In his Chapter 2 Goodspeed compares Keynes's Treatise on Money ( 1950) with Hayek's Prices and Production( 1967). Here, establishing a Wicksell connection is fairly straightforward. But so too, I would contend, is identifying the critical Keynes-Hayek disconnect. Keynes explicitly recognizes that his "Fundamental Equations" give play to a possible Wicksellian divergence between saving and investment. As quoted by Goodspeed (p. 50), "In substance and intention, Wicksell's theory is closely akin ... to the theory in this Treatise." But, assuming full employment and lacking an underlying theory of capital, Keynes could conceive of an equilibrating process (bringing saving and investment into alignment) only in terms of adjustments in his equations' two price levels (pertaining to consumption goods and investment goods).
Copyright (c) 2012 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (email@example.com). Published by EH.Net (September 2012). All EH.Net reviews are archived at http://www.eh.net/BookReview.
Subject: History of Economic Thought; Methodology