L. Albert Hahn’s Economic Theory of Bank Credit

Abstract:

In the mid-1920s L. Albert Hahn’s Economic Theory of Bank Credit (1920) had become one of the most influential and certainly the most controversial books on monetary theory in the German-language area. Hahn wanted to overcome the orthodox view that every credit has to be financed by means of savings deposited by the banks. Banks are producers of credit that is not limited by the amount of saving. Capital was seen by Hahn as the result of credit creation and not of saving. Over time Hahn moderated some exaggerations of the first two editions of The Economic Theory of Bank Credit, such as the idea of a permanent boom. The paper also compares Hahn’s views on the role and effects of credit with those of Schumpeter and investigates Hahn’s claim to have anticipated essential ideas of Keynes’s General Theory.

Key Words::

• bank credit
• business-cycle theory

Additional information

Notes on contributors

Harald Hageman

Harald Hagemann is a professor at the Institute of Economics, University of Hohenheim. An earlier version of this paper was presented at the Vienna University of Economics and Business. The author thanks Hansjörg Klausinger and Hans-Michael Trautwein for valuable comments.