387. R. F. Kahn to Harrod , 28 October 1934 [a]

[Replies to 383 , answered by 389 ]

King's College, Cambridge #

28 October 1934

My dear Roy,

Your letter is very cheering. But it leaves me puzzled. Why say something which, to all intents and purposes is untrue, simply as a prime of strategy? Isn't it a bit foolish? I quite agree that it is extraordinarily improbable that any of the blighters will have the wits to point out the fallacy in your argument (that is what makes their position so very comic). But it is hopeless, as I look at it, to try to make things look plausible to them. One cannot fight them on their own ground because this ground does not exist. It seems to me that you are giving far too much away to them by implying that the price level is of any particular significance. (You do not refer in your letter to my suggestion that the "responsiveness of money wages" must come in as a footnoted element in their problems). [1]

The fact, I fear, is that we are not yet in complete accord. There is no sense, as I see it, in which "investment > savings," even in a boom. In fact, in my philosophy there is no such thing as a boom--not what you mean by a boom. The great point to get clear is that investment is always equal to savings; and that is the whole of the matter.

I fear the new book will not, in all probability, be out in much less than a year. [2] It is all very sad. I am very much looking forward to Economica and to the relevant number of the Economist. [3] I am setting your letter as a question to my pupils.

Which are the "circles far wider than those of the L.S.E."? At any rate the <testy> Editor of The Times must have warmed your head when he wrote, a day or two ago, that what we are suffering from is inadequate consumption of capital! [4]

I repeat that the important thing is to get away from money and prices. Banks simply lend and borrow, and so do you and I.



P.S. Smith has broken his collar bone! [5]

P.P.S. Why not say that new loanable funds = new savings so long as summer time is in force?

  1. 1. Letter 382 , [jump to page] .

    2. Keynes's General Theory was actually published in February 1936.

    3. Harrod, "Rejoinder to Mr. Robertson" ( 1934:11 ) and "Banking Policy and Stable Prices" ( 1934:10 , press item 9 ).

    4. In an unsigned article on "Securities and Cheap Money. Larger Brewery Profits", The Times argued that "The fundamental reason for the rise of security prices is the underconsumption of credit and capital" (27 October 1934, p. 17).

    5. See letter 382 , [jump to page] .

    1. a. ALI, two pages on one leaf, in HP IV-586-668b.

Welcome page

top of page

Return to index of this section

Go to previous page

Go to next page