255. D. H. Robertson to Harrod , 9 September 1932 [a]

[Replies to 254 ]

Trinity [College, Cambridge]

9 September 1932

My dear Roy,

Many thanks for enclosed, which is most whetting to the appetite. Yes, I believe you will finish it this autumn,--which is most satisfactory.

About foreign investment,--I haven't ch 6, § 5 fresh in my mind, but no doubt there is a good deal there of what I'm looking for. But I hope there'll also be something in the "normative" chapter 8, [1] --some indication of the curiousness of this system by which temporary equilibrium is achieved by 1/2 the human race getting into debt to the other 1/2,--something to help us make up our minds whether Salter is right or consistent in attributing "the crisis" largely to the "bad lending" of 1925-28 and then going on to say that the sooner the creditor countries all start lending again to the Hungarians, Chileans etc. the better! [2] (Compare also the wise incoherent Indian in the current E.J. [3] ).

Thanks so much for your comment on my TS, which I have read carefully but put away for further reading when (if at all) I receive some others, from Shove, Kahn etc. [4] I think the error lies in your first sentence. [5] If you are right in saying that an industry cannot be said to be "adapted to a given state of demand" if individual sources are subject to decreasing productive costs and competitive marketing expenses, then my assimilation of cases (1) and (2) falls to the ground. Where you do me an injustice is in assuming that I had seen this, and that therefore my 2-dimensional curve was supposed to be the curve of an individual source and to be coupled with a horizontal demand curve. On that assumption you have no difficulty in showing that complete nonsense ensues,--intersections which don't give equilibria etc. I wasn't guilty of that! My crime, if any, is in thinking that the Pigouvian phrase [6] can be extended to cover an industry which is in the condition supposed,--my curve is the curve for a whole industry or nothing. And about this, and about your distinction between "direct" and "indirect" influence of the "state of demand" on cost [7] I must think again.

I'm leaving this place at last,--for Cheshire, then Ireland. I hope you have filled yourself with health.

I haven't yet coped properly with your review of Mr. Wilson on capital transfer, [8] --and am wondering whether you aren't between you really saying the same thing as Pigou in his highly concentrated and still unpublished paper, the gist of which is conveyed in my paper in Ec. Essays and Addresses. [9] At any rate I don't think the conclusions are inconsistent.



  1. 1. Harrod, International Economics ( 1933:10 ). Chapter VI (previously numbered as VII: see note 9 to letter 231 ) was further altered; the correct reference to the final version is therefore § 4 (on "International Capital Movements") rather than § 5. Chapter VIII on "World Monetary Reform" is not directly concerned with foreign investment.

    2. J. A. Salter, Political Aspects of the World Depression, Burge Memorial Lecture, Oxford: Clarendon Press, 1932, pp. 14-15. See also Salter's contribution to The World Economic Crisis and the Way of Escape, by A. Salter,J. Stamp, J. M. Keynes et al., London: Allen & Unwin, 1931, pp. 32-33 and 37-38.

    3. In September 1932 the Economic Journal published several articles, notes and reviews concerning the Indian economic situation: G. T. Garratt, "The Indian Industrial Worker", pp. 399-406; G. Findlay Shirras, reviews of "Growth of Trade and Industry in Modern India, by P. V. Deolalkar" (pp. 464-67), "Indian Economics--A Comprehensive and Critical Survey of the Economic Problems of India, by Jathar and Beri" (pp. 467-70), and "Indigenous Banking in India, by L. C. Jain" (pp. 470-72); G. D. Birla, "Notes on the General Situation of India" (pp. 485-89).

    4. D. H. Robertson, "A Note on the Supply Curve", Ts, ten pages and a cover page, not published, in DHR C18/8 (6-16). In a 1959 comment written on top of the front page, Robertson noted that "Harrod, Shove and Kahn thought it wrong, and Pigou thought it uninteresting". Shove's letter to Robertson, dated 8 September 1932, is in DHR C18/8 (1-5), Kahn's comment, dated 5 October 1932, is filed in DHR C18/10 (1-3). Two undated letters by Pigou are extant (both in DHR C1/5); one of these concluded: "I don't think there's much of interest in the paper if I'm right about (3): because the only point of substance is the correcting of Harrod's mistake: and, unless he has a different reason for his view than the one you cite, it's a very stupid mistake."

    5. Letter 254 , [jump to page] .

    6. Refers to Pigou's definition of "the normal supply-price of any quantity of output as the price which will just suffice to call out a regular flow of that quantity when the industry under review is fully adapted to producing that quantity" (A. C. Pigou, "An Analysis of Supply", 1928, p. 238, cited in Robertson, "A Note on the Supply Curve", p. 3).

    7. Letter 254 , footnote [i] to [jump to page] .

    8. Harrod, "Capital Imports and the Terms of Trade ..., by R. Wilson" ( 1932:5 ).

    9. "The Transfer Problem", in A. C. Pigou and D. H. Robertson, Economic Essays and Addresses, London: King & Son, 1931, pp. 170-81. Pigou's position is summarized on pp. 179-80. The paper was eventually published as "The Effect of Reparations on the Ratio of International Exchange", Economic Journal XLII, December 1932, pp. 532-43.

    1. a. ALS, two pages on one leaf, in HP IV-990-1069d/13.

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