by Hayek
[Title Page and Publication Details]: Title pages and publication metadata for Friedrich A. Hayek's 'Preise und Produktion', published in 1931 by Julius Springer in Vienna. [Vorwort (Preface)]: Hayek's preface to the German edition. He argues against 'elastic' money supply and price stabilization policies, which he believes lead to production misalignments and crises. He distinguishes his approach from oversimplified monetary theories by focusing on real shifts in the structure of production. He also addresses the 1929 crisis, rejecting underconsumption theories in favor of a capital shortage explanation caused by prior credit expansion. [Inhaltsverzeichnis (Table of Contents)]: Detailed table of contents for the four chapters of the book, covering the development of monetary theory, equilibrium between consumption and production, the price mechanism in the business cycle, and arguments regarding elastic currency. [Chapter 1: The Four Stages of Monetary Theory Development]: Hayek traces the evolution of monetary theory through four stages. He criticizes the mechanical quantity theory (Fisher) for focusing on price levels rather than relative prices. He highlights the contributions of Cantillon and Hume on the sequential effects of money, Thornton and Ricardo on interest rates, and Wicksell on the 'natural rate' and forced saving. Hayek proposes a fourth stage: a theory of 'neutral money' that analyzes how money affects the intertemporal exchange relations and the structure of production without relying on the concept of a general price level. [Chapter 2: Equilibrium Between Consumption and Production Demand]: This chapter analyzes the conditions for equilibrium between the demand for consumer goods and producers' goods. Using schematic triangles (Hayekian triangles), Hayek illustrates how voluntary saving lengthens the production process (more stages), while credit expansion creates a temporary, unsustainable lengthening (forced saving). He discusses the role of intermediate products and the 'coefficient of money transactions,' arguing that the total volume of payments for producer goods naturally exceeds that for consumer goods. He concludes that artificial increases in consumer demand (e.g., via consumer credit) reverse capital-intensive production structures. [Chapter 3: The Price Mechanism in the Business Cycle]: Hayek explains the microeconomic price shifts during a cycle. He distinguishes between 'specific' and 'non-specific' goods. A drop in interest rates below the natural rate leads to a narrowing of price margins between production stages, drawing non-specific resources into higher (earlier) stages. When credit expansion stops, consumer demand rises, widening price margins and making long production processes unprofitable. This results in a crisis characterized by a shortage of 'circulating capital' (complementary goods), leaving specialized equipment and labor in higher stages unemployed. He argues against using credit as a stimulant during depressions. [Chapter 4: Arguments For and Against an 'Elastic' Currency (Beginning)]: The opening of the fourth chapter, introducing the critique of the popular notion that the money supply should automatically expand with the volume of goods. [Monetary Neutrality and the Elasticity of Currency]: Hayek argues that the prevailing view—that money supply should expand in parallel with production—is fallacious. He contends that a fall in prices corresponding to increased productivity is necessary to avoid production misdirections. He critiques Cassel and Pigou's definitions of neutral money, arguing that stabilizing the price level through monetary expansion actually disturbs the economic process. He also addresses the common belief in the necessity of an 'elastic' currency, suggesting that while seasonal or crisis-driven demands for specific forms of money (like cash) exist, they do not justify a general expansion of the total money supply. [The Definition of Money and the Credit Pyramid]: Hayek explores the difficulties in defining and controlling the total supply of money due to the existence of money substitutes and non-bank credit. He describes the credit structure as an inverted pyramid where central bank credit forms the base for commercial and private credit. He argues that because the ratio between these layers is variable, a central bank would actually need to contract its own credit during an upswing to maintain a constant total money supply—a policy he admits is politically 'utopian' but theoretically necessary to prevent production distortions. [Exceptions to the Rule of Constant Money Supply]: Hayek identifies specific cases where the money supply must change to remain 'neutral.' These include changes in the 'coefficient of money transactions' (e.g., when a vertically integrated firm splits into independent units requiring cash payments for intermediate goods) and changes in the velocity of circulation. He concludes that while total monetary neutrality is a difficult practical goal, the primary rule should be that increased production alone does not justify credit expansion. He also distinguishes between monetary-induced crises and chronic depressions caused by state intervention and capital consumption. [Conclusion and Name Index]: The concluding remarks emphasize that money is not a 'neutral' veil but an active influence on the economy, necessitating a revision of economic theory that assumes barter. Hayek warns against replacing the gold standard with manipulated currencies given current theoretical uncertainties. The segment includes a comprehensive name index of cited authors and information regarding the Austrian Institute for Business Cycle Research (Österreichisches Institut für Konjunkturforschung). [Institutional Metadata and Publication Details]: Institutional information for the Austrian Institute for Business Cycle Research, listing its board members (including Reisch and Mises) and scientific staff (Hayek and Morgenstern). It details the institute's publications and subscription terms. The final section provides metadata for the 1995 facsimile edition of 'Preise und Produktion,' including the series editors and printing details.
