Paul Rosenstein-Rodan Told Ludwig Lachmann That “the Major Flaw in Hayek” Is the Question of Expectations

Lachmann had for a while been troubled by the influence of people's expectations on their actions, and felt that in Price and Production (1935a)  and Monetary Theory and the Trade Cycle (1933a) and in his debate with Keynes subsequent to the publication of Keynes's Treatise (1930), Hayek had neglected to adequately address expectations in the trade cycle story offered as a counter-argument to Keynes. Reading Keynes's General Theory (1936) upon its publication, he was surprised to find Keynes's extensive treatment of the subject.

Lachmann always maintained that the quarrel (the Hayek-Keynes debate) was unnecessary and that no important economic principles were at stake. It concerned empirical questions about how markets work in the modern industrial world (that is, which markets were fix-price and which were flex-price, in Hicks's terminology) although there were also some political undertones. Keynes had won, he thought, partly because he had introduced expectations most effectively into his theory, at least where it suited his purposes, whereas neither Mises nor Hayek responded in like manner. In 1934 Paul Rosenstein-Rodan had said to Lachmann that the question of expectations was ‘the major flaw in Hayek.’ Keynes had not made the same mistake.

—Peter Lewin, “Hayek and Lachmann,” in Elgar Companion to Hayekian Economics, ed. Roger W. Garrison and Norman Barry (Cheltenham, UK: Edward Elgar Publishing, 2014), 166.

Although Capital Is Central to Issues of Market Coordination, Capital Theory Held No Broad Interest

In 1941, The Pure Theory of Capital was too late -- and too obscure -- to catch the attention of an economics profession that was fixated upon John Maynard Keynes. Although capital is central to issues of market coordination, capital theory held no broad interest, even prior to the developing era of Keynesian economics:

In the Cambridge tradition that governed Keynes's brief study of economics, the Mill-Jevons theory of capital, later developed by Böhm-Bawerk and Wicksell was not seriously considered. By about 1930, these ideas had been largely forgotten in the English-speaking world.

By Hayek's own description, The Pure Theory of Capital is a 'highly abstract study of a problem of pure economic theory' that attempts to establish the 'fundamentals' that must serve 'more concrete work on the processes which we observe in the real world'. In particular, Hayek wished to remedy earlier expositions of a monetary theory of business cycles and to respond to criticisms that arose primarily from 'the inadequacy of its presentation of the theory of capital which it presupposed'.

--Gerald R. Steele, "Hayek's Pure Theory of Capital," in Elgar Companion to Hayekian Economics, ed. Roger W. Garrison and Norman Barry (Cheltenham, UK: Edward Elgar, 2014), 71.

The Body of Hayek's Work on Spontaneous Order Constitutes a Comprehensive Refutation of Marxian Theory

Of all socialist thinkers it is Marx who identifies social progress with the conscious control that will come with the advent of socialism. The frequent attacks by Marx and Engels against the 'anarchy of production', and the demand for an ex ante coordination of economic life where competition and spontaneous order give way to conscious human design, underlies the view that market society 'alienates' humankind from its character as a 'species being'. According to Marx, 'true' freedom requires an end to the subjugation of the worker (and the capitalist) to the 'blind power' of the market and its replacement by system where, 'production by freely associated men ... is consciously regulated by them in accordance with a settled plan'. For Marx, the conditions for such an order are imminent in the historical progression of capitalism itself, with the increasing concentration of industry in the hands of fewer enterprises under 'monopoly capitalism', paving the way for the ultimate overthrow of the market and its replacement with conscious planning.

Seen in this context, the body of Hayek's work on spontaneous order constitutes a comprehensive refutation of Marxian theory. The only circumstances in which conscious control would be possible on a society-wide basis would be those where the conditions of economic life are so few and simple that they could be surveyed by a single person or board. If humankind is to rely on conscious direction as the principal tool of social organization then it must confine itself to a primitive form of existence.

--Mark Pennington, "Hayek on Socialism," in Elgar Companion to Hayekian Economics, ed. Roger W. Garrison and Norman Barry (Cheltenham, UK: Edward Elgar, 2014), 261-262.