Hayek’s new ideas and present-day ones
Edmund S. Phelps
Published online: 2 April 2015
Springer Science+Business Media New York 2015
Abstract This paper reexamines key themes in Friedrich Hayek’s work, including his
early macroeconomics and work on overinvestment, as well as his critiques of socialism
and corporatism. The paper argues that Hayek’s concern was over economic efficiency
rather than innovation. Hayek viewed innovation as exogenous to the business sector, as
did Schumpeter. A likely reason for his resistance to innovation as indigenous to the
business world was his unease about a theory of the capitalist economy in which the
future is indeterminate. Viewing innovation as rare and exogenous helped to minimize
the problem of indeterminacy in his economic model. While Hayek’s great ideas will
continue to be revered, economic scholarship must now build an economics that gives
central place to indigenous innovation in determining a modern economy.
While adulated by many, Friedrich Hayek is no longer read at all widely in the
economics profession. In the minds of many, perhaps most, scholars of economic
thought, however, he is one of three main pioneers of modern economics, alongside
Frank Knight and John Maynard Keynes.
I will comment on a half-dozen of the themes sounded or puzzles raised in Hayek’s work.
1. Hayek’s early macroeconomics remains strange to most economists.
& Hayek’s belief that a cutback decrease in the supply of saving would soon
contract employment – contrary to Keynes’sview– was not corroborated from
Rev Austrian Econ (2015) 28:253–256
* Edmund S. Phelps
The Center on Capitalism and Society, Columbia University, 1126 International Affairs Building,
420 West 118th Street, Mail Code 3334, New York, NY 10027, USA