Prices and Production

Methodology and Conclusions

In «Prices and Production», Friedrich von Hayek examines the dynamics of prices and their impact on the economic cycle. Hayek's methodology is based on analyzing the interaction between the money supply, interest rates, and investments. He uses a theoretical approach grounded in the Austrian School of Economics to explain how changes in monetary policy can lead to distortions in the production structure and trigger economic cycles. Hayek concludes that artificially lowering interest rates by central banks can lead to unsustainable investments and, ultimately, economic crises. He emphasizes the importance of market signals, such as prices and interest rates, in coordinating economic activity and warns of the negative consequences of government intervention in these processes.