Keynes Suggested that Hayek Was Trapped in an Old Framework in which Only Changes in Credit Could Cause Savings to Differ from Investment

For Keynes’s second claim was that Hayek had misunderstood in a fundamental way the thrust of the Treatise [on Money], and that many of Hayek’s criticisms were therefore misdirected. What Hayek had missed, according to Keynes, was the claim that savings and investment could “get out of gear” within the framework of the Treatise [on Money] for any of a number of reasons that were independent of changes in the amount of credit in the system. Keynes suggested that Hayek’s misreading was due to his being trapped within an old framework, one in which only changes in credit could cause savings to differ from investment. Exposing Hayek’s flawed framework was then Keynes’s excuse for reviewing Prices and Production. . . . 

But Keynes’s claims notwithstanding, many sources of disturbance were possible within Hayek’s model, too. One reason that Keynes may have missed this point is that he focused on Prices and Production, where the origins of the cycle take a back seat to the changes in the structure of production that constitute the cycle. In the fourth chapter of his earlier (and at that time available only in German) Geldtheorie und Konjunkturtheorie [Monetary Theory and the Trade Cycle], Hayek described things other than the actions of banks that could cause, in Keynes’s later terminology, the “marginal efficiency of capital” curve to shift. But Keynes was right to say that for Hayek, the effects of the shift will necessarily be transmitted through the credit system: It cannot be otherwise in a monetary economy.

—Bruce Caldwell, ed., editor’s introduction to The Collected Works of F. A. Hayek, vol. 9, Contra Keynes and Cambridge: Essays, Correspondence, by F. A. Hayek (Indianapolis: Liberty Fund, 1995), 29-30.