Abstract
The purpose of this paper is to study the relationship between F. A. Hayek's theory and his observation on the real economy. His early works, written in German, did not wholly reflect on his monetary business cycle theory; some critical gap lies between them, and his disregard for several important factors led him to formulate a faulty theory.
We are concerned not with pointing out the limitations of Hayek's theory, but with considering the reason why his theory appears to have taken precedence over his previous observations. The first section is an introduction. In the second section, we survey his works, which were mainly composed in his Austrian days. The third section shows the outline of his business cycle theory, then, in the fourth section, we consider a possible explanation for the gap between his theory and observations, and conclude that it resulted from the influence of Mises.
