The Evolution of Hayek's Thought on Gold and Monetary Standards

Early in his career, Hayek viewed attempts to stabilize exchange rates by facilitating cooperation between central banks, with respect to their demand for gold, to be at odds with the fundamental mechanisms of the gold standard. He opposed proposals by Irving Fisher, Gustav Cassel, and Ralph Hawtrey that promoted stabilization of demand for gold and price levels as a next best option. Hayek viewed the nations that refused to devalue their currency after monetary expansion during wartime as complicit in degrading the international gold standard. In 1935 Hayek's emphasis began to change, his position sounding much like the arguments of Cassel and Hawtrey. Though he eventually gave up hope that the international gold standard would be reestablished, his later work on money provides theoretical underpinnings for systems that would promote the same sort of stability and predictability that the classical gold standard had provided.