Re: Hayek on interest rates

Giant_Joe — Mon, 08 Nov 2010 19:24:59 GMT

http://en.wikipedia.org/wiki/Friedrich_Hayek#The_business_cycle

The business cycle

Main article: Business cycle

Capital, money, and the business cycle are prominent topics in Hayek's early contributions to economics. Mises had earlier explained monetary and banking theory in his Theory of Money and Credit (1912), applying the marginal utility principle to the value of money and then proposing a new theory of industrial fluctuations based on the concepts of the British Currency School and the ideas of the Swedish economist Knut Wicksell. Hayek used this body of work as a starting point for his own interpretation of the business cycle, which defended what later became known as the "Austrian Theory of the Business Cycle". In his Prices and Production (1931) and The Pure Theory of Capital (1941), he explained the origin of the business cycle in terms of central bank credit expansion and its transmission over time in terms of capital misallocation caused by artificially low interest rates. Hayek claimed that: The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process. In accordance with arguments outlined in his essay The Use of Knowledge in Society, he argued that a monopolistic governmental agency like a central bank can neither possess the relevant information which should govern supply of money, nor have the ability to use it correctly.^[48]

I think 2 good books of his worth reading are Prices and Production (1931) and The Pure Theory of Capital (1941). I don't know if he was actually a proponent of the time preference theory of interest which most Austrians generall agree with and accept. (There has been development on the theory of interest since, and not all austrian scholars adopt the time-preference theory exactly.)

If you want to delve into the theories of interest and do a bit of a heavier study, I think a good place to start would be Capital and Interest:

The book is divided into seven parts: 1) The Development of the Problem, 2) The Productivity Theories, 3) The Use Theories, 4) The Abstinence Theory, 5) The Labour Theories, 6) The Exploitation Theory, 7) Minor Systems of Thought.

http://mises.org/resources/164

Someone else around here probably could make a better suggestion/more suggestions as to how to go about learning this stuff.

Hayek on interest rates

Jliax — Mon, 08 Nov 2010 15:32:29 GMT

What book (and maybe chapter) do i need to read to understand Hayek's theory on interest rates?
And is the theory still valid according to modern austrian economists?

Economics Questions

Re: Hayek on interest rates

The business cycle

Hayek on interest rates