355. G. Haberler to Harrod , [April 1934] [a]
[Replies to 351 ]
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.  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.  I have raised some doubts in my article to the Spiethoff Festschrift.  (Unfortunately I have no reprint here to send you one. But I think Opie  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
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.
- 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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