Here is a short video interview of F.A. Hayek in discussion of wage rates and the deflation during the British Depression of the 20s and 30s.(Hat tip Greg Ransom)
Some important quotes,
“While I’d spent a year analyzing in great detail his earlier book the Treatise on Money and then only to hear him by the time the second part of my criticism was published “oh I no longer believe in all that”, I didn’t want to invest more effort in criticising the general theory who’s success is still a puzzle to me, because it reverted to a very primitive idea which had been clearly refuted in the nineteenth century that there is a single relation between the demand-aggregate demand for final products and employment. So much so that Leslie Steven in the 1880s had pointed out “The test of a good economist is that he does not make that particular mistake. Well Keynes revived it and gave a plausible explanation and, I should add that he did not succeed while he lived. But when he died he was suddenly raised to sainthood.”
“The very last time I saw him about six weeks before his death...and talked to him after dinner and asked him whether he wasn’t alarmed by what his pupils naming two....were agitating for more expansion. when in fact, the danger was clearly inflation. He completely agreed with me and assured me my theory was frighteningly important in the 1930s when the question was of combating deflation. If inflation ever becomes a danger, I am going to turn around public opinion like this and six weeks later he was dead and couldn’t do it. I think he would have been fighting the inflationary policy.”
