[0] [1]
INSTITUTE OF ECONOMIC AFFAIRS
The Institute was formed in 1957 as a research and educational trust that
specializes in the study of markets and pricing systems as technical
devices for registering preferences and apportioning resources. Micro-
economic analysis forms the kernel of economics and is relevant and
illuminating in both public and private sectors, in collectivist as well as
in individualist societies. Where the macroeconomic method is used its
results are verified and interpreted in the light of micro-economic
significance.
The Institute's work is assisted by an advisory council which includes:
Professor Armen A. Alchian Professor E. Victor Morgan
Professor J. M. Buchanan Professor Alan T. Peacock
Colin Clark G. J. Ponsonby
Professor R. H. Coase Professor A. R. Prest
Professor R. F. Henderson Professor H. B. Rose
Professor T. W. Hutchison George Schwartz
Graham Hutton Henry Smith
Professor Harry G. Johnson Professor A. A. Walters
Professor Dennis Lees Professor Jack Wiseman
Professor B. S. Yamey
The Institute is a company limited by guarantee, controlled by
Managing Trustees. It is independent of any political party or group, and
financed by sales of publications and by voluntary contributions from
individuals, organizations and companies.
General Director Ralph Harris
Editorial Director Arthur Seldon
Deputy Director John B. Wood
Assistant to Directors Publications Manager
Joan Culverwell Michael Solly
Librarian
Kenneth Smith
THE INSTITUTE OF ECONOMIC AFFAIRS
2 Lord North Street, Westminster, London, SW1P 3LB
Telephone: 020 7799 8900
Choice in Currency
A WAY TO STOP INFLATION
F. A. HAYEK
Nobel Laureate 1974
with Commentaries by
IVOR F. PEARCE • HAROLD B. ROSE
DOUGLAS JAY • SIR KEITH JOSEPH
Published by
THE INSTITUTE OF ECONOMIC AFFAIRS
1976
Web Edition prepared in 2007. There may be minor differences from the original.
[2] [3]
First published February 1976 by
THE INSTITUTE OF ECONOMIC AFFAIRS
@ The Institute of Economic Affairs 1976
All rights reserved
SBN 255 36078-9
Printed in Great Britain by
TONBRIDGE PRINTERS LTD, TONBRIDGE KENT
Set in Intertype Plantin
Contents
PREFACE………………………………………….Arthur Seldon……………… 5
THE AUTHOR…………………………………………………………………..8
I MONEY, KEYNES AND HISTORY..……………………………………….9
Keynesian rehabilitation……………………………………………..10
Personal confession………………………………………………….10
II THE MANUFACTURE OF UNEMPLOYMENT…………………………11
Unemployment via ‘full employment policies’……………………...12
The lost generation…………………………………………………..13
The 1863 penny……………………………………………………...13
III THE WEAKNESS OF POLITICAL CONTROL OF MONEY..……….…..14
Group interests harmful……………………………………………..14
Rebuilding the resistances to inflation………………………………15
Protecting money from politics……………………………………..16
A dangerous monopoly……………………………………………..16
IV CHOICE OF MONEY FOR PAYMENT IN CONTRACTS...…………….17
Government and legal tender………………………………………..17
Benefits of free currency system……………………………………19
V LONG-RUN MONETARY STABILITY……...…………………………..20
‘The universal prize’………………………………………………..20
Free dealings in money better than monetary unions………………21
A COMMENT ON KEYNES, BEVERIDGE AND KEYNESIAN
ECONOMICS……………………………………………………………… 23
[4] [5]
COMMENTARIES:
Professor Ivor Pearce………………………………………………...25
Professor Harold Rose……………………………………………….26
Rt. Hon. Douglas Jay………………………………………………...27
Rt. Hon. Sir Keith Joseph……………………………………………28
A NOTE ON GOVERNMENT MONOPOLY OF MONEY IN
THEORY AND HISTORY ……………………Sudha Shenoy……………….30
I. THEORY………………………………………………………….30
II. HISTORY………………………………………………...………34
France, 1789… ……….……………………………...34
USA, before and after 1857…………………………….38
Germany, 1920-23……………………………………...39
AND A PORTENT…?
Currency Option for Foreign Creditors…………………………….. 45
Preface
THE Occasional Papers are intended to make essays or addresses,
of outstanding importance, accessible to a wider readership than
that to which they were originally addressed. The 47 so far have
included Papers by some of Britain's, and the world's, leading
economists but also some important Papers by less well-known
names. .
