See accompanying letter

(a) Point about continuous flow you concede. As soon as I sent off the review I thought of an apt analogy. You can advance in a tiny little boat to within a few yards of the foot of Niagara Falls. Very different would be the case if they suddenly began to pour into a hitherto undisturbed lake!

(b) Of course I did not expect you to prove that wages are sticky. I agree that wages may not move in proportion to labour-productivity. What I contended was that, equally, wages did not tend to remain stationary in terms of money. And I complained that you gave no reason for supposing that wages were in fact nearer being stationary in money than being what they would have to be if they had to advance in proportion to increasing labour efficiency.

You say in your letter that wages are slow to move relatively to prices. [3] Of course they are; but that is another point.

The point we are discussing is the long-period one of the relation of money wages to a steady advance of labour efficiency. Suppose the latter to be 2% p.a. Then the question is are money wages likely in fact to advance by more or less than 1%? If by more then stable prices is a closer approximation to what is required for equilibrium than stable money income, if by less then stable money income is a closer approximation. Both are approximations only and it may be that neither is a close enough approximation to be consistent with a steady advance. In that case some intermediate policy is not only desirable but necessary. But we cannot decide which is the policy more likely to succeed unless we know what does in fact happen to money wages--which is the closer approximation. To rule out stable prices as theoretically impossible and not in the same breath to rule out stable money income as theoretically impossible is an unwarrantable procedure, for the same argument kills both plans.

In my judgement Keynes in his Treatise on Money said the last word on this topic and nothing more can profitably be said. He said that the proper behaviour of prices was determined by the de facto relation between the course of money wages and the course of labour efficiency. [4]

(c) Question of equality of prices and costs in relation to full employment. I, like you, meant prices and costs in consumption trades. You say "I do not see why an equality between prices and costs of the full output should not occur simultaneously with full employment in the consumption goods industries." [5] No more do I. But why the devil should it? Surely the man who claims that two events will occur simultaneously has got to state his reasons why. Events in general do not occur simultaneously. Any two events may. But the probability is on the other side.

Finally you wish to connect the boom with an increase of producers' credits. [6] I dont deny that there often is an increase of producers' credits. But I dont regard it as the leading feature of the boom. Money may (and does) circulate more rapidly.

Your P.S.! I quite agree that Keynes would do better for himself by being less far-reaching in his claims. But these geniuses are apt to have prima donna-ish temperaments and we should lose if we refused to listen to them on this account. But I confess that I dont think very much of the results of "a century of scientific thought." [7] Economics--as you with your scientific training [8] must know quite well--has been much more scholastics than science. And anyhow it can all be written on the back of a postage stamp, cant it?


But, I quite agree, he is very naughty.

  1. 1. Compare Harrod's statement on the subject in letter 651 to Robertson, [jump to page] .

    2. No earlier correspondence between Harrod and Durbin relating to The Problem of Credit Policy (1935) was found.

    3. Letter 519 , [jump to page] .

    4. J. M. Keynes, Treatise on Money, 1930 (in Collected Writings, vol. V, p. 152).

    5. Letter 519 , [jump to page] .

    6. Letter 519 , [jump to page] , and Durbin, The Problem of Credit Policy (1935), pp. 71-77. In a footnote, Durbin warns that the argument of these pages must be qualified by the considerations raised by Harrod in "The Expansion of Credit in an Advancing Community" ( 1934:8 ) and "Rejoinder to Mr. Robertson" ( 1934:11 ).

    7. J. M. Keynes, The General Theory, 1936 (in Collected Writings, vol. VII), p. 3.

    8. Durbin obtained his first degree in zoology (New College, Oxford, 1927), and undertook study in philosophy, politics and economics (PPE) for a second degree.

    1. a. ALS, four pages (numbered from the second) on two leaves, in Durbin Papers 3/5(1-2), with ANI, two numbered pages on two leaves, DP 3/5(3).

      b. Ms: «show it you».

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