by Hayek
[Front Matter and Table of Contents]: This segment contains the title page, publication details, acknowledgements, and a comprehensive table of contents for 'A Tiger by the Tail'. It outlines the book's structure, which serves as a 40-year running commentary by Hayek on Keynesianism, including essays on inflation, the misuse of aggregates, real versus monetary aspects of economics, and the outlook for the 1970s. [Introduction to the Third Edition by Joseph T. Salerno]: Joseph Salerno introduces the third edition by framing Hayek's work as a vital 'tract for our times' in light of the 2008 financial crisis. He critiques the return of 'crude, old-style Keynesianism' and the fallacy that money spending directly causes employment. Salerno explains Hayek's argument that depressions result from resource misallocation (especially labor) induced by distorted interest rates during inflationary booms, and warns that further inflation only postpones a more severe inevitable adjustment. [Preface and Preface to the Second Edition by Arthur Seldon]: Arthur Seldon provides context for the Hobart Paperbacks series and the intellectual conflict between Keynes and Hayek. He notes that while Keynes dominated post-war policy, Hayek's consistent critique of the inflationary implications of Keynesianism was eventually vindicated, leading to his 1974 Nobel Prize. Seldon questions whether Keynesian macro-economics has dangerously distracted attention from the micro-economic structure of relative prices and costs. [The Authors]: Biographical sketches of Friedrich August Hayek and Sudha R. Shenoy, detailing their academic appointments, major publications, and contributions to economic literature. [I. The Debate, 1931–1971 by Sudha Shenoy]: Sudha Shenoy traces the historical development of the debate between Keynesian and Hayekian economics from 1931 to 1971. She explains how Keynesianism became the dominant post-war orthodoxy focused on aggregate demand, while Hayek's 'Austrian' analysis focused on the coordination of relative prices. Shenoy argues that attempts to maintain full employment through inflation lead to a 'tiger by the tail' scenario where accelerating inflation is required to avoid recession, eventually necessitating failed 'incomes policies' that freeze the price system's signaling function. [II. The Misuse of Aggregates]: This section compiles Hayek's critiques of the use of statistical aggregates in economic policy. Hayek argues that there is no direct causal connection between macro totals (like the quantity of money or the general price level) and individual micro-decisions. He critiques 'monetary nationalism' and the fallacy of the 'price level,' explaining that economic reality consists of interlinked chains of individual price and income changes that often cross national boundaries. He warns that national stabilization policies often lead to cumulative international inflation by preventing necessary downward price adjustments. [Monetary Danger of Collective Bargaining]: Hayek predicts the process of wage-inflation, arguing that a monetary policy designed to adjust to a 'given' wage level is theoretically misconceived. He warns that collective bargaining will be used exclusively to raise wages, forcing the monetary authority to use depreciation to offset competitive disadvantages, a method workers will eventually recognize as a real wage cut. [Keynes’s Neglect of Scarcity]: Hayek critiques the Keynesian system for implicitly denying real scarcities and assuming that aggregate real output automatically follows monetary expenditure. He explores the mechanics of investment demand, idle balances, and the rate of profit, concluding that Keynes's 'General Theory' is an 'economics of abundance' that ignores the fundamental role of relative price variations and factor scarcity in guiding production. [Importance of Real Factors and the Rate of Saving]: This section emphasizes that the scarcity of real resources, rather than monetary streams, ultimately determines the profitability and volume of investment. Hayek argues against under-consumptionist theories, stating that the rate of saving sets the limits for successful investment by influencing investment demand, and that relative prices are determined by the impact of monetary demand on fixed supplies of goods in the short run. [Dangers of the Short Run and the Duty of the Economist]: Hayek warns against the increasing concentration on short-run monetary effects, describing it as a betrayal of the economist's duty to study long-run consequences. He argues that while monetary policy has wide scope in the very short run, ignoring underlying real forces leads back to a pre-scientific stage of economics reminiscent of mercantilism, famously summarized by the dismissive 'in the long run we are all dead' philosophy. [A Commodity Reserve Currency]: Hayek discusses the virtues of the gold standard—predictability and automaticity—while proposing a commodity reserve currency as a superior alternative. He argues that such a system