In The Etymologies, the Noldorin development of the primitive diphthong ᴹ✶ai is unclear. In some cases, it became ae: N. gwaew “wind” < ᴹ√WAIWA (Ety/WĀ). In others, it became oe: N. moed “handy, skilled” < ON. maite (Ety/MAƷ). Tolkien seems to have vacillated between the two results, for example gaer (EtyAC/GAIRĀ) >> goer (Ety/GAY) and lhaeb (EtyAC/LÁYAK) >> lhoeb (Ety/LÁYAK).

Possible Phonetic Rules: In the contemporaneous Comparative Tables (PE19/18-28), the phonetic development was primitive ᴹ✶ai > ON. ę̄ > ei > N. ae (PE19/25, column 9). There is one example in The Etymologies that seems to follow a similar development: ᴹ✶gaisrā > gǣsra > ON. gērrha > N. gaer “dreadful” (Ety/GÁYAS). Another example appears in a fragmentary note discussing ai > ae from 1940: ON. glaibe > glēbe > glaef > N. glaew “ointment” (TMME/53). It seems likely that entry in the table represents Tolkien’s basic idea for the Noldorin development of this diphthong.

Examples in The Etymologies seem to indicate that, where it appeared, the diphthong oe was a further development from ae, for example: ᴹ√GAY > N. gaer, goer (Ety/GAY) and ᴹ√KHAYA > N. hae (hoe) (EtyAC/KHAYA). There are several cases in which the diphthong ae is consistently preserved, however:

• Where the diphthong arose from the vocalization of primitive g, such as: ᴹ✶sagrā > N. saer (Ety/SAG) and ON. ragna > N. rhaen (Ety/RAG).
• Where the diphthong arose from the vocalization of primitive p or k, such as: ᴹ✶yakta- > N. iaeth (Ety/YAK) and apsa > N. aes (Ety/AP).
• Where the diphthong was preceded or followed by w, such as: gwaew (Ety/WĀ), glaew (Ety/LIB²) and gwaedh (Ety/WED). In case of preceding w, this development was explicity mentioned by Tolkien: “ae ... was the regular development of ON ai after w” (PE22/31).

It is possible that at this stage, Tolkien considered the normal development to be ai > ae > oe, except that ae was preserved in words with the combination aew or its antecedents: ᴹ✶[ai{wbm}]. Furthermore, the shift of ae > oe occurred before the vocalizations of primitive g, p, k, so that:

• ᴹ✶[ag{lrmn}] > [aɣ{lrmn}] > [ai{lrmn}] > N. [ae{lrmn}]
• ᴹ✶[a{pk}{st}] > [a{ɸx}{xθ}] > [ai{xθ}] > N. [ae{xθ}]

There are quite a few ae-forms in The Etymologies that cannot be explained by this rule, however:

• ᴹ√NAY > N. nae (Ety/NAY)
• ᴹ✶laire > N. lhaer (EtyAC/LIR¹), later revised to ᴹ√GLIR > N. glaer (Ety/GLIR).

It seems that Tolkien’s ideas on the Noldorin development of primitive ᴹ✶ai were in flux as he wrote The Etymologies, making it very difficult to discern his intentions.

Conceptual Development: The Silmarillion drafts from the 1930s generally had ae-forms: N. Belegaer (LR/19) and N. Aelin-uial (LR/262) versus the oe-forms in The Etymologies: N. Belegoer (Ety/AY) and N. Oelinuial (Ety/AY). As noted above, the development in the Comparative Tables from the (?early) 1930s was ᴹ✶ai > ON. ę̄ > N. ae (PE19/25). It seems likely that Tolkien introduced the oe-forms as he was composing The Etymologies.

The variations between ae and oe continued in Lord of the Rings drafts from the 1940s, for example N. Taragaer “Ruddyhorn” (RS/419) versus earlier goer “ruddy” (Ety/GAY) but N. loer “summer” (PM/135) versus later S. laer¹ (LotR/1107). In the published versions of The Lord of the Rings and in Silmarillion revisions from the 1950s-60s, the oe-forms had largely disappeared, making it likely that Tolkien abandoned this particular phonetic rule.

Alternate Theories: I am not sure who first pointed out the ae/oe variation in The Etymologies, but it is well established in the literature. Helge Fauskanger discussed the variation in his article: “AE or OE?” (AL). David Salo also noted the variation in his discussion of Noldorin phonology (GS/68, §4.230). My analysis agrees with the broad outlines of both these treatments, but given the ambiguity of the underlying evidence, the details are open to interpretation.