383. Harrod to R. F. Kahn , 25 October 1934 [a]

[Replies to 382 , answered by 387 1 ]

Christ Church, Oxford #

25 October 1934

My dear Kahn

I entirely agree with your letter. The proposition that new loanable funds = new savings entails a stable price level [1] involves a funny definition of savings. [2] I put it in that form to épater the Hayekians. But of course generally new loanable funds = new savings is always true. 2 I think my best statement is the rejoinder to Dennis which will appear in Economica. [3]

I dont agree that your position is simple. The negative part is of course simple, viz. that new loanable funds = new savings is a tautology. But then that doesnt when the phenomenon which it is required to characterize, namely that in some sense in the boom Investments > Savings. 3 That is where the complication comes in. To explain in what sense, you have to expound Maynard's definitions. [4] And they are not simple, nor, it is agreed I take it, altogether satisfactory in their old form. That is why I am impatient for the new book.

I think you are rather optimistic about letting the Hayekians stew in their own juice. It is true that Hayek himself does not seem keen to make himself clearer. But there are always people like Durbin [5] ready for the fray. And I do find in circles far wider than those of the LSE 4 that the impression has been created that these people have made a good case against the extension of loans at any time.

Haberler has written an immense letter to the Economist, which I think I have dealt with faithfully. [6] I dont know what on earth the Economist will do about it, as the correspondence has now reached enormous dimensions! [7]



Pollard is in Cambridge, attached to S. Johns.

  1. 1. In Harrod, "Banking Policy and Stable Prices" ( 1934:9 , press item 8 ).

    2. See also letters 388 , [jump to page] , and 389 , [jump to page] .

    3. Harrod, "Rejoinder to Mr. Robertson" ( 1934:11 ).

    4. J. M. Keynes, Treatise on Money (1930), book I, chapter 9 (in The Collected Writings of J. M. Keynes, vol. V, pp. 113-14).

    5. On Evan F. M. Durbin's theoretical affinities and divergences with Hayek in the early 1930s and on the debates between the "Hayekian" and "Keynesian" young members of the New Fabian Research Bureau, see E. F. Durbin, New Jerusalems. The Labour Party and the Economics of Democratic Socialism (1985), pp. 142-46.

    6. G. Haberler, "Banking Policy and Stable Prices" (1934), a draft of which was preliminarily sent to Harrod: see note 1 to letter 381 . Harrod's reply was printed in the same issue ( 1934:10 , press item 9 ).

    7. Other contributions from Kaldor, Hubert Blake, Jack Stafford, and Harold Barger were also printed in the same issue of The Economist's Monthly Book Supplement, on pp. 7-8, together with Harrod's rejoinder ( 1934:10 ); the essential passages are reported in the editorial notes to press item 9 .

    1. a. ALS, three pages on two leaves, in KP 13/57/80-82.

1. Ref. 28.10.34. (see pencil notes) [Kahn's note in pen at the top of the page].

2. Strategy? Why not "so long as summer time is in force"? [Kahn's pencilled note in the margin]

3. No sense. No such thing [Kahn's underlying and pencilled note in the margin].

4. Where? [Kahn's pencilled note in the margin].

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