403. Harrod to G. Haberler , 14 November 1934 [a]

[Replies to 401 [1] ]

Christ Church, Oxford #

14 November 1934

Dear Haberler

Really, this wont do. I never originated the term hoarding. That was your idea. What I said was that in a progressive society, part of saving would or might (would with certain monetary policies) be absorbed in additional money holdings. This involves an absorption of saving, but I think it inappropriate to call it hoarding unless it involves a change in V. In the system which I envisage the absorption of saving in money holdings would not involve a change in V and \ it ought not to be called hoarding.

Having forced the term hoarding upon me, you then say that it leads to an absurd result, viz. that there is hoarding unless the income receivers circulates his additional income with velocity = ·. [2] I entirely agree. I think it is an absurd use of the term hoarding and would never accept it as my own. The use by Barger of the term hoarding in the Economist correspondence in this sense led Barger to commit the mistake of supposing that the presence of hoarding in this sense involved a change in V. [3]

Saving goes into three channels:--

1. Lending.

2. Appropriate addition to monetary holding.

3. Hoarding.

In 2 appropriate addition is defined as such addition as does not involve a change in V. Any further addition may be suitably named hoarding.

This is quite all right and conformable with ordinary usage. It does not involve me in absurdities!

Yours very sincerely

Roy Harrod

  1. 1. The correspondence was discontinued at this point. Later, however, Haberler was invited by the editorial board of Economica (see letter 417 R, [jump to page] ) to reply to Harrod's contribution on "The Expansion of Credit in an Advancing Community" ( 1934:8 ). Haberler wrote "Monetary Equilibrium and the Price Level in a Progressive Economy" (1935) jointly with Karl Bode. A preliminary draft of it was discusses between Harrod and Bode (letters 414 , 415 , 421 ), while the correspondence with Haberler was resumed after Christmas vacation (letter 422 ).

    2. Letter 401 , [jump to page] .

    3. H. Barger, "Banking Policy and Stable Prices", The Economist CXIX, Monthly Book Supplement, 10 November 1934, p. 8; the relevant passage is quoted in note 6 to press item 9 . Harrod commented on Barger's point in his rejoinder to The Economist, "Banking Policy and Stable Prices (2)" ( 1934:10 ), press item 9 , [jump to page] .

    1. a. ALS, two pages on one leaf, in GH Box 66.


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