The dispute between Hayek and Sraffa over the concept of the natural rate of interest

The natural rate of interest is a concept introduced into economics by Knut Wicksell as part of a broader explanation of changes in the price level. Friedrich Hayek combined this theory with his own theory of intertemporal equilibrium and elaboration of the theory of capital to create the theory of the business cycle. This work, together with his additional activities at the LSE, propelled him to the position of the leading economic theorist of the 1930s. The debate with Sraffa is one of the major landmarks of this period. Among other things, Sraffa described a situation where there are multiple commodity interest rates in an economy and none of them can be identified as a natural interest rate. In doing so, he challenged Hayek's monetary policy recommendations. Hayek attempted to deal with this criticism first in his own reply and then in The Pure Theory of Capital. The paper attempts to combine the formalization of the argument on the topic of commodity interest rates with different views on equilibrium. It then compares the conclusions of this section with interpretations in other secondary literature.