Roy Harrod by Esteban Pérez Caldentey

Author:Esteban Pérez Caldentey
Language: eng
Format: epub, pdf
ISBN: 9781349740857
Publisher: Palgrave Macmillan UK

The intertemporal method formed the basis to argue against a monetary policy of stabilization. Hayek maintained that a monetary policy of stabilization would artificially distort the exchange relations and in the production structure resulting from the working of the real forces under an intertemporal setting. In his own words (ibid., p. 210), “Any policy which seeks to arbitrarily influence ‘the value of money’ will prevent the establishment of that natural structure of prices through time corresponding to the intertemporal exchange (and production structure) relations originating from barter, and alone able to ensure undisturbed reproduction.”

This was one of the cornerstones of Hayek’s theory of the trade cycle and a key argument he would develop further in Prices and Production (1931) and also in the Monetary Policy and the Trade Cycle (1933) which constituted the target of Harrod’s criticism in the “Expansion of Credit in an Advancing Community” (1934a) (see also Harrod 1948a, pp. 32–34). Intertemporal equilibrium was further developed by John Hicks in Value and Capital (1939) which “…most Anglo-Saxon economists, would probably agree…heralded the introduction of the notion of intertemporal equilibrium” (Milgate 1982, p. 129). Hicks’s book also received strong criticism from Harrod (1939) for being an exercise in static analysis.17

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