Although Hayek did not provide any formalization of his theories, his equilibrium theory offered a wealth of suggestions that were to be taken up in the literature of the 1940s and 1950s. The ideas of intertemporal equilibrium, which was to be precisely defined in axiomatic terms by Arrow and Debreu, took shape in his writings of the 1920s and 1930s.
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Bruna Ingrao and Giorgio Israel, in The Invisible Hand : Economic Equilibrium in the History of Science (1990), p. 233Friedrich Hayek
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[Hayek's] equilibrium theory offered a wealth of suggestions that were to be taken up in the literature of the 1940s and 1950s. The idea of intertemporal equilibrium, which was to be precisely defined in axiomatic terms by Arrow and Debreu, took shape in his writings of the 1920s and 1930s.
Friedrich Hayek
I remember Robbins asking me if I could turn the Hayek model into mathematics … it began to dawn on me that … the model must be better specified. It was claimed that, if there were no monetary disturbance, the system would remain in 'equilibrium'. What could such an equilibrium mean? This, as it turned out, was a very deep question; I could do no more, in 1932, than make a start at answering it. I began by looking at what had been said by … Pareto and Wicksell. Their equilibrium was a static equilibrium, in which neither prices nor outputs were changing … That, clearly, would not do for Hayek. His 'equilibrium' must be progressive equilibrium, in which real wages, in particular, would be rising, so relative prices could not remain unchange … The next step in my thinking, was … equilibrium with perfect foresight. Investment of capital, to yield its fruit in the future, must be based on expectations, of opportunities in the future. When I put this to Hayek, he told me that this was indeed the direction in which he had been thinking. Hayek gave me a copy of a paper on 'intertemporal equilibrium', which he had written some years before his arrival in London; the conditions for a perfect foresight equilibrium were there set out in a very sophisticated manner.
Friedrich Hayek
[Hayek] did contribute toward an important conceptual development in his reflections on the problems raised by extending the analysis of equilibrium in time. In a key article of 1928 published in the 'Weltwirtschafliches Archiv,' he observed that it was not possible to ignore the element of time in the simultaneous determination of prices if analysis was to be extended to monetary phenomena. {quotes Hayek} Hayek defined the problem concisely as one of an intertemporal system of prices. {quotes Hayek}.
Friedrich Hayek
"I can date my own personal 'revolution' rather exactly to May or June 1933. It was like this. It began … with Hayek. His "Prices and Production" is one of the influences that can be detected in The Theory of Wages; it could not have been otherwise, for 1931 was a Prices and Production year at the London School of Economics … I did not in fact find it all easy to fit in whith my own ideas. What started me off in 1933 was an earlier work of Hayek's, his paper on 'Intertemporal Equilibrium', an idea which I found easier to reduce to my preferred (Paretian or Wicksellian) pattern.
Friedrich Hayek
All of this, of course, establishes Hayek's primacy over Hicks in the origin of the notion of intertemporal equilibrium.
Friedrich Hayek
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