opposition to Keynes—and illuminates his efforts to fight protectionism in an age of economic crisis.
F. A. Hayek (1899-1992), recipient of the Medal of Freedom in 1991 and co-winner of the Nobel Memorial Prize in Economics in 1974, was a pioneer in monetary theory and the principal proponent of classical liberal thought in the twentieth century. He taught at the University of London, the University of Chicago, and the University of Freiburg.
- GenresEconomicsNonfiction
277 pages, Hardcover
First published January 1, 1995
About the author
Friedrich A. Hayek
266 books1,823 followersFriedrich August von Hayek CH was an Austrian and British economist and philosopher known for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought. He is considered by some to be one of the most important economists and political philosophers of the twentieth century. Hayek's account of how changing prices communicate signals which enable individuals to coordinate their plans is widely regarded as an important achievement in economics. Hayek also wrote on the topics of jurisprudence, neuroscience and the history of ideas.
Hayek is one of the most influential members of the Austrian School of economics, and in 1974 shared the Nobel Memorial Prize in Economics with Gunnar Myrdal "for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena." He also received the U.S. Presidential Medal of Freedom in 1991 from president George H. W. Bush.
Hayek lived in Austria, Great Britain, the United States and Germany, and became a British subject in 1938.
Hayek is one of the most influential members of the Austrian School of economics, and in 1974 shared the Nobel Memorial Prize in Economics with Gunnar Myrdal "for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena." He also received the U.S. Presidential Medal of Freedom in 1991 from president George H. W. Bush.
Hayek lived in Austria, Great Britain, the United States and Germany, and became a British subject in 1938.
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Displaying 1 - 4 of 4 reviews
February 15, 2013
This book has a good introduction which is relatively even-handed, for a Liberty Fund publication. Caldwell captures the tension in England between Hayek and the Keynesians, while demonstrating apparent lack of animosity between the two men themselves. The book contains Hayek's ponderous prose spinning his tale of monetary excess and Keynes's somewhat hyperventilated reaction, which really never resolves the issues between them.
No doubt the Liberty Fund published these essays because they thought that Hayek won the debate; but in actual fact, Hayek fled England and the profession of economics after these years to the more comfortable confines of the University of Chicago Committee on Social Thought. Caldwell relates the successful trench warfare led by Joan Robinson which undermined Hayek's credibility with the young economists at LSE and led to Hayek's flight. Hayek had his moment of fame later when Mrs. Thatcher proclaimed that The Constitution of Liberty was what "we believe." And it is this belief that led to unemployment in Britain going from 750,000 when Mrs. Thatcher was elected to four million after implementation of the Thatcher "miracle". A fitting reminder of how wrong-headed was this strangest of all Nobel laureates in economics. Amazingly, the right wing still idolize the man, whose policy recommendations have proven to lead to economic disaster.
No doubt the Liberty Fund published these essays because they thought that Hayek won the debate; but in actual fact, Hayek fled England and the profession of economics after these years to the more comfortable confines of the University of Chicago Committee on Social Thought. Caldwell relates the successful trench warfare led by Joan Robinson which undermined Hayek's credibility with the young economists at LSE and led to Hayek's flight. Hayek had his moment of fame later when Mrs. Thatcher proclaimed that The Constitution of Liberty was what "we believe." And it is this belief that led to unemployment in Britain going from 750,000 when Mrs. Thatcher was elected to four million after implementation of the Thatcher "miracle". A fitting reminder of how wrong-headed was this strangest of all Nobel laureates in economics. Amazingly, the right wing still idolize the man, whose policy recommendations have proven to lead to economic disaster.
May 24, 2025
This book is a must read for anyone wondering how America and the West got itself into the fiscal situation they now finds itself in. I didn't major in economics, but took economics in college. I loved microeconomics and cost accounting. I also liked behavioral economics and its overlap with psychology. Then, I got to macroeconomics. It was there I decided that econ wasn't for me. Back then I was young and just shrugged my shoulders, assuming there was some hidden mystery I didn't quite "get". But after listening to a recent podcast by Saifadeen Ammous interviewing congressman Thomas Massie, I realize many others had the exact same experience. If you are looking for the source of the cognitive dissonance you may feel when moving from micro or behaviorial econ to macro econ... look no further than this book. It's not an easy read, but it gets easier as you go on and the discussion between Keynes and Hayek becomes clearer.