would provide a stable international standard based on a composite of raw materials, removing arbitrary national controls and providing a mechanical rule for monetary management that avoids the defects of purely national policies. [Keynes's Comment on Hayek and the National Wage-Level]: Keynes responds to Hayek’s commodity reserve proposal, arguing that national price levels are determined by the relation of money-wages to efficiency. He asserts that the world has discarded the use of unemployment as a weapon to restrain wages, and therefore international currency schemes must allow for orderly adjustments of exchange rates to accommodate different national wage and price policies. [F.D. Graham’s Criticism of Keynes]: Professor Graham critiques Keynes's response to Hayek, highlighting the inflationary dangers of subordinating monetary policy to union wage demands. He argues that refusing to anchor the currency leads to a 'racket' where the politically powerful exploit the weak through unending price increases. Graham defends the automaticity of standards and suggests a minimum wage policy tied to efficiency as an alternative to monetary deception. [Keynes’s Reply to Graham]: In a brief reply, Keynes acknowledges the theoretical appeal of a tabular standard but dismisses it as impractical for contemporary policy. He emphasizes the political danger of appearing to impose external pressure on national wage levels and suggests that international buffer stocks are a more opportune starting point for evolving monetary techniques. [Full Employment, Planning and Inflation]: Hayek argues that modern full employment policies rely on short-term monetary pressure that inevitably leads to inflation and government controls. He contends that unemployment is often caused by a maldistribution of labor rather than insufficient aggregate demand; monetary expansion merely draws labor into unsustainable occupations, creating a dilemma where inflation must either continue indefinitely or stop and cause even greater unemployment. [Inflation Resulting from Downward Inflexibility of Wages]: Hayek identifies the core of the 'Keynesian Revolution' as the assumption that money wages cannot be reduced, leading to a policy of reducing the value of money instead. This creates a vicious circle where inflation must be progressive to remain effective as a stimulus. He calls for restoring responsibility for wage levels to trade unions and recognizing that stable monetary conditions require wages to adapt to a fixed stream of money expenditure. [Labour Unions and Employment: The Problem of Union Power]: Hayek argues that labour unions obtain higher wages for members only by restricting labour supply, which reduces wages for non-union workers or creates unemployment. He traces the historical shift of unions from persecuted associations to uniquely privileged institutions exempt from general laws, particularly in Britain and the US. He contends that unions have become the primary source of coercion in the market, often directed against fellow workers rather than employers. [Union Coercion and the Distortion of the Wage Structure]: This section examines how union coercion of fellow workers allows for the expropriation of enterprise returns, though this rarely benefits all workers. Hayek explains that raising real wages above market levels necessarily creates unemployment or forces others into lower-paid jobs, meaning unions serve sectional rather than class interests. He argues that the perceived success of unions in raising wages is often an illusion maintained by inflationary policies that prevent immediate unemployment. [Harmful Activities and the Non-coercive Role of Unions]: Hayek details the dangers of union monopolies, including the restriction of labour mobility and the deterrence of investment. He distinguishes between coercive unionism and the potentially useful, non-coercive functions of unions, such as acting as 'friendly societies' or participating in the internal rule-making of large organizations. He specifically critiques 'industrial democracy' and 'codetermination' as impractical syndicalist ideas that conflict with consumer interests. [Legal Reforms and the Rule of Law in Labour Relations]: Hayek proposes legal changes to restore the rule of law, including the prohibition of coercive picketing and the invalidation of closed-shop contracts as restraints of trade. He argues that while special 'right-to-work' legislation is regrettable, it is necessary to remove the specific legal privileges previously granted to unions. The goal is to ensure that coercion is treated as illegitimate regardless of whether it is employed by employers or employees. [Inflation: A Short-term Expedient with Long-term Dangers]: Hayek compares inflation to drug-taking, noting that its initial effects are pleasant but require ever-increasing doses to maintain the stimulus. He argues that inflation only stimulates the economy as long as it is unforeseen; once expectations catch up, the rate must accelerate to