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Prices and Production and Other Works On Money, the Business Cycle, and the Gold Standard
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
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
588 pages, Paperback
First published September 1, 1931
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About the author
Friedrich A. Hayek
259 books1,749 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 - 7 of 7 reviews
March 29, 2020
Hayek’s essays from the 1930s are widely recognized as the most quintessential and important readings on the methodology of Austrian Business Cycle Theory. Hayek integrates Böhm von Bawerk’s contributions of capital and interest into Mises’ theory of the business cycle; basically explaining how changes in prices are coordinated with the expansion and contraction of the money supply, along with the relationship between saving and investing. Hayek maintains that a healthy economy is one in which resources are allocated between the past and future in accordance with the preferences of savers. The interest rate is the tradeoff between present and future consumption, and the price that clears the market for loanable funds. Thus, Hayek makes the argument that the equilibrium reached by the collective time preferences of buyers and sellers in the marketplace - as opposed to central bank intervention, is most efficient. Also contained are a couple of essays where he contests the Keynesian and Neoclassical theories at the time; headed by John Maynard Keynes and Frank Knight, respectively. Joseph T. Salerno’s introduction provides excellent historical context of the works.
This collection of essays are a must read for any scholar of
the Austrian School of economics and how the Federal Reserve distorts the capital structure of the economy through interest rate manipulation. However, it may be best to start with Chapter 6 of Rothbard’s “Man, Economy, & State,” if you aren’t already familiar with the works of the earlier Austrians. Hayek’s writing style is difficult to read, as opposed to Rothbard’s more straightforward approach. Don’t be discouraged if you don’t understand it right away.
This collection of essays are a must read for any scholar of
the Austrian School of economics and how the Federal Reserve distorts the capital structure of the economy through interest rate manipulation. However, it may be best to start with Chapter 6 of Rothbard’s “Man, Economy, & State,” if you aren’t already familiar with the works of the earlier Austrians. Hayek’s writing style is difficult to read, as opposed to Rothbard’s more straightforward approach. Don’t be discouraged if you don’t understand it right away.
June 30, 2020
This is a volume containing several important papers and lectures by F. A. Hayek from the 1930s. The best materials in here include "Monetary Theory and the Trade Cycle", "Prices and Production", "Monetary Nationalism and International Stability", and "Investment That Raises the Demand for Capital". Many of the other works sprinkled between them are critiques of the works of other economists that would be of limited use to most readers.
Hayek's writing style often uses long sentences and long paragraphs. He is rarely concise or eloquent, but is quite calculated. Hayek takes a methodological approach to how he writes about economic theory, which makes his work very educational. He has prolifically studied the works of past economists from the famous to the obscure. His critiques of them can be harsh, but keeps biases in check and gives credit and respect to any good work that a colleague has done. Hayek never generalizes. He is always honest and logical.
Hayek's writing style often uses long sentences and long paragraphs. He is rarely concise or eloquent, but is quite calculated. Hayek takes a methodological approach to how he writes about economic theory, which makes his work very educational. He has prolifically studied the works of past economists from the famous to the obscure. His critiques of them can be harsh, but keeps biases in check and gives credit and respect to any good work that a colleague has done. Hayek never generalizes. He is always honest and logical.
February 18, 2024
The term “neutral money,” as mentioned in Lecture I, was
apparently first used by Wicksell, but more or less incidentally, and without the intention to introduce it as a technical
term. It was only comparatively recently that it came to be more
widely used, apparently first in Holland, probably owing to the
influence of Mr. J.G. Koopmans, who has for years been investigating this problem. The first results of Mr. Koopmans’ studies
have, however, appeared only recently, since the present book was
first published.81 But Mr. Koopmans has carried his investigations considerably further than was possible in the present essay,
and to anyone who is interested in that problem I can only
warmly recommend Mr. Koopmans’s study, with which I find
myself in general agreement.
A short but earlier discussion of the problem is to be found in
a German work by Mr. W.G. Behrens.82 Mr. Behrens also points
out correctly that this is only a new name for the problem which
had been discussed by Carl Menger and Professor Mises under
the (in my opinion rather unfortunate) name of the invariability
of the “innere objektive Tauschwert” of money, or shortly of the
“innere Geldwert.” And it may also be added that it was essentially for the same purpose that L. Walras and the later economists of the Lausanne School used the concept of a “numéraire”
as distinguished from that of “monnaie.”
It is not intended here to go further into the extremely difficult theoretical problems which this concept raises. There is,
however, one respect in which recent discussions devoted to it
have shown a certain ambiguity of the concept, which it seems
desirable to clear up. It is frequently assumed that the concept of
neutrality provides a maxim which is immediately applicable to
the practical problems of monetary policy.