No. 48 is an edited version of an address by Professor F. A.
Hayek to a conference in Switzerland. In a sense it is a sequel to
Occasional Paper 45, in which Professor Hayek argued that the
cause of unemployment was not inadequate demand, arising from
inadequate total income, but disproportions in relative wages
required to equate the demand for labour and its supply in each
sector of the economy. The error of supposing that full
employment, high output and prosperity could be maintained by
enlarging total money expenditure is described in this Paper as an
age-old superstit ion to which Keynes and his followers have given
the sanction of scientific authority.
In this Paper Professor Hayek considers the conditions under
which it is possible for government to enlarge total expenditure by
increasing the quantity of money. He argues that history indicates
that, sooner or later, the control of the supply of money by
government has ended in inflation. Hence the development of
national and international monetary systems based on gold and
other devices designed to remove from government the powers it
invariably abused.
The opposite view, argued strongly in recent years in Britain,
is that, if government was released from rigid mechanical rules
in domestic or overseas monetary management, such as fixed
exchange rates, it would be better able to act for the general
good. This expectation, it is now evident, has not been realised
because, although the rules were reasonably clear, government
has found them politically tempting to break in practice. This is
not a theoretical doubt whether government can improve on
an automatic or semi-automa tic monetary system, such as a
gold or gold-exchange standard, in which the supply and value
[6] [7]
of money is beyond domestic political control. It is a practical
judgement in political economy that a government subject to
electoral pressures will not be able to observe the rules if to do so
brings transitionary dislocation and unemployment.
Professor Hayek therefore argues that the time may have come
to remove from government the power to require its citizens to use
the money under its control. And in the last resort this would
require that government be deprived of the power to define legal
tender. The requirement is not to deprive government of the power
to issue money but to deny it the exclusive right to do so and to
force the citizenry to use it at the price it specifies. It is thus the
government monopoly of money that is objectionable, and history
is full of examples of governments that have attempted to enforce
their power by extreme measures, including the ultimate sanction
of death.
The solution is therefore to allow people to use the money they
find most convenient, whether the money issued by their own
government or by other governments. Professor Hayek argues that
this system would be more desirable and practicable than a
utopian European Monetary Unit.
This proposal, Professor Hayek recognises, may seem far-
fetched after centuries in which it has been considered that one of
the proper, or essential, functions of government is to provide a
currency on which the citizens could depend as a reliable unit of
account and means of exchange, a function which has included the
concept of legal tender. Professor Hayek denies that legal tender is
an essential part of the monetary function of government. He
argues that people should be free to refuse money they distrust in
favour of money in which they have confidence. It is this new
power of the people to refuse the national money that would
induce national governments to ensure that their money was stable
in value. Hence Professor Hayek argues the case for a new kind of
international money.
In this Occasional Paper Professor Hayek has provided
stimulating analysis of a contemporary problem and emerged
with a radical solution. He considers ways in which the system
might work in practice, and replies to objections to it. He
discusses the effects it will have on banking systems, and in so
doing he provides a commentary on the current debate on money
and inflation and on the desired national and international
institutions. Here it will come as no surprise to learn that he
believes an international monetary authority is hardly to be trusted
more than a national authority: he would confine government to 'a
framework of legal roles in which the people could develop the
monetary institutions that best suit them'.
To indicate the possibly varying views on the importance and
the practicality of Professor Hayek's proposals we invited com-
ments from two economists and two senior politicians who have
held high government office. The economists are Professor Ivor
Pearce and Professor Harold Rose. Both politicians, Mr Douglas
Jay and Sir Keith Joseph, are Fellows of All Souls College,
Oxford, and are especially interested in economic affairs.
To illustrate the argument Miss Sudha Shenoy has assembled
extracts from economic and historical writings on the failure of
governments in France and Germany to confine the use of money
to legal tender despite severe penalties and on the fall in the value
of paper legal tender as its supply was increased during periods of
inflation, and on the exclusion by the US Government of
currencies other than the dollar.
November 1975 ARTHUR SELDON
[8] [9]
The Author
FRIEDRICH AUGUST HAYEK, Dr Jur, Dr Sc Pol (Vienna),
DSc (Econ.) (London), Visiting Professor at the University of
Salzburg, Austria, 1970-74. Educated at the University of
Vienna, Director of the Austrian Institute for Economic
Research, 1927-31, and Lecturer in Economics at the University
of Vienna, 1929-31. 1931-50 Tooke Professor of Economic
Science and Statistics, University of London. 1950-62 Professor
of Social and Moral Science, University of Chicago. Professor of
Economics, University of Freiburg i.Brg., West Germany, 1962-
68. He was awarded the Alfred Nobel Memorial Prize in
Economic Sciences in 1974.
