@article{Patruti_2023, title={Keynes and Hayek: some common elements in business cycle theory}, volume={43}, url={https://centrodeeconomiapolitica.org.br/repojs/index.php/journal/article/view/2384}, DOI={10.1590/0101-31572023-3375}, abstractNote={<p>Keynes and Hayek are usually perceived in the history of economic thought as<br />intellectual rivals. Although it is true that in terms of policy recommendations, they have<br />not always seen eye to eye, there are numerous theoretical elements that the two economists<br />tend to share. This is especially true if one follows Axel Leijonhufvud (1976) in considering <br />that Keynes’s fundamental theoretical work is the Treatise and not the General Theory. In the early 1930s, following the works of Wicksell (1989), both explained business cycles <br />as caused by a discrepancy between savings and investment. They considered that in the<br />modern economy the interest rate cannot speedily adjust these two magnitudes. To a certain<br />extent, Keynes and Hayek even agreed on the dynamic sequence of prices in a “normal”<br />depression. By the time the General Theory came out, liquidity preference obscured most<br />of the commonalities between the two economists. Although Hayek introduced liquidity<br />preference as a short run friction in his 1941 Pure Theory of Capital, he could not accept<br />it as a fundamental determinant of the interest rate. However, in the 1970s Hayek began to<br />believe that “normal” Hayekian crises could further degenerate into Keynesian depressions.<br />By focusing on Keynes’s theoretical development prior to the elaboration of the General<br />Theory in parallel with Hayek’s evolution throughout his life, we argue that a selective<br />reading of their works could lead to a theoretical model in which Keynesian and Hayekian<br />scenarios are specific cases of a more general theory.</p> <p><strong>JEL Classification:</strong> B13; B22; E12; E20; E32; E43.</p>}, number={1}, journal={Brazilian Journal of Political Economy}, author={Patruti, Alexandru}, year={2023}, month={Feb.}, pages={48-66} }