Review Of Hayek’s Economic Theory

Friedrich August von Hayek(1899-1992)，was an important person of history ofeconomic thoughts in the20th century, and one of the most important representativesof the Austrian School. He was a winner of Nobel prize in economist in1974, andresearched on many fields just like economics, political science, philosophy,intellectual history, law, psychology, and epistemology. It could be said that he was aprolific economists and political philosophers.In the1970s, the neo-liberal ideological revived in the West, Hayek’s ideologicaland theoretical were paid attention again. With the reform and opening up, the arrivingof the market economy, there was a wave of liberal ideology research in academiccommunity. China’s economic system reform or restructuring associated with Hayek’sliberal economic ideology, Hayek believed that a free market economy began tooccupy China, therefore, Hayek’s ideas and theories were paid more attention in China,and his liberal philosophy was becoming a hot topic in Chinese scholars. Unfortunately,not many Chinese scholars started from the the Hayek’s pure economic theory, analysisand research the system. In order to fill this blank, this article will research and discussthe economic theories of Hayek, And comparative analysis of Hayek and Marx,Keynes and Friedman who has the equal status as Hayek.The paper introduced Hayek’s life first, mainly discussed the historicalbackground, ideological origin, the formation and development of the economic theory.Hayek had growed and lived in an era of great change, he experienced two world wars,when his economic theory also generated. The main source of Hayek’s economictheory were classical liberalism and the Austrian School. In Classical liberalism,Hayek believed in the British tradition, especially Hume and Kant, these ideas becomean important source of his liberalism and the principle of "spontaneous order" in thefuture. Austrian School of Economics impacted Hayek’s economic theories moredirectly, his theory of value, in general, was the Austrian school of marginal utilitytheory of value. Hayek inherited Carl Menger’s individualism and subjectivism in the Austrian School, and Mises’ praxeology methodology, drawed on the B hm-Bawerk’scapital theory and Mises’ credit cycle theory, through participation in social Marxisteconomic accounting controversy and argued with Keynes, he further developed hisown unique economic theory. Hayek puted the neo-liberal ideas into his economictheories, and defended the liberalism all his life.Hayek’s methodology of economics was special, he used individualism,subjectivism and praxeology as methods to construct his whole economic theoreticalsystem. Hayek’s economic theory based on the human action, by interpreting the textof the axiom that "individuals engaged in the action of a specific purpose", whichmeaned that his methodological individualism and subjectivism. Hayek could bedescribed as a "non-mainstream" western economist, unlike traditional economicsstudies, he did an innovative research, used the basic principles of economics, politicaltheory, law, philosophy of science, and The philosophy of thinking in his own way,defended his liberal from a wider space. Although Hayek have gained internationalprestige and honor in several scientific fields at the same time, however, hiscontribution to the other social sciences, largely as an extension of his academicachievements in the area of economics and its methodological basis.Hayek’s theory of value was the foundation and starting point of all economictheories, which came from the tradition of the Austrian School, was the marginal utilitytheory of value or subjective value theory. On the basis of the subjective theory ofvalue, Hayek extended it to the whole social sphere, raised subjective theory ofknowledge. In the theory of knowledge, he raised awareness “discrete personalknowledge”and unconscious tacit knowledge, provided another theoretical basis forhis" liberal "and" spontaneous order "thinking. Hayek applied the knowledge to themarket economy theory on the basis of the subjective theory of value. In this theory, heemphasized the role of the price system, the mechanism of competition and marketdiscovery, dissemination and exchange of information. In1935, Hayek involved in afamous controversy on socialist economic accounting. As a supporters of Mises,Hayek argued with western socialists inventively by using his theory of knowledge andthe market process theory, tried to prove that the socialist economy can not effectivelyaccounting, planned economy is inefficient, only the market economy can allocate theresources effectively. This debate also became the turning point of the of Hayekacademic career, so he gradually became a staunch liberal defenders from a moderate socialists.Hayek’s Monetary Theory was made of neutral monetary theory and freemonetary theory. In Neutral monetary theory, he continued the Austrian theoryideology, borrowed the term "neutral currency" from Wicksell. Starting from thesubjective ideology, with the personal analysis, Hayek did a further discussion of thebalanced relationship between the currency and commodity prices, currency andeconomic, formed its own unique neutral monetary theory. To against the GreatDepression of the1930s, using the neutral monetary theory, Hayek proposed a solutionthat kept the currency near neutral state in the long term, maintained the quantity ofmoney unchanged, and limitted the monetary policy from the central bank. Hayekraised the free monetary theory when western world appear economic stagnation in the1970s. The theory againsted the state monopoly on currency issue, and believed thatshould be provided by private banks to issue currency. Hayek also anticipated theeconomic crisis and the failure of Keynesian, and got the extensive attention.Hayek’s business cycle theory, on the one hand, got the revelation of the creditcycle doctrine of the Austrian economists Mises, on the other hand, stemmed fromWicksell’s monetary theory and one of the representatives of the Austrian SchoolB hm-Bawerk’s capital theory. Hayek inherited the previous theories and ideas, basedon the monetary theory and capital theory of his own, shaped a well-known theory ofbusiness cycles. In this theory, Hayek did an analysis of the production structure andproduction process, at the same time, pointed out that changes in the money supplymakes currency interest rate and the natural rate of interest departure from theproduction process circuitous change that changes in the structure of production led tothe cyclical economic fluctuations. Hayek proposed that the fundamental way toovercome the economic crisis is to keep the money maintain neutral and follow themarket physique spontaneous coordination, configuration. Achieve these requirementsmust be implemented free of monetary policy, the abolition of the central bank, theabolition of the national currency monopoly. Hayek advocated liberal economicpolicies, strongly opposed to government intervention in the economy.Finally, this paper will do a comparative analysis of Hayek and Keynes, Friedman,and Marx who were the representative economists in the west economic circles. As thesuccessor of the laissez-faire economy, Hayek critiqued Keynesian governmentinterventionism completely, but he and Friedman who was also the Laissez-faire economic successor had differences in methodology, economic theory and policyadvocates. However, these were just different views of the same class. Hayek, who wasthe representative of the bourgeoisie, had a true, no doubt the antagonistic relationshipbetween the proletariat of Marx. In background of China, through comparative analysisof Hayek and Marx, could play a role of reference and inspiration for Chinese socialisteconomic construction.