Gene Callahan, with the help of Daniel Kuehn, tries to place his fingers on a essential difference between Keynes and Hayek. He writes,

And in the same post noted just below, Kuehn puts his finger right on the crucial difference between Hayek and Keynes: For Keynes but not for Hayek, “those expectations of future profits are compared to an interest rate that is determined by liquidity preference and not the supply and demand of loanable funds.”

I don’t think this is the “crucial difference,” given that Hayek — in his indirect response to The General Theory — emphasized something completely different: the Ricardo Effect versus the Kahn–Keynes employment multiplier. But, for the purpose of this post allow me to go down a different route. The rate of interest and factor pricing.

Following Menger and Böhm-Bawerk, the prices of factors of production are imputed from the final consumer good. Specifically, as developed by Böhm-Bawerk, the prices of the means of production are imputed from the least valued output. How does this work? Expectations of future incomes earned from output, in conjunction with other costs (including interest), will help the entrepreneur decide how much to spend on the means of production. More clearly, the prices of producers’ goods reflects expectations of future income and costs.

If the classical loanable funds theory is correct, the aggregate demand for factors of production equals exactly the amount of money saved. If Keynes’ liquidity preference theory is correct, there runs the chance that the rate of interest won’t accurately reflect society’s time preference. In both cases, the prices of the factors of production should reflect the nature of the rate of interest.

In other words, even if the rate of interest is higher than what it should be given society’s time preference, the prices of the factors of production will reflect total aggregate demand for them. That is, the prices of the means of production would be lower than they would be if the rate of interest were lower. We can roughly conceive of this as an equilibrium ratio between the prices of producers’ goods, the rate of interest, and expectations of future income.

So, no, I don’t think Daniel’s theory — although not irrelevant — is “the” crucial difference between Keynes and Hayek. It is true, though, that Hayek does later indirectly attack the liquidity theory of interest by elucidating on his own concept of interest in The Pure Theory of Capital. But, I think there are more important differences between the two. Hayek’s theory is predominately one about the role of prices.