avoid a recession. He warns that inflation destroys the basis of business accounting and creates a dangerous gap between the wealthy and the propertyless by eroding savings. [Personal Recollections of Keynes and the Macro-Economic Error]: Hayek provides a personal and intellectual portrait of J.M. Keynes, praising his personality while critiquing his economic methodology. He argues that Keynes's 'General Theory' was a 'tract for the times' that mistakenly elevated macro-analysis (thinking in aggregates) over micro-economic price relationships. Hayek asserts that Keynes's assumption of 'full unemployment' (unused resources) made the price system seem redundant and led to the revival of inflationist fallacies. [General and Relative Wages: The Role of the Pricing System]: Hayek discusses the role of the pricing system as a transmitter of empirical knowledge and the necessity of price changes for economic adaptation. He argues that efforts to enforce 'social justice' through price and income protection prevent the reallocation of labor and resources, ultimately lowering aggregate real income. He emphasizes that maintaining wealth in a changing world requires continuous adjustments in relative remuneration, which macro-economic aggregates often conceal. [Wage Rigidities and the Legacy of Keynesian Policy]: Hayek critiques the institutionalization of wage rigidities and the use of monetary policy to circumvent them. He argues that the 'Keynesian' focus on the general level of real wages, born from Britain's unique post-1925 situation, led to a neglect of the more crucial problem of wage structure flexibility. He asserts that trade union power to preserve traditional wage differentials is a primary obstacle to the advancement of real income for the working class as a whole. [Caracas Conference Remarks: A Tiger by the Tail]: In these remarks from the Caracas conference, Hayek introduces the metaphor of having a 'tiger by the tail' to describe the dilemma of inflation-borne prosperity. He explains that once an economy becomes dependent on inflation, slowing it down produces a recession, yet continuing it leads to a runaway situation. He expresses disillusionment with the Bretton Woods system's shift of responsibility to creditor nations. [The Outlook for the 1970s: Open or Repressed Inflation?]: Hayek analyzes the progression from open inflation to repressed inflation through price controls, arguing that the latter leads inevitably to a centrally directed economy. He identifies trade union wage determination as the ultimate cause of the inflationary trend and proposes profit-sharing as a radical institutional change to restore wage flexibility. He warns that unless the basic cause of inflation is addressed, both economic progress and political freedom are threatened. [Addendum 1978: The Relative Price Structure Approach]: Sudha Shenoy provides an addendum contrasting the 'Austrian' approach to inflation with the standard price-index approach. She argues that focusing on a statistical average (the price index) ignores the dislocating effects of monetary expansion on individual price relationships. This discoordination leads to unsustainable patterns of output and employment, as resources are misallocated based on monetary signals rather than real scarcities. [Good and Bad Unemployment Policies]: Hayek distinguishes between temporary relief from unemployment via monetary expansion and a lasting cure. He argues that persistent unemployment is primarily a structural wage problem caused by rigidities and monopolies in labor and capital. He warns that relying solely on monetary policy to fix these issues leads to a 'totalitarian state' by necessitating increasing government control over the economic system. [Full Employment Illusions and the Acceleration Principle]: Hayek critiques the 'full employment' catchword and the theory that increasing total money expenditure can permanently maintain employment. He explains the 'acceleration principle of derived demand,' showing how an excessive increase in consumer demand can actually lead to a slump in capital goods industries by shifting investment from fixed to working capital. This analysis predicts 'stagflation' by showing why maintaining purchasing power fails to cure structural unemployment. [Review of Beveridge: Full Employment in a Free Society]: Hayek reviews William Beveridge's 'Full Employment in a Free Society,' critiquing its reliance on Keynesian 'demand-deficiency' theory. He argues that Beveridge's proposal to subject all private investment to a National Investment Board threatens essential liberties. Hayek disputes the idea that depressions are caused by over-saving, suggesting instead that they stem from the overgrowth of capital-goods industries during booms, which monetary expansion only aggravates. [Hayek's Bibliography and Index]: A comprehensive list of F.A. Hayek's major economic and philosophical publications from 1929 to 1979, followed by a detailed subject and author index for the volume 'A Tiger by the Tail'.
