ABSTRACT
The economics of Keynes and Hayek were a lifelong challenge for Hicks in developing his own theory. Whereas the first is well known to a wider public, and can be expressed in four letters, IS-LM, Hayek’s influence on Hicks is of a more critical nature and still only known to a small group of academic economists. Hicks always had been sceptical about Hayek’s claim that the economy would be in equilibrium if there were no monetary disturbances. Although he took over from Hayek the idea that the impact of an impulse on the real structure of production is most important, it is very clear for Hicks that, unlike in Hayek, the divergence from a steady-state path and the dynamic adjustment process are not caused by monetary but by real factors like technological change. Hicks’s position has much in common with Adolph Lowe whose contributions to business-cycle theory in the 1920s were the major challenge for Hayek. Finally it is shown that despite the fact that Wicksell’s analysis of the cumulative process provided an important building block of Hayek’s business-cycle theory, Wicksell essentially held a real view of the cycle, a view which was shared by Hicks. This is a fundamental disagreement with Hayek for whom monetary disorders were of first and not of secondary importance.
