Theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena.

Hayek is widely recognized for having introduced
the time dimension to the equilibrium construction,
and for his key role in helping to having inspired the fields of growth theory, information economics,
and the theory of spontaneous order.

The "informal" economics presented in Milton Friedman's massively influential popular work
"Free to Choose" (1980),
is explicitly Hayekian in its account of the price system as a system for transmitting and coordinating knowledge.

This can be explained by the fact that Friedman taught Hayek's famous paper
"The Use of Knowledge in Society" (1945) in his graduate seminars.

...

The business cycle :

Capital, money, and the business cycle are prominent topics in Hayek's early contributions to economics.
Mises had earlier explained monetary and banking theory in his Theory of Money and Credit (1912), applying the marginal utility principle to the value of money and then proposing a new theory of industrial fluctuations based on the concepts of the :

-British Currency School
(The British Currency School was a group of British economists, active in the 1840s and 1850s, who argued that the excessive issuing of banknotes was a major cause of price inflation, and believed that, in order to restrict circulation, issuers of new banknotes should be required to hold an equivalent value of gold as a reserve. In these beliefs they were supporting the provisions of the 1844 Bank Charter Act, which had been passed by the Conservative government of Robert Peel.
The leading figure of the school was Lord Overstone, the British politician and banker. His role in the debate was analysed and criticised by Henry Meulen.
The currency school was opposed by members of the British Banking School, who argued that currency issue could be naturally restricted by the desire of bank depositors to redeem their notes for gold.)

and the

-ideas of the Swedish economist Knut Wicksell.
(Johan Gustaf Knut Wicksell (December 20, 1851 in Stockholm – May 3, 1926 in Stocksund) was a Swedish economist who contributed to the Keynesian, as well as the Stockholm school (economics) and Austrian School of Economics way of thinking.)

Hayek used this body of work as a starting point for his own interpretation of the business cycle, which defended what later became known as the :

"Austrian Theory of the Business Cycle".

In his :
-Prices and Production (1931) and
-The Pure Theory of Capital (1941),
he explained the origin of the business cycle in terms of central bank credit expansion and its transmission over time in terms of capital misallocation caused by artificially low interest rates.

Hayek claimed that:

The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism,
money,
from itself being regulated by the market process.

In accordance with arguments outlined in his essay :
"The Use of Knowledge in Society",
he argued that a monopolistic governmental agency like a central bank can neither possess the relevant information which should govern supply of money, nor have the ability to use it correctly.

...

Friedrich August von Hayek CH (8 May 1899 – 23 March 1992),
was an Austrian and British economist and philosopher known for his defense of :
-classical liberalism and
-free-market capitalism
against socialist and collectivist thought.

He is considered by some to be one of the most important economists and political philosophers of the twentieth century.

Hayek's account of how changing prices communicate signals which enable individuals to coordinate their plans is widely regarded as an important achievement in economics.

Hayek also wrote on the topics of
-jurisprudence,
-neuroscience and the
-history of ideas.

Hayek is one of the most influential members of the Austrian School of economics,
and in 1974 shared the Nobel Memorial Prize in Economics with Gunnar Myrdal :

"for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena."

He also received the U.S. Presidential Medal of Freedom in 1991 from president George H. W. Bush.

Hayek lived in Austria, Great Britain, the United States and Germany, and became a British subject in 1938.


...


Hayek's influence on the development of economics is widely acknowledged.

Hayek is the second-most frequently cited economist (after Kenneth Arrow) in the Nobel lectures of the prize winners in economics – particularly that his lecture was critical of the field of orthodox economics and neo-classical modelization.

A number of Nobel Laureates in economics – such as Vernon Smith and Herbert Simon – recognize Hayek as the greatest economist of the modern period.
Another Nobel winner, Paul Samuelson believes that Hayek was worthy of his award but nevertheless avers that "there were good historical reasons for fading memories of Hayek within the mainstream last half of the twentieth century economist fraternity. In 1931,Hayek’s Prices and Production had enjoyed an ultra-short Byronic success.
In retrospect hindsight tells us that its mumbo-jumbo about the period of production grossly misdiagnosed the macroeconomics of the 1927–1931 (and the 1931–2007) historical scene".

Harvard economist and former Harvard University President Lawrence Summers explains Hayek's place in modern economics this way: "What's the single most important thing to learn from an economics course today? What I tried to leave my students with is the view that the invisible hand is more powerful than the [un]hidden hand. Things will happen in well-organized efforts without direction, controls, plans. That's the consensus among economists. That's the Hayek legacy."

By 1947, Hayek was an organizer of the Mont Pelerin Society,
a group of classical liberals who sought to oppose what they saw as socialism in various areas. He was also instrumental in the founding of the Institute of Economic Affairs, the free-market think tank that inspired Thatcherism.

Hayek had a long-standing and close friendship with philosopher of science Karl Popper, also from Vienna. In a letter to Hayek in 1944, Popper stated, "I think I have learnt more from you than from any other living thinker, except perhaps Alfred Tarski." (See Hacohen, 2000). Popper dedicated his Conjectures and Refutations to Hayek. For his part, Hayek dedicated a collection of papers, Studies in Philosophy, Politics, and Economics, to Popper, and in 1982 said, "... ever since his Logik der Forschung first came out in 1934, I have been a complete adherent to his general theory of methodology."
Popper also participated in the inaugural meeting of the Mont Pelerin Society. Their friendship and mutual admiration, however, do not change the fact that there are important differences between their ideas.

Hayek's greatest intellectual debt was to Carl Menger, who pioneered an approach to social explanation similar to that developed in Britain by Bernard Mandeville and the Scottish moral philosophers (cf. Scottish Enlightenment). He had a wide-reaching influence on contemporary economics, politics, philosophy, sociology, psychology and anthropology. For example, Hayek's discussion in The Road to Serfdom (1944) about truth, falsehood and the use of language influenced some later opponents of postmodernism.