This opportunism and nonchalance were typical. He changed his mind often and was proud of his mental flexibility in adapting to new facts and insights. He nevertheless did take a rather cheap revenge in trashing Hayek's book Prices and Production, which came out in 1931. Hayek presented an over-investment theory of the business cycle, which ran contrary to the under-consumption theories that were in vogue in those days in the Anglo-Saxon world and which Keynes endorsed as well. Keynes ridiculed Hayek for having used an equilibrium position as a starting point for his argument. Given that the economy quite clearly seemed to be in disequilibrium, he found this beside the point. 

But this wasn't the core of their disagreement. Hayek argued that after an excessive boom, saving needs to increase and consumption has to drop in order for investment to maintain the capital stock in use. A reduction of consumption is inevitable in order to return to equilibrium, and any public intervention to try to prevent this is bound to prolong the crisis instead of curing it. Keynes, however, viewed under-consumption not over-investment as the cause of the boom. He was convinced that a rise in savings just wouldn't do because savings don't automatically feed into investment if the mood isn't right. If people are pessimistic, they don't invest and they don't consume; they put their money under their pillows and leave it there. In his General Theory, which Hayek chose not to review, Keynes called this attitude the "liquidity preference". To the well-known functions of money as a transaction device and as a standard of value, Keynes thus added the function of a store of value. If all goes wrong, this psychologically determined liquidity preference can increase and degenerate into a "liquidity trap" that soaks up all efforts by the central bank to float the market. When monetary policy becomes ineffective, fiscal policy — increased government spending — is the only instrument that government can use.

Keynes's distinctive note was his intuition that psychology always plays a role. In his General Theory, he not only works with a "marginal propensity to consume", a psychological element and at the same time something he claims to be an anthropological constant in the style of Adam Smith's "natural propensity to truck, barter and trade", but he also underscores very strongly that expectations matter. Given the fundamental uncertainty that is always present in social interaction, pessimism can spread and easily feed into a collective downward spiral. The difference between Hayek and Keynes was not just an empirical question about whether it was over-investment or under-consumption that had created a specific cycle; it was much more a fundamental disagreement between their views concerning the process of adaptation. Hayek understood Keynes's point, but didn't believe that government could, or even should, influence people's expectations. 

In modern economic theory, a whole branch of study focuses on the expectations problem: the rational expectations approach. It argues that all relevant future events are anticipated and all relevant information is therefore already present in the data underlying present action. The rational expectations argument against Keynesian deficit spending, for example, is that if government raises spending today expectations won't improve because people know that they will have to pay it back in the future, either through taxes or inflation.