Machlup and Hayek: Filiation of Ideas and Ambition

Abstract

Fritz Machlup was a lifelong friend of Friedrich Hayek and an important contributor to the latter’s body of work and worldwide recognition. Machlup was a taxonomist of ideas. This is clear from his categorization of economists (including Hayek and himself) in terms of their contribution to the notion of the production period; his categorization of Hayek’s accomplishments in his report leading to Hayek’s Nobel Prize; his categorization of ideas leading to economic integration and his categorization of his own contributions to economics in terms of economists with whom he might share a Nobel Prize should the Committee seek to nominate him. Always the critic and editor, Machlup also contributed to Hayek’s clarity around concepts like the services of resources and the phases of production/investment. These concepts proved as important to Machlup as to Hayek and Machlup’s student, Edith Penrose. Long-associated with a Penrosean notion of capabilities-driven growth of the firm, the services of resources and phases of production/investment owe their existence to the penetrating discussions of Machlup and Hayek over capital theory, prices and production—and hence invite a deeper investigation of the Austrian influence on her work. Important to a larger theory of economic growth—which became Penrose’s major interest after the publication of a The Theory of the Growth of the Firm, while Machlup was still her mentor—the Machlup and Hayek discussions and publications support the integration of capital theory into the trade cycle. This chapter focuses on a few of those places where Machlup engaged with Hayek on ideas—change, time, production/investment, services of resources, capital theory and the trade cycle—as well as their joint effort to secure a position for Ludwig von Mises, Machlup’s effort on behalf of the US publication of the Road to Serfdom and his work on Hayek’s Nobel Prize.