440. Harrod to G. Haberler , 8 March 1935 [a]
[Replies to 436 ]
Christ Church, Oxford #
8 March 1935
Your letters always lead me on in the most disgraceful way.
1. when I say suppose they dont spend the £1000 at first,  I am not saying we must or ought to suppose that. I was merely making a supposition which might be congenial to you and showing how on that supposition S = I.
2. There is no difficulty about spending the whole £1000 at first, provided that the increment does not exceed the unspent margin outstanding at the moment; even if it does, it can be spent almost at once as I tried to bring out with my example in a former letter of a man in danger of bankruptcy. 
3. If you ask what we ought to assume, my reply is that our assumption is bound to be arbitrary if we suppose the increment to come in a lump. It often does so in the case of an individual, but taking a community it is better to assume a rate of increase of incomes. And the best assumption about expenditure is that it increases at the same or at a somewhat lower rate. If the latter, the proportion of income saved is rising.
I draw attention to some wording in your last letter which you may protest is innocent, but which I dont believe you would have used if you really were innocent. You say:--"You adopt as a matter of course Robertson's view, namely the period analysis."  I call your attention to the word "view". A view is some conclusion reached as the result of analysis. Now I am not aware that I adopted any view of Robertson's in this sense. Methods of analysis, as contradistinguished from views, are not true or false, but fruitful or barren. A method may be fruitful in one connexion and useless in another. One ought to adopt such methods from time to time as lead to good results. What I do say about the period method is that judging by results it usually leads to a hopeless bog of confusion. This in turn, I think, is because it usually necessitates the multiplication of assumptions out of all reason.
I go further. I think there is a certain logical priority about the other method. The period analysis depends on the quantitative importance of various kinds of lags [b] : if we knew these we might make great advance: it is the assumptions about them in the absence of factual knowledge that are so dangerous. The other method is in a way less ambitious but is a necessary propaedeutic. It is desirable to be absolutely clear about the mutual relations of the various elements at any point of time in a progressive society. If we are muddled about these, we shall become far more muddled if we superimpose a number of arbitrary assumptions about lags. The value of the ordinary (on my view!) definition of saving is that it can be used in the preliminary work of getting a clear view of the simultaneous relations of the different elements in a state of advance
2. Letter 428 , [jump to page] .
3. Letter 436 , [jump to page] .
- a. ALS, four pages on two leaves, in GH Box 66.
b. The word was circled by Haberler.
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