But this need by no means be the case, and the concept was
certainly not primarily intended for that purpose. It was destined
in the first instance to provide an instrument for theoretical
analysis, and to help us to isolate the active influences, which
money exercised on the course of economic life. It refers to the
set of conditions, under which it would be conceivable that events
in a monetary economy would take place, and particularly under
which, in such an economy, relative prices would be formed, as if
they were influenced only by the “real” factors which are taken
into account in equilibrium economics. In this sense the term
points, of course, only to a problem, and does not represent a
solution. It is evident that such a solution would be of great
importance for the questions of monetary policy. But it is not
impossible that it represents only one ideal, which in practice
competes with other important aims of monetary policy.
The necessary starting point for any attempt to answer the
theoretical problem seems to me to be the recognition of the fact
that the identity of demand and supply, which must necessarily
exist in the case of barter, ceases to exist as soon as money
becomes the intermediary of the exchange transactions. The
problem then becomes one of isolating the one-sided effects of
money—to repeat an expression which on an earlier occasion I
had unconsciously borrowed from Wieser 83—which will appear
when, after the division of the barter transaction into two separate
transactions, one of these takes place without the other complementary transaction. In this sense demand without corresponding
supply, and supply without a corresponding demand, evidently
seem to occur in the first instance when money is spent out of
hoards (i.e., when cash balances are reduced), when money
received is not immediately spent, when additional money comes
on the market, or when money is destroyed. So this formulation
of the problem leads immediately to the solution of a constant
money stream, with the exceptions sketched in the last lecture.
The argument has, however, been developed systematically only
by Mr. J.G. Koopmans in the essay mentioned above.
In order to preserve, in the case of a money economy, the tendencies toward a stage of equilibrium which are described by
general economic theory, it would be necessary to secure the existence of all the conditions, which the theory of neutral money
has to establish. It is however very probable that this is practically
impossible. It will be necessary to take into account the fact that
the existence of a generally used medium of exchange will always
lead to the existence of long-term contracts in terms of this
medium of exchange, which will have been concluded in the
expectation of a certain future price level. It may further be necessary to take into account the fact that many other prices possess a considerable degree of rigidity and will be particularly difficult to reduce. All these “frictions” which obstruct the smooth
adaptation of the price system to changed conditions, which
would be necessary if the money supply were to be kept neutral,
are of course of the greatest importance for all practical problems of monetary policy. And it may be necessary to seek for a compromise between two aims which can be realized only
alternatively: the greatest possible realization of the forces working toward a state of equilibrium, and the avoidance of excessive
frictional resistances. But it is important to realize fully that in
this case the elimination of the active influences of money has
ceased to be the only, or even a fully realizable, purpose of monetary policy; and it could only cause confusion to describe this
practical aim of monetary policy by the same name, which is used
to designate the theoretically conceivable situation, in which one
of the two competing aims was fully obtained.
The true relationship between the theoretical concept of neutral money, and the practical ideal of monetary policy is, therefore, that the former provides one criterion for judging the latter;
the degree to which a concrete system approaches the condition
of neutrality is one and perhaps the most important, but not the
only criterion by which one has to judge the appropriateness of a
given course of policy. It is quite conceivable that a distortion of
relative prices and a misdirection of production by monetary
influences could only be avoided if, first, the total money stream
remained constant, and second, all prices were completely flexible, and, third, all long term contracts were based on a correct
anticipation of future price movements. This would mean that, if
the second and third conditions are not given, the ideal could not
be realized by any kind of monetary policy.
apparently first used by Wicksell, but more or less incidentally, and without the intention to introduce it as a technical
term. It was only comparatively recently that it came to be more
widely used, apparently first in Holland, probably owing to the
influence of Mr. J.G. Koopmans, who has for years been investigating this problem. The first results of Mr. Koopmans’ studies
have, however, appeared only recently, since the present book was
first published.81 But Mr. Koopmans has carried his investigations considerably further than was possible in the present essay,
and to anyone who is interested in that problem I can only
warmly recommend Mr. Koopmans’s study, with which I find
myself in general agreement.
A short but earlier discussion of the problem is to be found in
a German work by Mr. W.G. Behrens.82 Mr. Behrens also points
out correctly that this is only a new name for the problem which
had been discussed by Carl Menger and Professor Mises under
the (in my opinion rather unfortunate) name of the invariability
of the “innere objektive Tauschwert” of money, or shortly of the
“innere Geldwert.” And it may also be added that it was essentially for the same purpose that L. Walras and the later economists of the Lausanne School used the concept of a “numéraire”
as distinguished from that of “monnaie.”
