Jliax
November 8, 2010, 8:32am
1
What book (and maybe chapter) do i need to read to understand Hayek’s theory on interest rates?
Friedrich August von Hayek[a] (8 May 1899 – 23 March 1992) was an Austrian economist and philosopher. He is known for his contributions to political economy, political philosophy and intellectual history. Hayek shared the 1974 Nobel Memorial Prize in Economic Sciences with Gunnar Myrdal for work on money and economic fluctuations, and the interdependence of economic, social and institutional phenomena. His account of how prices communicate information is widely regarded as an During his teenage...
The business cycleMain 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 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.