A very short letter to many Austrians

Dear Austrian reader,

I get the impression that you seem to think that Hayek advocated a stable money supply in his early works. This was far from the case. He advocated a stable effective money supply – stable MV, or stable Nominal GDP, or stable Aggregate Demand. He expected the supply of money to move in response to changes in money demand. He’s quite clear about this in Prices and Production: 
“any change in the velocity of circulation would have to be compensated by a reciprocal change in the amount of money in circulation if money is to remain neutral towards prices.” (Hayek, 1935, p.124).
By the way, in the same work Hayek states that it is
“a fact which has been established by long experience, that in times of crisis central banks should give increased accommodation and extend thereby their circulation in order to prevent panics, and that they can do it to a great extent without effects which are injurious.” (Hayek, 1935, p.109).
These quotes (and others) are often glossed over by Austrians who want to form a unified front by stressing that Mises and Hayek really did have the same views on how an Austrian business cycle develops. They didn’t.
Best regards,


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