Friedrich August von Hayek - Theories

Even at the age of 92 when he died Hayek was still actively espousing the virtues of the free-market and he was regarded as something of an 'elder-statesman' of the libertarian movement. Hayek's society - the Mont Pelerin Society - became increasingly influential in the 1970s and 1980s as many politicians began to look for intellectual backing for their free-market beliefs.

Hayek did a considerable amount of work on the trade-cycle theories that were developed by his friend von Mises and combined them with theories on capital. He looked at how real wages will usually fall in a recession causing firms to switch to more labour-intensive methods of production. This in turn will lead investment to fall. In a boom time the opposite will occur.

Hayek also argued like Friedman that the growth of the money supply should be restricted, even if that led to high unemployment, as it was the only way to control inflation.

Biography | Work | Theories