Were Hayek’s Monetary Policy Recommendations Inconsistent?*

Contrary to the received view, we maintain that Hayek’s monetary policy recommendations were not inconsistent. The prevalent perception of early Hayek as the money stream stabilizer and late Hayek as the price level stabilizer is attributable to an unjustified normative interpretation of Hayek’s positive analysis. We argue that in his contributions to monetary theory, Hayek took the goals of monetary policy as exogenously given and analysed the efficiency of different means to achieve these goals. Hayek’s allegedly inconsistent switch from being a critic to an advocate of price level stabilization is explained by a change in the issues on which he focused, rather than by a change in his theoretical views. We also claim that Hayek was always aware that every practical monetary policy involves difficult trade-offs and was thus reluctant to impose his own value judgments about what people should strive for. *We would like to thank Pavel Potužák for his helpful comments on an earlier draft. Any mistakes are, of course, ours.