Preface to the Second Edition by Arthur Seldon

The first edition of Tiger by the Tail made an almost immediate impact by reminding economists, the press and the public that for 40 years Professor Hayek’s critique of Keynesian economics had been consistent, persistent and, in the end, vindicated. The extracts collated by Miss Sudha Shenoy comprised a graphic introduction to Professor Hayek’s longer works since his early differences with Keynes.

The first edition was published in 1972 and was reprinted in 1973. Since the first edition the doubts about the Keynesian analysis, and its adaptation by economists who followed Keynes, have been increasing, and the readiness to listen to Professor Hayek’s critique has accordingly grown. His work in general was, perhaps belatedly, recognised in the award of the Nobel Prize in 1974. And in 1975 The Times, which had not been Hayekian in the decades since the 1930s, paid Professor Hayek, in an oblique reference to A Tiger by the Tail, the tribute of identifying him as the economist above all who had accurately diagnosed the progression of inflation and its dangers to the economy:

As Professor Friedrich Hayek has argued ever since his pre-war disputes with Keynes, the price of maintaining full employment by more and more inflationary public finance is not only accelerating inflation but also a progressive diversion of economic resources into activities favoured by or dependent on inflation. If inflation is to be checked, that structural distortion has to be reversed, which must be painful.⁵

Nothing written by the neo-Keynesians has refuted this diagnosis; and it is now the common currency not only of an increasing number of economists but of economic commentators in the press in Britain, America and Europe.

As the continuing demand from readers for A Tiger by the Tail has occasioned a further reprinting, the original text has been made into a new edition by adding three pieces of writing in the mid-1940s in which Professor Hayek anticipated developments in economic affairs and policies 30 years and more later. As in the first edition, they are introduced by Miss Shenoy, who also writes on the significance for business decisions of the distinction between average and relative prices and on the secondary role of money supply.

The analysis is still relevant since governments in all countries that have allowed the tiger out of its cage are still pursuing its tail.

— Arthur Seldon

January, 1978

⁵The Times, 4 January, 1975.