402. R. F. Kahn to Harrod , 13 November 1934 [a]

[Follows on from 400 , replies to 392 , answered by 405 ]

King's College, Cambridge #

13 November 1934

My dear Roy,

As I read your essay on Paradox [1] I was for a time amazed to find how completely I agreed with you. These words, I thought to myself, should be inscribed in letters of gold over the portals of every academy of political economy. But when I came to the statement that it is paradoxical to say that the rate of interest is not determined by the supply and demand for saving [b] I was brought up with a damaging jar. You are, I suppose, right that the statement is paradoxical, in the sense that most economists would regard it as rather odd. You do, I think, agree with me that the statement is true. You thus appear to be saying that one must not in economics say anything which is true if most economists would regard it as odd. That is a doctrine which I find very difficult to accept.

Your references to "equilibrium economics" [2] seem to me to supply the clue to the puzzle. I think it would not be too unfair to suggest that by the term "equilibrium economics" you really mean the "economics of full employment"--in fact, the classical economics which we have all been brought up on and the study of which has been pursued for a large number of years. It is the application [c] of ideas which are tacitly based on the classical assumption of full employment to the question of how unemployment can be reduced, which brings economists into bad repute with the lay world. I feel far more anxious about the reputation of economists with the layman than of one economist with another. [3] Maynard's stuff is the kind of stuff which makes sense to the layman even if it is not acceptable by the sophisticated economist whose system does not really admit of the existence of unemployment.

I do hope that we shall gradually find ourselves able to see eye to eye on these questions. You are one of the few economists in the whole world on whom Maynard can reckon. I do not add the words "outside Cambridge" because the number of Cambridge economists, as may by now have noticed, who can really be regarded as Maynard's supporters is a vanishingly small quantity. Such as we are, we do very much look to you as a leader in what must after all be described as a fight.

If I have said anything to annoy you, please put it down to the thoughtlessness which the heat of battle always engenders in me, far more against those on whose side I am myself fighting than against the common enemy.

I am delighted to hear you can come. [4]



  1. 1. No "Essay on paradox" was found among Kahn's papers, nor is there any reference anywhere else. Kahn is certainly ironically referring to letter 392 .

    2. Letter 392 , [jump to page] .

    3. Reference is to Harrod's letter 392 , [jump to page] .

    4. Harrod's positive reply (not found) to Kahn's invitation for December 6 (letter 400 ) must have come in just before Kahn sent the letter, because this paragraph substitutes the following, which was crossed out: "You will have received my invitation to Founders' Day. I very much hope that this will give us an opportunity of meeting and having further discussions on some of these matters."

    1. a. TLS with autograph corrections, three pages on three leaves, in HP IV-586-668b. Non corrected Cc in Kahn 13/57/69-71.

      b. Cc: «of investment» (corrected in the hand of Kahn on the original).

      c. Ts: «applications».

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