355. G. Haberler to Harrod , [April 1934] [a]

[Replies to 351 ]

[April 1934]

Dear Harrod,

Excuse me that I write to you so late. I wanted to go into the matter afresh, but I had neither your book at hand nor my paper. [1] Now I have both of them.

(1) As a matter of fact, I was thinking of adjusting wages downward. Perhaps it is in practice not so absurd to assume that a [b] correct adjustment downward is easier to attain than upward. Surely, it is easy to get some adjustment of wages upwards [c] , but is not the danger very great that they rise too much, as soon as one starts a policy to raise them at all?

(2) I am no longer absolutely convinced that a stable price level will lead to disastrous consequences. [2] I have raised some doubts in my article to the Spiethoff Festschrift. [3] (Unfortunately I have no reprint here to send you one. But I think Opie [4] has one). I am sure, on the other hand that the present slump cannot be explained as a consequence of the price stabilisation in the [d] USA--or, better to say, of the illicit inflation which was made possible by this stabilisatory policy. I believe now that intensifying factors are responsible for the severity of the depression--factors which are not connected with that inflation.

(3) I believe that unstable exchange rates would be a great impediment to international capital movements. I even think that changes in the exchange rate which go beyond--say--4-5% a year would induce flights of capital, <some> here, <some> there, and [e] that this policy would be in danger of defeating itself, as these capital movements would naturally react on the exchange rate. On the other hand, changes of 2% a year, will necessitate--in order to be applied intelligently--economic-statistical microscopes [f] which we never shall have and surely have not at present. It is true, if we do away with the system of international lending we would dry up a source of disturbances, but at an enormous price.

I hope you will not have the feeling that I have evaded your searching questions. But I think we do not yet know enough to make <such> far-reaching proposals as the main question.

I hope there will be a chance to welcome you <over> in Geneva and anyhow I expect to come to England during this year. Please remember me to Mr. & Mrs. Opie.

Yours very sincerely

Gottfried Haberler

  1. 1. Harrod, International Economics ( 1933:10 ). Haberler reviewed the book for Economica, February 1934, pp. 98-103.

    2. For Haberler's criticism to the policy aiming at stabilizing the price level see e.g. "Money and the Business Cycle", in Q. Wright, Gold and Monetary Stabilization, Chicago: The University of Chicago Press, 1932, pp. 50-56.

    3. J. A. Schumpeter (ed.), Der Stand und die nächste Zukunft der Konjunkturforschung. Festschrift für Arthur Spiethoff, München: Duncker & Humblot, 1933, pp. 92-103 (see in particular p. 99). See note 4 to letter 366 .

    4. Redvers Opie.

    1. a. ALS, two pages on one leaf, in HP IV-395-422.

      b. Ms: «an» (the word "correct" was added as an afterthought).

      c. Ms: «upward».

      d. Ms: «in USA».

      e. Ms: «there, that».

      f. Ms: «microscops».

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