As this book illustrates, Keynes, who was not a trained economist, was almost single-handedly responsible for the creation of the field of what we now call macroeconomics. One of the reasons Keynes was (justifiably) held in such high regard was that he was an advisor at the Paris Peace Conference after WWI, and he resigned in protest over the peace terms. He correctly predicted the calamitous results that would follow in his 1919 book "The Economic Consequences of the Peace". So, at least from 1933 on, when Keynes spoke, people listened.
Some of the key principles underlying macroeconomics are that: (i) sufficiently detailed aggregate data can be collected on key economic drivers; (ii) scientific equations can be derived from reviewing historical aggregate data; (iii) the government can use those equations to intervene in the economy to accomplish specific policy ends. I don't know what the colleges do today, but when I went to college, the foregoing were taught as if they were self-evident principles.
There are issues with each one of the principles, however. On (i) consider a statistic like "unemployment" which only measures people actvely seeking work who can't find work. It doesn't measure how many people "can" work (i.e., don't have family resonsibilities that preclude it) but don't because there is a skills mismatch for the jobs in their area or simply choose not to. With respect to (ii), the family of equations don't tie and frequently don't hold (see e.g., the Philipps Curve). With respect to (iii), I'd point people to Karl Popper's book, The Logic of Scientific Discovery, and how dsciplines that do not satisfy his narrow definition of "science" should not be relied on as such.
What this book reveals is that each of these principles was vehemently challenged by guys like Ludwig von Mises and Hayek at or before their ascendancy. Even more interesting is the fact that Hayek thinks that even Keynes would not have drawn some of the conclusions his disciples at Cambridge drew after his death which became received wisdom in the 1950s, 1960s and beyond.
Given that we are likely entering a very new economic paradigm here, the foregoing should be required reading. We'll likely need to reevaluate a lot in the coming years. As the saying goes, "May you live in interesting times."
As this book illustrates, Keynes, who was not a trained economist, was almost single-handedly responsible for the creation of the field of what we now call macroeconomics. One of the reasons Keynes was (justifiably) held in such high regard was that he was an advisor at the Paris Peace Conference after WWI, and he resigned in protest over the peace terms. He correctly predicted the calamitous results that would follow in his 1919 book "The Economic Consequences of the Peace". So, at least from 1933 on, when Keynes spoke, people listened.
Some of the key principles underlying macroeconomics are that: (i) sufficiently detailed aggregate data can be collected on key economic drivers; (ii) scientific equations can be derived from reviewing historical aggregate data; (iii) the government can use those equations to intervene in the economy to accomplish specific policy ends. I don't know what the colleges do today, but when I went to college, the foregoing were taught as if they were self-evident principles.
There are issues with each one of the principles, however. On (i) consider a statistic like "unemployment" which only measures people actvely seeking work who can't find work. It doesn't measure how many people "can" work (i.e., don't have family resonsibilities that preclude it) but don't because there is a skills mismatch for the jobs in their area or simply choose not to. With respect to (ii), the family of equations don't tie and frequently don't hold (see e.g., the Philipps Curve). With respect to (iii), I'd point people to Karl Popper's book, The Logic of Scientific Discovery, and how dsciplines that do not satisfy his narrow definition of "science" should not be relied on as such.
What this book reveals is that each of these principles was vehemently challenged by guys like Ludwig von Mises and Hayek at or before their ascendancy. Even more interesting is the fact that Hayek thinks that even Keynes would not have drawn some of the conclusions his disciples at Cambridge drew after his death which became received wisdom in the 1950s, 1960s and beyond.
Given that we are likely entering a very new economic paradigm here, the foregoing should be required reading. We'll likely need to reevaluate a lot in the coming years. As the saying goes, "May you live in interesting times."
May 17, 2012
This book is probably the best series of essays on Keynesian economics and Keynes that I have read in a long time. Hayek did a great job demonstrating the inflationary core to Keynes's theory- an inescapable consequence of an attack on savings in order to expand credit (or a policy of stimulus). Also I enjoyed reading something of a personal friendship that existed between the two men. Hayek may had profound differences with Keynes on monetary policy and economic theory, but he clearly admired and like Keynes (and at last from Keynes’s letters and Hayek’s personal reflection after the death of Keynes, the feeling was mutual.)
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September 23, 2010"Contra Keynes and Cambridge: Essays, Correspondence (Collected Works of F. A. Hayek) by F A HAYEK (2009)"
Displaying 1 - 4 of 4 reviews