Friedrich August von Hayek · 1976
This file is a scholarly monograph in monetary and cycle theory: Hayek’s 1929 text, reissued in 1976 with a retrospective preface and Kurt Leube’s bibliographic appendix. Its five chapters move from method, to the weakness of nonmonetary cycle theories, to a reconstruction of monetary theory, to the recurrence of credit cycles, and finally to problems of interest theory, banking statistics, and policy.
Hayek’s opening claim is methodological. Empirical cycle research can guide application and disclose unsolved problems, but it cannot generate the theory of necessary economic relations. The business cycle must be explained through price theory, production theory, money, and interest, not through correlations alone.
Mehr als eine Anregung durch Aufwerfen neuer Probleme ist von der Statistik für den Fortschritt der theoretischen Erkenntnis von vornherein nicht zu erwarten.
English translation: From statistics one cannot from the outset expect more than a stimulus, through the raising of new problems, to the advancement of theoretical understanding.
The polemic against nonmonetary theories follows from this. Accounts based on technical lags, psychology, saving, or disproportionality fail, Hayek argues, because in equilibrium relative prices and the interest rate would restrain overextension. Entrepreneurs do not produce by surveying total social need; they act under price expectations and profitability calculations.
Der Unternehmer trifft eben in der Verkehrswirtschaft seine Entscheidungen keineswegs in der Absicht, einen bestimmten Bedarf zu decken — wenn auch diese Phrase manchmal gebraucht werden mag —, sondern auf Grund einer Kalkulation über die zu erwartende Rentabilität, und gerade dadurch wird die Übereinstimmung zwischen Angebot und Nachfrage herbeigeführt.
English translation: In an exchange economy the entrepreneur by no means makes his decisions with the intention of satisfying a definite need — even if that phrase is sometimes used — but rather on the basis of a calculation of expected profitability; and it is precisely through this that the correspondence between supply and demand is brought about.
The decisive gap in real-side theories is thus their hidden reliance on elastic credit. They appear plausible only because they assume that investment can expand without the corresponding rise in the price of capital.
Diese stillschweigende Annahme, die sich bei allen Theorien der bisher behandelten Gruppen an Hand der Darstellungen leicht nachweisen läßt, ist das Vorhandensein von Kredit, der den Unternehmern innerhalb der in Frage kommenden Grenzen zu unveränderten Kosten zur Verfügung steht.
English translation: This tacit assumption, which can readily be shown to underlie the presentations of all the theories in the groups treated so far, is the existence of credit that is available to entrepreneurs, within the relevant limits, at unchanged cost.
Chapter 3 separates Hayek’s monetary theory from a crude price-level doctrine. The crucial effects of money are not exhausted by inflation or deflation of an average index. A stable price level may itself require new money and thereby distort the intertemporal structure of production. Monetary theory must become a theory of how a money economy departs from the “pure” equilibrium economy.
Im Gegenteil, die Geldtheorie wird von einer isolierten Behandlung des Geldes zu einer Theorie jener Erscheinungen werden müssen, durch die sich die Geldwirtschaft von den der „reinen Ökonomie“ stets zugrunde liegenden naturalen Gleichgewichtszusammenhängen unterscheidet.
English translation: On the contrary, monetary theory will have to develop from an isolated treatment of money into a theory of those phenomena by which a money economy differs from the real-equilibrium relationships that always underlie 'pure economics'.
The core mechanism is Wicksell-Mises: bank credit can push the money rate below the natural or equilibrium rate. Investment then lengthens the higher stages of production beyond what voluntary saving can sustain. The boom is therefore not merely expansion but a distorted capital structure. When credit expansion slows, projects dependent on the artificial rate become unprofitable.
Chapter 4 makes the theory endogenous. Deposit banking creates additional means of payment through ordinary credit operations, competitive pressure, clearing relations, and liquidity calculations, not only through deliberate central-bank error. Hence the cycle recurs from the institutional elasticity of bank credit itself. Hayek’s policy conclusion is austere:
Solange wir uns des Mittels des Bankkredites bedienen, um die Entwicklung zu fördern, werden wir auch die Konjunkturschwankungen mit in Kauf nehmen müssen, die durch ihn verursacht werden.
English translation: As long as we make use of bank credit as a means of promoting economic development, we shall also have to accept the cyclical fluctuations that it causes.
The final chapter turns this into a research program: study all effects of changes in the money supply, distinguish natural and money rates more exactly, analyze forced saving, and improve banking and money-market statistics. The work’s relevance lies in its early formulation of Hayek’s Austrian cycle theory before Prices and Production: it rejects both theoryless empiricism and stabilization policy aimed only at the price level, relocating the cycle in interest, credit, relative prices, and intertemporal coordination.
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