Annexe: J. M. Keynes to D. H. Robertson , 2 October 1933 [e]
2 October 1933
D. H. R.
The Prof. p. 102, §4. 
N 1 labour employed in wage-good industries
N 2 labour employed in [non-] [f] wage-good industries
X reduction of money wages.
In non-wage-good industries receipts are initially unchanged, whilst costs are reduced by N 2 X. Thus profits increase by N 2 X and they are stimulated to expand.
In wage-goods industries, however, receipts are reduced by N 1 X + N 2 X and costs reduced by N 1 X. Thus their profits decrease by N 2 X and they are stimulated to contract.
The net result may be either greater or less employment, and either lower or higher real-wages, according to circumstances. It is easy to show that either result is possible, though to work out the answer for the most general possible case is hideously complex.
J. M. K.
2. Beveridge's attempt to review Pigou's book was in fact aborted: see letter 337 , [jump to page] .
3. Keynes eventually renounced commenting on Pigou's book in the Journal (see letter 337 , [jump to page] ).
4. On pp. 22-25 of "Professor Pigou's Theory of Unemployment" ( 1934:1 ), Harrod points out that Pigou's rejection of the view that a reduction in money wages, by reducing the price-level, does not affect real wages is based on specific assumptions as to the behaviour of non-wage earners.
5. Harrod, "Professor Pigou's Theory of Unemployment" ( 1934:1 ), pp. 23-24.
6. Harrod, "Professor Pigou's Theory of Unemployment" ( 1934:1 ), pp. 24-25.
7. A C. Pigou, The Theory of Unemployment, London: Macmillan, 1933. The section referred to examines the consequences of a reduction of money-wages on real wages and employment.
- a. TLS with autograph corrections, two pages on two leaves, in HP II-34. Reproduced by kind permission of the Provost and Scholars, King's College, Cambridge.
b. Ms: «in».
c. Ts: «pages».
d. Ts: «Christ Church College».
e. TNI, one page, typed initials, in HP II-35 and JMK GTE/1/150.
f. Ts: in the copy sent to Harrod, the definition of N 2 was given by ditto marks repeating the definition of N 1 . But from context it is clear that it refers to employment in non-wage goods. The copy in JMK actually bears the correction in Keynes's hand.
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