It is not intended here to go further into the extremely difficult theoretical problems which this concept raises. There is,
however, one respect in which recent discussions devoted to it
have shown a certain ambiguity of the concept, which it seems
desirable to clear up. It is frequently assumed that the concept of
neutrality provides a maxim which is immediately applicable to
the practical problems of monetary policy.
But this need by no means be the case, and the concept was
certainly not primarily intended for that purpose. It was destined
in the first instance to provide an instrument for theoretical
analysis, and to help us to isolate the active influences, which
money exercised on the course of economic life. It refers to the
set of conditions, under which it would be conceivable that events
in a monetary economy would take place, and particularly under
which, in such an economy, relative prices would be formed, as if
they were influenced only by the “real” factors which are taken
into account in equilibrium economics. In this sense the term
points, of course, only to a problem, and does not represent a
solution. It is evident that such a solution would be of great
importance for the questions of monetary policy. But it is not
impossible that it represents only one ideal, which in practice
competes with other important aims of monetary policy.
The necessary starting point for any attempt to answer the
theoretical problem seems to me to be the recognition of the fact
that the identity of demand and supply, which must necessarily
exist in the case of barter, ceases to exist as soon as money
becomes the intermediary of the exchange transactions. The
problem then becomes one of isolating the one-sided effects of
money—to repeat an expression which on an earlier occasion I
had unconsciously borrowed from Wieser 83—which will appear
when, after the division of the barter transaction into two separate
transactions, one of these takes place without the other complementary transaction. In this sense demand without corresponding
supply, and supply without a corresponding demand, evidently
seem to occur in the first instance when money is spent out of
hoards (i.e., when cash balances are reduced), when money
received is not immediately spent, when additional money comes
on the market, or when money is destroyed. So this formulation
of the problem leads immediately to the solution of a constant
money stream, with the exceptions sketched in the last lecture.
The argument has, however, been developed systematically only
by Mr. J.G. Koopmans in the essay mentioned above.
In order to preserve, in the case of a money economy, the tendencies toward a stage of equilibrium which are described by
general economic theory, it would be necessary to secure the existence of all the conditions, which the theory of neutral money
has to establish. It is however very probable that this is practically
impossible. It will be necessary to take into account the fact that
the existence of a generally used medium of exchange will always
lead to the existence of long-term contracts in terms of this
medium of exchange, which will have been concluded in the
expectation of a certain future price level. It may further be necessary to take into account the fact that many other prices possess a considerable degree of rigidity and will be particularly difficult to reduce. All these “frictions” which obstruct the smooth
adaptation of the price system to changed conditions, which
would be necessary if the money supply were to be kept neutral,
are of course of the greatest importance for all practical problems of monetary policy. And it may be necessary to seek for a compromise between two aims which can be realized only
alternatively: the greatest possible realization of the forces working toward a state of equilibrium, and the avoidance of excessive
frictional resistances. But it is important to realize fully that in
this case the elimination of the active influences of money has
ceased to be the only, or even a fully realizable, purpose of monetary policy; and it could only cause confusion to describe this
practical aim of monetary policy by the same name, which is used
to designate the theoretically conceivable situation, in which one
of the two competing aims was fully obtained.
The true relationship between the theoretical concept of neutral money, and the practical ideal of monetary policy is, therefore, that the former provides one criterion for judging the latter;
the degree to which a concrete system approaches the condition
of neutrality is one and perhaps the most important, but not the
only criterion by which one has to judge the appropriateness of a
given course of policy. It is quite conceivable that a distortion of
relative prices and a misdirection of production by monetary
influences could only be avoided if, first, the total money stream
remained constant, and second, all prices were completely flexible, and, third, all long term contracts were based on a correct
anticipation of future price movements. This would mean that, if
the second and third conditions are not given, the ideal could not
be realized by any kind of monetary policy.
September 18, 2025
It is a verry hard reading book. You need to have strong foundations in economics.
Hayek has a unique style of writing that could concentrate so much information and debate in only 2 or 3 pages. You will try to make connections with the real world, but not to many are indicated. Principles of Austrian economics are presented in a theoretical view.
To read this book you will need to have read Eugen von Böhm-Bawerk( I didn't) to understand what Hayek is indicating here, also to be adapted to understand Keynes' economics.
Hayek has a unique style of writing that could concentrate so much information and debate in only 2 or 3 pages. You will try to make connections with the real world, but not to many are indicated. Principles of Austrian economics are presented in a theoretical view.
To read this book you will need to have read Eugen von Böhm-Bawerk( I didn't) to understand what Hayek is indicating here, also to be adapted to understand Keynes' economics.
