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Hayek later changed his mind on monetary policy, denounced some of his old views, and endorsed inflation targeting, so that's not a very good example.

DennisP 14y ago
He published Denationalization of Money when he was 77 years old.
narrator 14y ago
Funny thing about Hayek. If you read "Monetary Theory and the Trade Cycle" (http://mises.org/daily/3121 http://mises.org/daily/3121) he describes the dynamics of the boom/bust cycle and how they are a direct result of fractional reserve banking but then says: "If it were possible, as has been repeatedly asserted in recent English literature,[114] to keep the total amount of bank deposits entirely stable, that would constitute the only means of getting rid of cyclical fluctuations. This seems to us purely utopian. It would necessitate the complete abolition of all bank money — i.e., notes and checks — and the reduction of the banks to the role of brokers, trading in savings. But even if we assume the fundamental possibility of this state of things, it remains very questionable whether many would wish to put it into effect if they were clear about its consequences. The stability of the economic system would be obtained at the price of curbing economic progress. The rate of interest would be constantly above the level maintained under the existing system (for, generally speaking, even in times of depression some extension of credit takes place).[115] The utilization of new inventions and the "realization of new combinations" would be made more difficult, and thus there would disappear a psychological incentive towards progress, whose importance cannot be judged on purely economic grounds. It is no exaggeration to say that not only would it be impossible to put such a scheme into practice in the present state of economic enlightenment of the public, but even its theoretical justification would be doubtful." He's basically apologizing for finding all these flaws in the monetary system and central banking. He was convinced, at least at this point in his life that he could reason with the financial system to resolve these issues through better understanding. That's the interesting thing about Hayek. He was not opposed to the structure of the financial system out of ideological conviction but just that he had enormous insight into the dynamics of the system and stated his understanding without editing or simply repeating the conventional wisdom.

DennisP 14y ago

He published Denationalization of Money when he was 77 years old.

narrator 14y ago

Funny thing about Hayek. If you read "Monetary Theory and the Trade Cycle" (http://mises.org/daily/3121 http://mises.org/daily/3121) he describes the dynamics of the boom/bust cycle and how they are a direct result of fractional reserve banking but then says: "If it were possible, as has been repeatedly asserted in recent English literature,[114] to keep the total amount of bank deposits entirely stable, that would constitute the only means of getting rid of cyclical fluctuations. This seems to us purely utopian. It would necessitate the complete abolition of all bank money — i.e., notes and checks — and the reduction of the banks to the role of brokers, trading in savings. But even if we assume the fundamental possibility of this state of things, it remains very questionable whether many would wish to put it into effect if they were clear about its consequences. The stability of the economic system would be obtained at the price of curbing economic progress. The rate of interest would be constantly above the level maintained under the existing system (for, generally speaking, even in times of depression some extension of credit takes place).[115] The utilization of new inventions and the "realization of new combinations" would be made more difficult, and thus there would disappear a psychological incentive towards progress, whose importance cannot be judged on purely economic grounds. It is no exaggeration to say that not only would it be impossible to put such a scheme into practice in the present state of economic enlightenment of the public, but even its theoretical justification would be doubtful." He's basically apologizing for finding all these flaws in the monetary system and central banking. He was convinced, at least at this point in his life that he could reason with the financial system to resolve these issues through better understanding. That's the interesting thing about Hayek. He was not opposed to the structure of the financial system out of ideological conviction but just that he had enormous insight into the dynamics of the system and stated his understanding without editing or simply repeating the conventional wisdom.