536. Harrod to H. D. Henderson , 4 March 1936 [a]

Christ Church, Oxford #

4 March 1936

Dear Henderson

I have a guest staying with me next week-end and must take him into Hall on Sunday evening. Could I look in for tea on Sunday?

You ought to have come to the Joan Robinson meeting. She swept a large body of undergraduates into a far more extreme position on these matters than you have yet even begun to contemplate. It was a magnificent performance.

I dont think I used the phrase independent variable of the rate of interest. I said that the level of income was a dependent variable and, that being so, the two bladed scissors solution of the rate of interest problem makes nonsense. [1]

You say that the possibility that people will vary the proportion of resources they will hold in liquid form in response to changes in the remunerativeness of remunerative assets is a slender basis for a new theoretical construction (I should put it for a further development of theory). I dont agree. We know that there are wide variations in this proportion. There is overwhelming evidence from plain observation in the slump that the increase is due to the un-remunerativeness of other assets. Your assertion that there is no variation in the long-period is a mere ipse dixit, not I believe borne out by the facts. If it proves possible to develope an elegant extension of general theory which takes account of the possibility, why resist it, if it is coherent and self-consistent?


Roy Harrod

  1. 1. Harrod's view seems to have changed since August 1935, when he argued against Keynes that the traditional theory of interest is invalid but not nonsense: see letters 464 , [jump to page] , and 471 , [jump to page] and [jump to page] .
    1. a. ALS, two pages on one leaf, in HHP 22A/6.

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