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Hayek and the Great Depression of 1929: Did he really change his mind?


  • Antonio Magliulo


The aim of this research is to establish whether, and if so in what way, Hayek changed his mind about the Great Depression of 1929.The work is divided into two parts. In the first part, I present the ‘early’ Hayek of the 1930s. Hayek was the great rival of Keynes. Both explained the Great Depression, applying opposing business cycle theories. For Keynes, the crisis was caused by an excess of saving over investment; for Hayek, on the contrary, by an excess of investment over saving. In the early 1930s, Röpke attempted a synthesis, positing that a recession due to overinvestment can degenerate, as in 1929, into a depression caused by oversaving. Hayek examined and rejected Röpke's theory. In the second part, I present the ‘later’ Hayek of the 1970s. After years of silence and solitude, Hayek was unexpectedly awarded the Nobel Memorial Prize in Economics, precisely for the contribution he made in the 1930s to the theory of the business cycle. Hayek returned to his pursuit of the ghost of Keynes, debated with his friend and rival Friedman, re-examined Röpke's special case and, according to Haberler, changed his mind. In my conclusion, I attempt to resolve the dilemma.

Suggested Citation

  • Antonio Magliulo, 2016. "Hayek and the Great Depression of 1929: Did he really change his mind?," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 23(1), pages 31-58, February.
  • Handle: RePEc:taf:eujhet:v:23:y:2016:i:1:p:31-58
    DOI: 10.1080/09672567.2013.792373

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    References listed on IDEAS

    1. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, April.
    2. repec:ucp:bkecon:9780226320625 is not listed on IDEAS
    3. Friedrich von Hayek, 1975. "A Discussion with Friedrich A. von Hayek," Books, American Enterprise Institute, number 920817, September.
    4. Laidler,David, 1999. "Fabricating the Keynesian Revolution," Cambridge Books, Cambridge University Press, number 9780521641739, December.
    5. Hayek, F. A., . "Money, Capital, and Fluctuations," University of Chicago Press Economics Books, University of Chicago Press, number 9780226321271 edited by McCloughry, R. K., April.
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    Cited by:

    1. Alexandru Patruti, 2018. "Why the Keynes-Hayek Macro Debate Cannot be won by either Side," HISTORY OF ECONOMIC THOUGHT AND POLICY, FrancoAngeli Editore, vol. 2018(2), pages 113-125.

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