322. J. M. Keynes to Harrod , 27 October 1933 [a]

[Replies to a letter not found, follows on from 320 , continues at 337 ]

46, Gordon Square, Bloomsbury #

27 October 1933

Dear Roy,

The position about Pigou's book is as follows.

The book was sent to Beveridge for review, though it really of course lies quite outside his field. He has departed for America, [1] without having delivered the review, but taking the book with him under promise to provide a review for March. So this means that comment must, I think, be deferred until then. Apart from this, however, the space in the December Journal is now far more than full, as a result of a very long topical article arriving at the last moment. [2]

What I suggest, therefore, is that when Beveridge's review comes out in March, you and I should both add our comments separately from the review. I will deal with Pigou's argument as it stands, and you with the more general case. [3]

My own argument, which I will let you see shortly, will be rather different from what I put to you in my letter. I was there producing an ad hominem argument, based on the Professor's assumption that non-wage-earners' incomes would be unchanged throughout. [4] In fact, however, this assumption is impossible of fulfillment, and when one allows for what will happen to these incomes ceteris paribus, the whole conclusion follows much more beautifully.

As to the criticism I made on your argument, I agree to what you say on the first point, namely about your assumption that output is constant. [5] One cannot, however, determine the new position of equilibrium unless the argument can be extended to the case where output is not constant. However, I dare say that this is pushing your problem further than you wished or intended to push it.

Your reply to my second note is quite true. The view you are taking is the usual argument, and my criticism is prompted [b] by a lot of stuff I am now doing as to the inapplicability of many of the classical assumptions to a monetary entrepreneur economy. Even if I am right, I cannot expect you to agree until you have read some 100 pages or more of unpublished material.

Next time we have a chance of meeting, I should like to have a talk with you about Pigou's book as a whole. It is a great pity that the Journal review will not really get to the bottom of the matter. For it is a question of some weeks' work really to determine what Pigou is doing and in what particular hypothetical world he is moving. [6]

Yours ever,

J M Keynes

Roy Harrod Esq., Christ Church [c] , Oxford.

  1. 1. Beveridge visited the United States to report for the Rockefeller Foundation on Roosevelt's "New Deal" legislation: see W. Beveridge, "Some Aspects of the American Recovery Programme", Economica NS 1, February 1934, pp. 1-12, and J. Harris, William Beveridge. A Biography, Oxford: Clarendon Press, 1977, p. 317.

    2. S. E. Harris, "The Economic Legislation of the 73rd Congress (1st Session), 1933", Economic Journal XLIII, December 1933, pp. 619-51.

    3. Things turned otherwise, as Beveridge renounced reviewing Pigou's Theory of Unemployment (1933): see letter 337 , [jump to page] . Keynes postponed his criticism (see note 6 to this letter), and Harrod wrote a review article: "Professor Pigou's Theory of Unemployment" ( 1934:1 ).

    4. Pigou, Theory of Unemployment (1933), p. 102 § 4.

    5. The assumption that output is constant seems to have been maintained in Harrod's argument: "Professor Pigou's Theory of Unemployment" ( 1934:1 ), pp. 22-24.

    6. In his comment on Pigou's book, in the appendix to chapter 19 of The General Theory (1936), Keynes made explicit a number of tacit assumptions characterizing Pigou's approach: see Keynes, Collected Writings, vol. VII, pp. 272-79.

    1. a. TLS, two pages on two leaves, in HP II-36. Reproduced by kind permission of the Provost and Scholars, King's College, Cambridge.

      b. Ts: «promoted».

      c. Ts: «Christ Church College».

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