Professor Hayek's most important publications inc lude Mone-
tary Theory and the Trade Cycle (1933), The Pure Theory of
Capital (1941), The Road to Serfdom (1944), Individualism and
Economic Order (1948), The Counter-Revolution of Science.
(1952), and The Constitution of Liberty (1960). His latest works
are col1ections of his writings under the titles Studies in
Philosophy, Politics and Economics (1967) and Law,
Legislation and Liberty (Vo1. I, 1973). He has also edited
several books and has published artic1es in the Economic
Journal, Economica and other journals. The IEA has published
his The Confusion of Language in Political Thought
(Occasional Paper 20, 1968), his Wincott Memoria1 Lecture,
Economic Freedom and Representative Government
(Occasiona1 Paper 39, 1973), a collection of his writings with a
new essay (assembled by Sudha Shenoy), A Tiger by the Tail
(Hobart Paperback 4, 1972), an essay in Verdict on Rent
Control (IEA Readings NO.7, 1972), and Full Employment at
Any Price? (Occasional Paper 45, 1975).
Choice in Currency:
A Way to Stop Inflation1
F.A.HAYEK
I.
MONEY, KEYNES AND HISTORY2
THE CHIEF ROOT of our present monetary troubles is, of course,
the sanction of scientific authority which Lord Keynes and
his disciples have given to the age-old superstition that by
increasing the aggregate of money expenditure we can lastingly
ensure prosperity and full employment. It is a superstition against
which economists before Keynes had struggled with some success
for at least two centuries.3 It had governed most of earlier history.
This history, indeed, has been largely a history of inflation;
significantly, it was only during the rise of the prosperous modern
industrial systems and during the rule of the gold standard, that
over a period of about two hundred years (in Britain from about
1714 to 1914, and in the United States from about 1749 to 1939)
prices were at the end about where they had been at the beginning.
During this unique period of monetary stability the gold
standard had imposed upon monetary authorities a discipline which
prevented them from abusing their powers, as they have done
1 Based on an Address entitled ‘International Money’ delivered to the Geneva Gold and
Monetary Conference on 25 September, 1975, at Lausanne, Switzerland.
2 [The main section and sub-headings have been inserted to help readers, especially non-
economists unfamiliar with Professor Hayek’s writings, to follow the argument; they were
not part of the original lecture.-ED.]
3 [This observation is amplified by Professor Hayek in a note, ‘A Comment on Keynes,
Beveridge and Keynesian Economics’, page 23.-ED.]
[10] [11]
at nearly all other times. Experience in other parts of the world
does not seem to have been very different: I have been told that a
Chinese law attempted to prohibit paper money for all times (of
course, ineffectively), long before the Europeans ever invented it!
Keynesian rehabilitation
It was John Maynard Keynes, a man of great intellect but limited
knowledge of economic theory, who ultimately succeeded in
rehabilitating a view long the preserve of cranks with whom he
openly sympathised. He had attempted by a succession of new
theories to justify the same, superficially persuasive, intuitive
belief that had been held by many practical men before, but that
will not withstand rigorous analysis of the price mechanism: just
as there cannot be a uniform price for all kinds of labour, an
equality of demand and supply for labour in general cannot be
secured by managing aggregate demand. The volume of
employment depends on the correspondence of demand and
supply in each sector of the economy, and therefore on the wage
structure and the distribution of demand between the sectors. The
consequence is that over a longer period the Keynesian remedy
does not cure unemployment but makes it worse.
The claim of an eminent public figure and brilliant polemicist
to provide a cheap and easy means of permanently preventing
serious unemployment conquered public opinion and, after his
death, professional opinion too. Sir John Hicks has even
proposed that we call the third quarter of this century, 1950 to
1975, the age of Keynes, as the second quarter was the age of
Hitler.1 I do not feel that the harm Keynes did is really so much
as to justify that description. But it is true that, so long as his
prescriptions seemed to work, they operated as an orthodoxy
which it appeared useless to oppose.