Title pages and publication metadata for Friedrich A. Hayek's 'Preise und Produktion', published in 1931 by Julius Springer in Vienna.
Read full textHayek's preface to the German edition. He argues against 'elastic' money supply and price stabilization policies, which he believes lead to production misalignments and crises. He distinguishes his approach from oversimplified monetary theories by focusing on real shifts in the structure of production. He also addresses the 1929 crisis, rejecting underconsumption theories in favor of a capital shortage explanation caused by prior credit expansion.
Read full textDetailed table of contents for the four chapters of the book, covering the development of monetary theory, equilibrium between consumption and production, the price mechanism in the business cycle, and arguments regarding elastic currency.
Read full textHayek traces the evolution of monetary theory through four stages. He criticizes the mechanical quantity theory (Fisher) for focusing on price levels rather than relative prices. He highlights the contributions of Cantillon and Hume on the sequential effects of money, Thornton and Ricardo on interest rates, and Wicksell on the 'natural rate' and forced saving. Hayek proposes a fourth stage: a theory of 'neutral money' that analyzes how money affects the intertemporal exchange relations and the structure of production without relying on the concept of a general price level.
Read full textThis chapter analyzes the conditions for equilibrium between the demand for consumer goods and producers' goods. Using schematic triangles (Hayekian triangles), Hayek illustrates how voluntary saving lengthens the production process (more stages), while credit expansion creates a temporary, unsustainable lengthening (forced saving). He discusses the role of intermediate products and the 'coefficient of money transactions,' arguing that the total volume of payments for producer goods naturally exceeds that for consumer goods. He concludes that artificial increases in consumer demand (e.g., via consumer credit) reverse capital-intensive production structures.
Read full textHayek explains the microeconomic price shifts during a cycle. He distinguishes between 'specific' and 'non-specific' goods. A drop in interest rates below the natural rate leads to a narrowing of price margins between production stages, drawing non-specific resources into higher (earlier) stages. When credit expansion stops, consumer demand rises, widening price margins and making long production processes unprofitable. This results in a crisis characterized by a shortage of 'circulating capital' (complementary goods), leaving specialized equipment and labor in higher stages unemployed. He argues against using credit as a stimulant during depressions.
Read full textThe opening of the fourth chapter, introducing the critique of the popular notion that the money supply should automatically expand with the volume of goods.
Read full textHayek argues that the prevailing view—that money supply should expand in parallel with production—is fallacious. He contends that a fall in prices corresponding to increased productivity is necessary to avoid production misdirections. He critiques Cassel and Pigou's definitions of neutral money, arguing that stabilizing the price level through monetary expansion actually disturbs the economic process. He also addresses the common belief in the necessity of an 'elastic' currency, suggesting that while seasonal or crisis-driven demands for specific forms of money (like cash) exist, they do not justify a general expansion of the total money supply.
Read full textHayek explores the difficulties in defining and controlling the total supply of money due to the existence of money substitutes and non-bank credit. He describes the credit structure as an inverted pyramid where central bank credit forms the base for commercial and private credit. He argues that because the ratio between these layers is variable, a central bank would actually need to contract its own credit during an upswing to maintain a constant total money supply—a policy he admits is politically 'utopian' but theoretically necessary to prevent production distortions.
Read full textHayek identifies specific cases where the money supply must change to remain 'neutral.' These include changes in the 'coefficient of money transactions' (e.g., when a vertically integrated firm splits into independent units requiring cash payments for intermediate goods) and changes in the velocity of circulation. He concludes that while total monetary neutrality is a difficult practical goal, the primary rule should be that increased production alone does not justify credit expansion. He also distinguishes between monetary-induced crises and chronic depressions caused by state intervention and capital consumption.
Read full textThe concluding remarks emphasize that money is not a 'neutral' veil but an active influence on the economy, necessitating a revision of economic theory that assumes barter. Hayek warns against replacing the gold standard with manipulated currencies given current theoretical uncertainties. The segment includes a comprehensive name index of cited authors and information regarding the Austrian Institute for Business Cycle Research (Österreichisches Institut für Konjunkturforschung).
Read full textInstitutional information for the Austrian Institute for Business Cycle Research, listing its board members (including Reisch and Mises) and scientific staff (Hayek and Morgenstern). It details the institute's publications and subscription terms. The final section provides metadata for the 1995 facsimile edition of 'Preise und Produktion,' including the series editors and printing details.
Read full text