446. R. F. Kahn to Harrod , 6 April 1935 [a]
[Replies to a Pc not found, follows on from 443 ]
King's College, Cambridge #
6 April 1935
My dear Roy,
I do not think that we are now in disagreement, though I feel bound to state that your manner of expedition seems to me to border on the formalistic. There is a great deal of difference between saying (a) that so and so will happen if something or other is a constant proportion of something else, and (b) that the same thing will happen if something or other is a certain fixed proportion of something else.
As regards your postcard, which I enclose, I am bound to say that I have been feeling too stupid to elucidate it. I wonder if you could give me a little assistance.
Please excuse the formal character of this communication--dictated in a hurry just before I left Cambridge. I feel that we are really at cross purposes. J.M.K. does not say:--"If the absolute rate of saving increases as income increases, then in the absence of inventions the rate of interest must fall continuously in order to maintain full employment".  As you rightly point out, the <abs[olute].> condition which is necessary for this to be true is that saving is positive. JMK's assumption that saving increases with income is the assumption which has to be made in order to ensure stability of equilibrium.  If saving is independent of income equilibrium is neutral (as you pointed out at the Marshall Society  ) and if saving diminishes as income increases, equilibrium is unstable.
What you are saying is that if inventions are proceeding at a sufficiently high rate and if they are of the right kind, the "full-employment rate of interest" will be a rising one. There is no disagreement.
R.F. Harrod, Esq., 51, Campden Hill Square, London, W. 8.
2. Keynes, General Theory, in Collected Writings, vol. VII, p. 31.
3. No records survive of Harrod's talk before the Marshall Society (see letter 416 , [jump to page] ).
- a. TLI, with autograph corrections and addition, two pages on one leaf, in HP IV-586-668b.
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