October 15, 2025
Hayek expone en esta obra su visión sobre cómo la manipulación política del dinero (creación de dinero de la nada por parte del Estado y los bancos) nos perjudica gravemente.
La clave del razonamiento de Hayek reside en la idea de que crear dinero de la nada no cambia los recursos reales de los que disponemos para satisfacer nuestras necesidades, solo nos induce a error, a pensar que existen más recursos reales de los que verdaderamente existen, empleando de forma inadecuada los recursos reales disponibles.
La clave del razonamiento de Hayek reside en la idea de que crear dinero de la nada no cambia los recursos reales de los que disponemos para satisfacer nuestras necesidades, solo nos induce a error, a pensar que existen más recursos reales de los que verdaderamente existen, empleando de forma inadecuada los recursos reales disponibles.
July 14, 2025
25年7月14日阅读完毕
June 12, 2024
I read Hayek's introduction to Menger alongside a few of his shorter works. I thought Hayek would be a clear, readable writer. Boy was I wrong!
This book will be a struggle to get through only to understand some esoteric topics in Austrian capital theory. The first 100 pages are just about economic methodology and the conditions which research should be done in. The main work, Prices and Production, is about interest rates and their effect on trade cycles. Hayek is pretty clear to understand here and his reasoning is sensible but his lack of differentiation between the money supply and interest rates is frustrating. At one moment he is criticizing Mises for solely explaining trade cycles through the money supply and at another moment he is likening the money supply to interest rates. He criticizes other economists like Keynes for this lack of distinction between terms when he is clear enough himself! It drove me wild! Hayek is unclear on the lengthening of the production process. He never gives an example of what necessitates a lengthening of the production process other than investment and he specifically differentiates it from 'technological' innovation lengthening the productive process (eg. a new tool or method to create the same, or a new consumer good, thereby creating a new stage of production.)
Hayek is like the final boss of the Austrian school. Hayek's economic works are far too dense and advanced for me to understand and I seriously recommend reading most of the Austrian economists before him. Even with my amateur understanding of the Austrian school I was left scratching my head. Familiarity with Eugen Bohm-Bawerk and Carl Menger I believe would be especially helpful. Hayek discusses the qualities of economic goods at some points in the book and how they relate to the production process. I've been told, and have inferred from the footnotes, that Hayek's explanations require familiarity with Eugen Bohm-Bawerk's capital theory and his emphasis on interest and time; this would clear up the lengthening of the production process. I'm sure Hayek's reasoning is great, but it is so inaccessible and unclear that I really can't say. I think, also, that being a little more sober reading this book would've made me a little less confused.
tldr:
very difficult read unless you know a lot of austrian economics and hayeks writing is super dense and unclear. im really not sure why hayek didnt win the nobel for his philosophical works rather than his economics stuff this stuff SUCKS!!!!!!!!!!!!
This book will be a struggle to get through only to understand some esoteric topics in Austrian capital theory. The first 100 pages are just about economic methodology and the conditions which research should be done in. The main work, Prices and Production, is about interest rates and their effect on trade cycles. Hayek is pretty clear to understand here and his reasoning is sensible but his lack of differentiation between the money supply and interest rates is frustrating. At one moment he is criticizing Mises for solely explaining trade cycles through the money supply and at another moment he is likening the money supply to interest rates. He criticizes other economists like Keynes for this lack of distinction between terms when he is clear enough himself! It drove me wild! Hayek is unclear on the lengthening of the production process. He never gives an example of what necessitates a lengthening of the production process other than investment and he specifically differentiates it from 'technological' innovation lengthening the productive process (eg. a new tool or method to create the same, or a new consumer good, thereby creating a new stage of production.)
Hayek is like the final boss of the Austrian school. Hayek's economic works are far too dense and advanced for me to understand and I seriously recommend reading most of the Austrian economists before him. Even with my amateur understanding of the Austrian school I was left scratching my head. Familiarity with Eugen Bohm-Bawerk and Carl Menger I believe would be especially helpful. Hayek discusses the qualities of economic goods at some points in the book and how they relate to the production process. I've been told, and have inferred from the footnotes, that Hayek's explanations require familiarity with Eugen Bohm-Bawerk's capital theory and his emphasis on interest and time; this would clear up the lengthening of the production process. I'm sure Hayek's reasoning is great, but it is so inaccessible and unclear that I really can't say. I think, also, that being a little more sober reading this book would've made me a little less confused.
tldr:
very difficult read unless you know a lot of austrian economics and hayeks writing is super dense and unclear. im really not sure why hayek didnt win the nobel for his philosophical works rather than his economics stuff this stuff SUCKS!!!!!!!!!!!!
Displaying 1 - 7 of 7 reviews