14.   FULL EMPLOYMENT, PLANNING AND INFLATION

Professor Hayek here develops one of his main themes. Save in the exceptional circumstances of the general unemployment of all factors of production, the ‘unemployment’ problem is one of securing the right distribution of labour; monetary expansion along Keynesian lines, by nullifying the effects of relative price movements, exacerbates the situation and makes it impossible to maintain any given volume of employment, except by continued inflation.

18.   PERSONAL RECOLLECTIONS OF KEYNES

Professor Hayek here brings together some of the major threads in his criticisms of Keynes and the macro approach. He points out that the Keynesian concept of what may be called ‘full’ unemployment assumes implicitly that all resources are freely available and that consequently any increase in money incomes will increase output, thus reviving the inflationist fallacies which in 1931 he had supposed to have been eradicated.

By F.A. Hayek

In the last 40 years monetary policy has increasingly committed us to a development which has recurrently made necessary further measures that weakened the functioning of the market mechanism. We have now reached a point when it is widely proposed to combat the effects of our policy by further controls which would not only make the price mechanism wholly ineffective, but also make inevitable an ever-increasing central direction of all economic activity.

Introduction

By Sudha Shenoy

Professor Hayek’s writings on inflation and monetary policy, during the six years since the publication of the first edition of this book, are contained in his other IEA publications: Full Employment at Any Price? (1975), Choice in Currency (1976) and Denationalisation of Money (1976 and 1978). This second edition has been enlarged by the addition of three early analyses of the Keynesian approach.

Geldtheorie und Konjunkturtheorie (Vienna and Leipzig: Holder-Pichler-Tempsky, 1929; England, 1933; Japan, 1935; Spain 1936)

Prices and Production (London: Routledge & Kegan Paul, 1931) Monetary Theory and the Trade Cycle (London: Jonathan Cape, 1993

Monetary Nationalism and International Stability (Geneva: Universitaire de Hautes Etudes Internationales, 1937)

Profits, Interest and Investment (London: Routledge & Kegan Paul, 1939)

Age of Keynes, The, 3n

Angewandte Lohntheorie, 78n

Arbeiterfrage unter dem Gesichtspunkte des Vereinsrechtes, Die, 74n

Balogh, T., 6

Bamberger, Ludwig, 74n

Bank for International Settlements, 50

Barnard, C.I., 88n

Bernanke, Ben, xv

Beveridge, Lord, 6, 152–53

Böhm-Bawerk, Eugen von, 9

Böhm, Franz, 90n

Bradley, P.D., 78n

THE STOCK MARKET, CREDIT
AND CAPITAL FORMATION

BY

FRITZ MACHLUP

PROFESSOR OF ECONOMICS AT THE UNIVERSITY OF
BUFFALO

TRANSLATED FROM A REVISED VERSION OF THE

GERMAN EDITION BY

VERA C. SMITH, B.SC. (ECON.), PH.D.

LONDON            EDINBURGH            GLASGOW

WILLIAM HODGE AND COMPANY, LIMITED
1940