[cboyack]

Did Hayek disagree with Mises regarding the economic calculation problem with socialism, or was he merely trying to emphasize another problem with socialism?

[jmherbener]

It may be more accurate to say that Hayek thought Mises misunderstood the reason why central planners can’t calculate in socialism. Peter Klein, an expert on Hayek, makes some relevant comments in this article:

http://mises.org/page/1454/Biography-of-F-A-Hayek-18991992

Here is Mises on Hayek’s contribution to the economic calculation debate:

http://mises.org/journals/qjae/pdf/qjae3_1_2.pdf

[jmherbener]

Hayek-Novice, you might also take a look at Peter Klein’s short biography of Hayek.

http://mises.org/page/1454/Biography-of-F-A-Hayek-18991992

[miljacic]

This last link was excellent, and I browsed Peter Klein’s name on mises.org, and this presentation of his helped a lot:
http://library.mises.org/books/Peter%20G%20Klein/Economics%20of%20F%20A%20Hayek.pdf

in particular, the last slide of the presentation entitled “Hayek on Mises”.

To me it seems striking that Hayek writes about this in 1981, 60 years after Mises’s Socialism, and only then saying only that it “now seems to him”… that Mises was factually wrong. So it took him quite a while to settle on a particular interpretation of Mises’s words. That tells me how subtle the differences between the two of them were. I’d think that whoever is trying to dehomogenize them has a seriously complex problem at hand, and so the critical audience should not accept anything but a very high quality analysis.

[cboyack]

In the short biography of Hayek by Peter Klein that you linked to, he mentioned the Hayekian triangle. What is it, how does it work, and how useful is it?

I’ll admit that I’m hesitating more and more with studying Hayek. I initially liked him, but lately i’m becoming more and more doubtful as I’m seeing more differences between him and Mises.

In the last live session(question #9 about this was from me), you did recommend studying Hayek, but as for me, the extent of my economic knowledge comes from reading Austrian economic books and listening to economic lectures here and at Mises.org, Recognizing and understanding where and how Hayek went wrong would be difficult if not impossible on my own.

Has anyone taken Hayek’s ideas such as the knowledge problem, ect and correctly applied them to the Misesian economic framework?

Either I’m unnecessarily making a big deal out of it and I should study him, carefully, or maybe I should stay away from Hayek until later on when i’m much more fluent in Austrian Economics.

[jmherbener]

The Hayekian triangle is a pedagogical devise used to illustrate certain features of an economy’s capital structure. It’s pictured as a right triangle with an acute angle on the far left of its base and the right angle on the far right of its base. Its height is the value of consumer goods produced in the economy. As production moves through each stage, one moves from the left to the right accumulating value. The first stage of production is extracting raw materials, the second stage is producing primitive capital goods, the later stages are producing sophisticated capital goods. For example, iron is mined, refined, made into steel, the steel is formed into fenders for a car, then the car is assembled. At each stage value is being added and the extra value (i.e., the difference between buying prices of inputs and selling prices of outputs) is the interest rate when the economy is in equilibrium. So the “slope” of the hypotenuse is the rate of interest.

Rothbard improved on the triangle with the trapezoids he uses the depict the capital structure of the economy in his book, Man, Economy, and State. These devises are useful in analyzing the dynamics of a market economy. For example, how do production processes change through the capital structure if people’s time preferences decline (the slope of the hypotenuse flattens) or if the state generates monetary inflation and credit expansion.

Check out Chs. 5 and 6 of Rothbard’s book:

http://library.mises.org/books/Murray%20N%20Rothbard/Man,%20Economy,%20and%20State,%20with%20Power%20and%20Market.pdf

I think your suggestion about studying Hayek is wise. Learn about Austrian economics from Rothbard and Mises and then tackle Hayek.

To get an idea of Hayek’s contributions to Austrian economics as such, you might take a look at Joe Salerno’s introduction to Prices and Production and Other Essays.

http://mises.org/books/hayekcollection.pdf

[cboyack]

I’m not finding an trapezoids in Man, Economy, and State, but i’ll keep my eye out for them.

I read the Mises institute’s pocket edition of the Economic Calculation in the Socialist commonwealth, and there is a short section at the end written by Jo Salerno where he was critical of Hayek in emphasizing the knowledge problem over economic calculation, but also seemed to indicate that some parts could compliment Mises’ work?

-Andrew

[jmherbener]

Look at page 369 in MES. The trapezoid is the shaded area of the rectangle.

[cboyack]

Ok, I see what you’re referring to now. I didn’t realize that Rothbard was building on Hayek’s work with that graphic representation. The height is determined by the number of stages of production, the slope is determined by the interest rate, and the length represents what is spent on a single good or the aggregate supply of all goods in the similar diagram on page 391?

-Andrew

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