When the LSE Michaelmas term 1931 opened on 5 October, Lionel Robbins had, for the coming year, a professorial colleague in economics. Friedrich Hayek rented a house for his family in Constable Close in Hampstead Garden Suburb near the Robbinses and the Plants. The two men became close friends, soon Fritz and Lionel to each other. Living near Robbins was important to Hayek (Shehadi Transcripts, BLPES): ‘When there was a problem, even if writing books…I was a great book collector at that time, but on particular things if I didn't have a book I would walk over to Robbins and take it out of his library.…We were really a circle of close personal friends who got on extremely well together.…I could never have had the influence I did if it hadn't been for Robbins.’

Hayek agreed to give the lectures on the Principles of Currency usually given by Gregory, who was still at Manchester. He told Robbins on 29 May that he wished also ‘to do something under the title Theory of Production, with special reference to capital, interest and fluctuations’ but preferably not as formal lectures (Hayek, RP). Since Robbins had already asked Hayek to join him in running the seminar he suggested that, as the Calendar duly announced, ‘During the session 1931–32 the seminar will be chiefly conducted by Dr. Hayek and will be devoted to informal discussions of the Theory of Production, with special reference to Capital and Interest.’ Hayek was very impressed with the junior staff members of the seminar, telling Mises: ‘There is much opportunity for me to learn, and I am hindered in doing so only because Robbins presented me as an eminent authority…’ (Hülsmann 2007, 635). He also joined Robbins and Plant in a joint course for third year undergraduates on Problems of Applied Economics intended ‘to deal from the point of view of general Economic theory’ with current policy issues (including protection). Robbins continued to give his Elements lectures to first year students and the Principles lectures to the economics specialists. In the Summer term he repeated his short course on the Nature and Significance of Economics.