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Cantillon and Ricardo effects: Hayek's contributions to business cycle theory

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  • Harald Hagemann
  • Hans-Michael Trautwein

Abstract

The distinctive line of argument in Hayek' business cycle theory can be characterized as a combination of the Cantillon effect monetary expansion on the price structure and the Ricardo effect of a shortage of consumption goods on the production of investment goods. This paper compares the original ideas of Cantillon and Ricardo with their adaptation and combination by Hayek. The differences help to expose fundamental problems in Hayek' theory and, more generally, in projects of integrating money and the business-cycle phenomenon with Walrasian general equilibrium theory.

Suggested Citation

  • Harald Hagemann & Hans-Michael Trautwein, 1998. "Cantillon and Ricardo effects: Hayek's contributions to business cycle theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 5(2), pages 292-316.
    • Handle: RePEc:taf:eujhet:v:5:y:1998:i:2:p:292-316
    DOI: 10.1080/10427719800000022
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    1. Hayek, F. A., . "Money, Capital, and Fluctuations," University of Chicago Press Economics Books, University of Chicago Press, number 9780226321271 edited by McCloughry, R. K., September.
    2. repec:ucp:bkecon:9780226320625 is not listed on IDEAS
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    Cited by:

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    3. Sheila C Dow, 2012. "Different Approaches to the Financial Crisis," Economic Thought, World Economics Association, vol. 1(1), pages 1-4, July.
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    5. Nicolo De Vecchi, 2006. "Hayek and the General Theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 13(2), pages 233-258.

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