Personal confession
I have often blamed myself for having given up the struggle
after I had spent much time and energy criticising the first
version of Keynes's theoretical framework. Only after the
second part of my critique had appeared did he tell me he had
1 John Hicks, The Crisis in Keynesian Economics, Oxford University Press,
1974, p.1.
changed his mind and no longer believed what he had said in the
Treatise on Money of 1930 (somewhat unjustly towards himself,
as it seems to me, since I still believe that volume II of the
Treatise contains some of the best work he ever did). At any
rate, I felt it then to be useless to return to the charge, because he
seemed so likely to change his views again. When it proved that
this new version - the General Theory of 1936 - conquered most
of the professional opinion, and when in the end even some of
the colleagues I most respected supported the wholly Keynesian
Bretton Woods agreement, I largely withdrew from the debate,
since to proclaim my dissent from the near-unanimous views of
the orthodox phalanx would merely have deprived me of a
hearing on other matters about which I was more concerned at
the time. (I believe, however, that, so far as some of the best
British economists were concerned, their support of Bretton
Woods was determined more by a misguided patriotism - the
hope that it would benefit Britain in her post-war difficulties -
than by a belief that it would provide a satisfactory international
monetary order.)
II
THE MANUFACTURE OF UNEMPLOYMENT
I WROTE 36 years ago on the crucial point of difference:
'It may perhaps be pointed out that it has, of course, never been
denied that employment can be rapidly increased, and a position
of "full employment" achieved in the shortest possible time, by
means of monetary expansion - least of all by those economists
whose outlook has been influenced by the experience of a major
inflation. All that has been contended is that the kind of full
employment which can be created in this way is inherently
unstable, and that to create employment by these means is to
perpetuate fluctuations. There may be desperate situations in
which it may indeed be necessary to increase employment at all
costs, even if it be only for a short period - perhaps the situation
in which Dr Brüning found himself in Germany in 1932 was
such a situation in which desperate means would have been
justified. But the economist should not conceal the fact that to
[12] [13]
aim at the maximum of employment which can be achieved in
the short run by means of monetary policy is essentially the
policy of the desperado who has nothing to lose and everything
to gain from a short breathing space.’1
To this I would now like to add, in reply to the constant deliberate
misrepresentation of my views by politicians, who like to picture
me as a sort of bogey whose influence makes conservative parties
dangerous, what I regularly emphasize and stated nine months
ago in my Nobel Memorial Prize Lecture at Stockholm in the
following words:
'The truth is that by a mistaken theoretical view we have been
led into a precarious position in which we cannot prevent
substantial unemployment from re-appearing: not because, as
my view is sometimes misrepresented, this unemployment is
deliberately brought about as a means to combat inflation, but
because it is now bound to appear as a deeply regrettable but
inescapable consequence of the mistaken policies of the past as
soon as inflation ceases to accelerate.'2
Unemployment via 'full employment policies'
This manufacture of unemployment by what are called 'full
employment policies' is a complex process. In essence it operates
by temporary changes in the distribution of demand, drawing both
unemployed and already employed workers into jobs which will
disappear with the end of inflation. In the periodically recurrent
crises of the pre-1914 years the expansion of credit during the
preceding boom served largely to finance industrial investment,
and the over-development and subsequent unemployment
occurred mainly in the industries producing capital equipment. In
the engineered inflation of the last decades things were more
complex.
What will happen during a major inflation is illustrated by
1 F.A. Hayek, Profits, Interest and Investment, Routledge & Kegan Paul,
London, 1939, p. 63n.
2 F.A. Hayek, ‘The Pretence of Knowledge’, Nobel Memorial Prize Lecture
1974, reprinted in Full Employment at Any Price?,
本文档为【*新书上架*【哈耶克】流通中的选择:制止膨胀的方式】,请使用软件OFFICE或WPS软件打开。作品中的文字与图均可以修改和编辑,
图片更改请在作品中右键图片并更换,文字修改请直接点击文字进行修改,也可以新增和删除文档中的内容。
该文档来自用户分享,如有侵权行为请发邮件ishare@vip.sina.com联系网站客服,我们会及时删除。
[版权声明] 本站所有资料为用户分享产生,若发现您的权利被侵害,请联系客服邮件isharekefu@iask.cn,我们尽快处理。
本作品所展示的图片、画像、字体、音乐的版权可能需版权方额外授权,请谨慎使用。
网站提供的党政主题相关内容(国旗、国徽、党徽..)目的在于配合国家政策宣传,仅限个人学习分享使用,禁止用于任何广告和商用目的。