Misunderstandings and other Coordination Failures in the Hayek–Keynes Controversy

Several authors have discussed the controversy between F. A. Hayek and Hayek–Keynes in the 1930s. These assessments critically compare their monetary views and business cycle theories, their economic methodologies and social philosophies; discuss the reasons behind the Keynesian victory and the influence they had on each other; and draw the lessons of the debate for contemporary business cycle theorists. The most obvious cause of misunderstandings in the communication of ideas is the use of language itself. It is therefore rather surprising that this aspect has never received much attention from commentators on the Hayek–Keynes controversy, particularly as the work of economists in the early 1930s is often said to be characterized by the complexity of their writing. In Hayek’s early business cycle theory, monetary equilibrium is a benchmark which abstracts from the problem causing cyclical fluctuations, namely coordination failures between saving and investment.