460. Harrod to J. M. Keynes , 1 August 1935 [a]

[Enclosed with 459 , continues at 461 ]

as from Christ Church

1 August 1935

Dear Maynard

You may wonder why I lay such stress on a point that merely concerns formal proof rather than the conclusions reached. I am thinking of the effectiveness of your work. Its effectiveness is diminished if you try to eradicate very deep-rooted habits of thought, unnecessarily. 1 One of these is the supply and demand analysis. I am not merely thinking of the aged and fossilized, but of the younger generation who have been thinking perhaps only for a few years but very hard about these topics. It is doing great violence to their fundamental groundwork of thought , 2 if you tell them that two independent demand and supply functions wont jointly determine price and quantity . Tell them that there may be more than one solution. Tell them that we dont know the supply function. Tell them that the ceteris paribus clause is inadmissible and that [b] we can discover more important functional relationships governing price & quantity in this case which render the s. and d. analysis nugatory. But dont impugn that analysis itself.

The fact that saving is only another aspect of investment makes it worse not better. If there were two separate things, saving & investment, then it is clear that the two equations will not determine both. But with one thing, then if you allowed the cet. par. clause which you rightly do not, it would be quite logical and sensible to approach it in the classical way.



  1. a. ALS, two pages on one leaf, in JMK GTE/1/296-97. This letter is printed in Keynes, Collected Writings, vol. XIII, pp. 533-34.

    b. Ms: «there».

1. Keynes marked this sentence with two vertical lines in the margin.

2. "I am not" [Keynes's note in the margin].

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