436. G. Haberler to Harrod , 4 March 1935 [a]

[Replies to 435 , answered by 440 ]

League of Nations, Geneva #

4 March 1935

Dear Harrod,

Many thanks for your letter of February 28th, which I like very much (although, as is usually the case with your letters, there were not enough stamps on it!). I like it so much, because it contains a striking proof of the correctness of my-- or rather Robertson's--definition of saving.

Your assumption in your previous letter, [1] that there is not necessarily an interval between income and outlay implies the possibility of a velocity of circulation equal to infinity. This time you say: "Suppose that they don't spend the money at first. The income is up £1000, I is up £1000 and S is up £1000." [2] Now I agree that we cannot assume that the money is spent at once. This is what I have said from the beginning. Here you adopt as a matter of course Robertson's view, namely the period analysis. But obviously we cannot say that somebody has saved just because he does not spend his income immediately on receipt. If I get my salary on the first of the month and spend it gradually during the month, I have kept the money on the average half a month in my pocket. But nobody would say that I have saved. That would be utterly against the general usage; it would be absurd, in your terminology. Therefore, in our case there is investment but not saving.

I have been unable to find anybody who does not find this perfectly clear.

What you say about the difference between absurdity and inconsistency is quite true. I knew it from the beginning and asked you in my last letter not to waste any more words on it. [3] I must have expressed myself incorrectly.

For your convenience I enclose a copy of your letter.

Yours sincerely,

G Haberler

Roy Harrod, Esq., Christ Church, Oxford. [b]

  1. 1. Letter 428 .

    2. Letter 435 , [jump to page] .

    3. Letter 429 , [jump to page] .

    1. a. TLS, two pages, the second of which numbered, on two leaves, in HP IV 395-422. Cc in GH Box 66.

      b. The address was typed at the bottom of the front page.

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