This segment contains the title page, publication details, acknowledgements, and a comprehensive table of contents for 'A Tiger by the Tail'. It outlines the book's structure, which serves as a 40-year running commentary by Hayek on Keynesianism, including essays on inflation, the misuse of aggregates, real versus monetary aspects of economics, and the outlook for the 1970s.
Read full textJoseph Salerno introduces the third edition by framing Hayek's work as a vital 'tract for our times' in light of the 2008 financial crisis. He critiques the return of 'crude, old-style Keynesianism' and the fallacy that money spending directly causes employment. Salerno explains Hayek's argument that depressions result from resource misallocation (especially labor) induced by distorted interest rates during inflationary booms, and warns that further inflation only postpones a more severe inevitable adjustment.
Read full textArthur Seldon provides context for the Hobart Paperbacks series and the intellectual conflict between Keynes and Hayek. He notes that while Keynes dominated post-war policy, Hayek's consistent critique of the inflationary implications of Keynesianism was eventually vindicated, leading to his 1974 Nobel Prize. Seldon questions whether Keynesian macro-economics has dangerously distracted attention from the micro-economic structure of relative prices and costs.
Read full textBiographical sketches of Friedrich August Hayek and Sudha R. Shenoy, detailing their academic appointments, major publications, and contributions to economic literature.
Read full textSudha Shenoy traces the historical development of the debate between Keynesian and Hayekian economics from 1931 to 1971. She explains how Keynesianism became the dominant post-war orthodoxy focused on aggregate demand, while Hayek's 'Austrian' analysis focused on the coordination of relative prices. Shenoy argues that attempts to maintain full employment through inflation lead to a 'tiger by the tail' scenario where accelerating inflation is required to avoid recession, eventually necessitating failed 'incomes policies' that freeze the price system's signaling function.
Read full textThis section compiles Hayek's critiques of the use of statistical aggregates in economic policy. Hayek argues that there is no direct causal connection between macro totals (like the quantity of money or the general price level) and individual micro-decisions. He critiques 'monetary nationalism' and the fallacy of the 'price level,' explaining that economic reality consists of interlinked chains of individual price and income changes that often cross national boundaries. He warns that national stabilization policies often lead to cumulative international inflation by preventing necessary downward price adjustments.
Read full textHayek predicts the process of wage-inflation, arguing that a monetary policy designed to adjust to a 'given' wage level is theoretically misconceived. He warns that collective bargaining will be used exclusively to raise wages, forcing the monetary authority to use depreciation to offset competitive disadvantages, a method workers will eventually recognize as a real wage cut.
Read full textHayek critiques the Keynesian system for implicitly denying real scarcities and assuming that aggregate real output automatically follows monetary expenditure. He explores the mechanics of investment demand, idle balances, and the rate of profit, concluding that Keynes's 'General Theory' is an 'economics of abundance' that ignores the fundamental role of relative price variations and factor scarcity in guiding production.
Read full textThis section emphasizes that the scarcity of real resources, rather than monetary streams, ultimately determines the profitability and volume of investment. Hayek argues against under-consumptionist theories, stating that the rate of saving sets the limits for successful investment by influencing investment demand, and that relative prices are determined by the impact of monetary demand on fixed supplies of goods in the short run.
