597. D. H. Robertson to Harrod , 9 November 1936 [a]

[Follows on from 593 ]

Trinity [College, Cambridge]

9 November 1936

My dear Roy,

At last I return your paper, with apologies for keeping it so long. [1]

Pigou's notes attached were for my information: but he says I may transcribe & transmit them.

On re-reading the paper, I find that the things which surprise me most are the claims made for illuminating change in respect of

(i) the importance of expectations,--pp. 6 & 22 [2]

(ii) the precision of the concept of liquidity preference (proper) and its relation with the marginal principle and with the rate of interest (pp. 19, 20). [3]

(iii) the manner in which changes in the quantity of money operate through the rate of interest (pp. 20-21). [4]

(iv) the influence of rigidity of wage-rates in terms of money (p. 12). [5]

On (iv) I gave some references in my last letter, e.g. Pigou, Theory of Unemp t . pp. 293-7, Robertson B.P & P.L., p. 21. [6]

On (i) see e.g. Marshall's Principles, bk. V, ch. 5, which is permeated with expectation throughout: [7] & the titles and contents of Pigou, Industrial Fluctuations (1929 ed n ), bk I, chs. III-IV. [8]

On (ii) see, e.g., Pigou, Essays in Applied Economics, pp. 181-3: Lavington, English Capital Market, pp. 30, 32, 95. [9]

{The Neo-Keynesian formulation seems to me definitely retrograde in various respects. In particular, it divorces money held for "precautionary motives" from direct connection with the rate of interest, which is supposed to be relevant only to money held for "speculative motives", i.e. because it is thought that the rate of interest may change. Thus interest is paid because interest is expected to change! (I have seen an effective criticism by Plumptre along these lines [10] )}

On (iii) see the classic passages in Marshall on which we were all brought up,--see Money, Credit and Commerce, pp. 75-76 and 254-7; [11] and (for evidence of [b] what a firmly established part of "orthodoxy" they were in 1913) my "Study of Industrial Fluctuation", p. 228. [12]

Well, well,--never mind! But it is odd, the whole thing!




See attached NOTE

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