Hayek biographer Lanny Ebenstein, writing on Hayek-L, draws our attention to a 1980 Hayek interview in which Hayek says:
I’m afraid Mrs. Thatcher is following the advice of Milton Friedman. He is a dear friend of mine and we agree on almost everything except monetary policy. He thinks in terms of statistics, aggregates and the average price level and does not really see that inflation leads to unemployment because of the distortion of the structure of relative prices.If you have a long period of inflation in which much misdirection of effort has taken place as a result of the distortion of the price structure, extensive unemployment becomes inevitable.
You can cure inflation suddenly or gradually. Politically, it is impossible to do it gradually. To put it crudely, I would say that it is possible to cause 20 percent unemployment for six months if you can hold out a hope that things will be better after that. You cannot have 10 percent unemployment for three years. Yet that is what the Government’s present course asks for and I don’t think it can hold out.
