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.


Welcome page

top of page

Return to index of this section

Go to previous page

Go to next page