Read full textHayek warns against the increasing concentration on short-run monetary effects, describing it as a betrayal of the economist's duty to study long-run consequences. He argues that while monetary policy has wide scope in the very short run, ignoring underlying real forces leads back to a pre-scientific stage of economics reminiscent of mercantilism, famously summarized by the dismissive 'in the long run we are all dead' philosophy.
Read full textHayek discusses the virtues of the gold standard—predictability and automaticity—while proposing a commodity reserve currency as a superior alternative. He argues that such a system would provide a stable international standard based on a composite of raw materials, removing arbitrary national controls and providing a mechanical rule for monetary management that avoids the defects of purely national policies.
Read full textKeynes responds to Hayek’s commodity reserve proposal, arguing that national price levels are determined by the relation of money-wages to efficiency. He asserts that the world has discarded the use of unemployment as a weapon to restrain wages, and therefore international currency schemes must allow for orderly adjustments of exchange rates to accommodate different national wage and price policies.
Read full textProfessor Graham critiques Keynes's response to Hayek, highlighting the inflationary dangers of subordinating monetary policy to union wage demands. He argues that refusing to anchor the currency leads to a 'racket' where the politically powerful exploit the weak through unending price increases. Graham defends the automaticity of standards and suggests a minimum wage policy tied to efficiency as an alternative to monetary deception.
Read full textIn a brief reply, Keynes acknowledges the theoretical appeal of a tabular standard but dismisses it as impractical for contemporary policy. He emphasizes the political danger of appearing to impose external pressure on national wage levels and suggests that international buffer stocks are a more opportune starting point for evolving monetary techniques.
Read full textHayek argues that modern full employment policies rely on short-term monetary pressure that inevitably leads to inflation and government controls. He contends that unemployment is often caused by a maldistribution of labor rather than insufficient aggregate demand; monetary expansion merely draws labor into unsustainable occupations, creating a dilemma where inflation must either continue indefinitely or stop and cause even greater unemployment.
Read full textHayek identifies the core of the 'Keynesian Revolution' as the assumption that money wages cannot be reduced, leading to a policy of reducing the value of money instead. This creates a vicious circle where inflation must be progressive to remain effective as a stimulus. He calls for restoring responsibility for wage levels to trade unions and recognizing that stable monetary conditions require wages to adapt to a fixed stream of money expenditure.
Read full textHayek argues that labour unions obtain higher wages for members only by restricting labour supply, which reduces wages for non-union workers or creates unemployment. He traces the historical shift of unions from persecuted associations to uniquely privileged institutions exempt from general laws, particularly in Britain and the US. He contends that unions have become the primary source of coercion in the market, often directed against fellow workers rather than employers.
Read full textThis section examines how union coercion of fellow workers allows for the expropriation of enterprise returns, though this rarely benefits all workers. Hayek explains that raising real wages above market levels necessarily creates unemployment or forces others into lower-paid jobs, meaning unions serve sectional rather than class interests. He argues that the perceived success of unions in raising wages is often an illusion maintained by inflationary policies that prevent immediate unemployment.
Read full textHayek details the dangers of union monopolies, including the restriction of labour mobility and the deterrence of investment. He distinguishes between coercive unionism and the potentially useful, non-coercive functions of unions, such as acting as 'friendly societies' or participating in the internal rule-making of large organizations. He specifically critiques 'industrial democracy' and 'codetermination' as impractical syndicalist ideas that conflict with consumer interests.
Read full textHayek proposes legal changes to restore the rule of law, including the prohibition of coercive picketing and the invalidation of closed-shop contracts as restraints of trade. He argues that while special 'right-to-work' legislation is regrettable, it is necessary to remove the specific legal privileges previously granted to unions. The goal is to ensure that coercion is treated as illegitimate regardless of whether it is employed by employers or employees.
