Hayek's Critique of the General Theory: A New View of the Debate Between Hayek and Keynes (Report‪)‬

INTRODUCTION The confrontation between John Maynard Keynes and Friedrich August Hayek is one of the most famous in the history of contemporary economic thought. The debate took place between 1931 and 1932, and its object was a book written by Keynes called Treatise on Money (1930). Although this debate is paramount, many of those who read this debate for the first time could be disappointed for three reasons. First, Treatise on Money is not a very well-known book, and moreover, if we compare it with The General Theory, its influence has been small. Second, Treatise on Money is an obscure book that is difficult to read. This led Hayek and Keynes to misunderstand each other (indeed one of the main topics discussed in this debate was the definition of saving and investment). This fact is also a strong handicap for anyone willing to study the debate. Third, saying that there was a debate between Hayek and Keynes in 1931-1932 is exaggerating what actually happened. During that time period, Hayek wrote a systematic review of Treatise on Money consisting of three articles (two of them very extensive). In response, Keynes wrote only a short article essentially accusing his Austrian rival of misinterpretation. Therefore, it would be appropriate to say that it was a somewhat one-sided debate. In March 1932 this controversy ended with Keynes' sudden withdrawal, arguing that he was retiring to "re-shape and improve" his "central position" (Keynes, 1932, p. 172). Therefore, we may say Hayek was the winner of this first engagement. (1)