Prices and Production

In 'Prices and Production,' Hayek integrates Böhm-Bawerk’s contributions on capital and interest into Mises’ theory of the business cycle.

He explains how changes in prices are coordinated with the expansion and contraction of the money supply and discusses the relationship between saving and investing.

Hayek argues that a healthy economy allocates resources based on the preferences of savers and that the interest rate is a tradeoff between present and future consumption.

The book is a critical analysis of monetary policy and its effects on economic cycles, contrasting with Keynesian theories and emphasizing the importance of market-determined prices in resource allocation.