Read full textHayek compares inflation to drug-taking, noting that its initial effects are pleasant but require ever-increasing doses to maintain the stimulus. He argues that inflation only stimulates the economy as long as it is unforeseen; once expectations catch up, the rate must accelerate to avoid a recession. He warns that inflation destroys the basis of business accounting and creates a dangerous gap between the wealthy and the propertyless by eroding savings.
Read full textHayek provides a personal and intellectual portrait of J.M. Keynes, praising his personality while critiquing his economic methodology. He argues that Keynes's 'General Theory' was a 'tract for the times' that mistakenly elevated macro-analysis (thinking in aggregates) over micro-economic price relationships. Hayek asserts that Keynes's assumption of 'full unemployment' (unused resources) made the price system seem redundant and led to the revival of inflationist fallacies.
Read full textHayek discusses the role of the pricing system as a transmitter of empirical knowledge and the necessity of price changes for economic adaptation. He argues that efforts to enforce 'social justice' through price and income protection prevent the reallocation of labor and resources, ultimately lowering aggregate real income. He emphasizes that maintaining wealth in a changing world requires continuous adjustments in relative remuneration, which macro-economic aggregates often conceal.
Read full textHayek critiques the institutionalization of wage rigidities and the use of monetary policy to circumvent them. He argues that the 'Keynesian' focus on the general level of real wages, born from Britain's unique post-1925 situation, led to a neglect of the more crucial problem of wage structure flexibility. He asserts that trade union power to preserve traditional wage differentials is a primary obstacle to the advancement of real income for the working class as a whole.
Read full textIn these remarks from the Caracas conference, Hayek introduces the metaphor of having a 'tiger by the tail' to describe the dilemma of inflation-borne prosperity. He explains that once an economy becomes dependent on inflation, slowing it down produces a recession, yet continuing it leads to a runaway situation. He expresses disillusionment with the Bretton Woods system's shift of responsibility to creditor nations.
Read full textHayek analyzes the progression from open inflation to repressed inflation through price controls, arguing that the latter leads inevitably to a centrally directed economy. He identifies trade union wage determination as the ultimate cause of the inflationary trend and proposes profit-sharing as a radical institutional change to restore wage flexibility. He warns that unless the basic cause of inflation is addressed, both economic progress and political freedom are threatened.
Read full textSudha Shenoy provides an addendum contrasting the 'Austrian' approach to inflation with the standard price-index approach. She argues that focusing on a statistical average (the price index) ignores the dislocating effects of monetary expansion on individual price relationships. This discoordination leads to unsustainable patterns of output and employment, as resources are misallocated based on monetary signals rather than real scarcities.
Read full textHayek distinguishes between temporary relief from unemployment via monetary expansion and a lasting cure. He argues that persistent unemployment is primarily a structural wage problem caused by rigidities and monopolies in labor and capital. He warns that relying solely on monetary policy to fix these issues leads to a 'totalitarian state' by necessitating increasing government control over the economic system.
Read full textHayek critiques the 'full employment' catchword and the theory that increasing total money expenditure can permanently maintain employment. He explains the 'acceleration principle of derived demand,' showing how an excessive increase in consumer demand can actually lead to a slump in capital goods industries by shifting investment from fixed to working capital. This analysis predicts 'stagflation' by showing why maintaining purchasing power fails to cure structural unemployment.
Read full textHayek reviews William Beveridge's 'Full Employment in a Free Society,' critiquing its reliance on Keynesian 'demand-deficiency' theory. He argues that Beveridge's proposal to subject all private investment to a National Investment Board threatens essential liberties. Hayek disputes the idea that depressions are caused by over-saving, suggesting instead that they stem from the overgrowth of capital-goods industries during booms, which monetary expansion only aggravates.
Read full textA comprehensive list of F.A. Hayek's major economic and philosophical publications from 1929 to 1979, followed by a detailed subject and author index for the volume 'A Tiger by the Tail'.
Read full text