[A. C. Pigou's Notes]


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(1) Down to p. 7 [13] the symbols seem to refer to real income, real rates of interest and so on; I don't follow how or when they jump to refer to money.

(2) It seems to me quite wrong to make Marshall's supply equation . [14] Marshall laid stress on ability to save. His second equation is . This gives 2 equations and 3 unknowns.

(3) If we assume that the real rate of wages is plastic in such wise that everybody is employed, and write R for the quantity of productive resources in existence, the required third equation is ; R being for short-cut purposes a constant. This, it is plausible to say, is the "classical school's" solution for some purposes.

(4) If we assume per contra that work people insist on a certain money wage w, and I is the money income, the third equation becomes .

(5) The "great discovery" seems to be that in these circumstances the system is indeterminate until account has been taken of the influences that govern I!

(6) These can be set out in a variety of different ways, showing the part played by banking policy and by Marshall's K (liquidity preference), in two equations that contain only one additional unknown apart from constants. The circle is then completed.

(7) I should have thought that everybody who had ever written about industrial fluctuations knew all this perfectly well (in effect, if not in terms of algebra). Indeed, if he didn't acknowledge it, he would have to deny that monetary policy etc. had anything to do with industrial fluctuations.

Sgnd (A.C.P.).

  1. 1. Harrod, "Mr. Keynes and Traditional Theory" ( 1937:4 ).

    2. Harrod, "Mr. Keynes and Traditional Theory" ( 1937:4 ), pp. 77 top and 86 top; see note 1 to letter 580 , [jump to page] , for a further passage on expectations omitted from the published version.

    3. Harrod, "Mr. Keynes and Traditional Theory" ( 1937:4 ), pp. 84-85.

    4. Harrod, "Mr. Keynes and Traditional Theory" ( 1937:4 ), p. 85.

    5. Harrod, "Mr. Keynes and Traditional Theory" ( 1937:4 ), p. 80 middle.

    6. Footnote [i] and note 7 to letter 593 .

    7. A. Marshall, Principles of Economics, 1907; chapter V of book V is on "Equilibrium of normal demand and supply, continued, with reference to long and short periods".

    8. A. C. Pigou, Industrial Fluctuations, 1929. Chapters II and IV of part I are dedicated, respectively, to the "Changes in Expectations as Proximate Causes of Changes in the Demand for Labour", and to the "Real Causes behind Varying Expectations of Profit from Industrial Spending among Business Men".

    9. A. C. Pigou, Essays in Applied Economics, London: King and Son, 1923: "The Exchange Value of Legal-Tender Money" (or 1924 edition, pp. 182-84). F. Lavington, The English Capital Market, London: Methuen, 1923 (as far as the cited pages are concerned, there is no difference in pagination with the 2nd edition, 1929).

    10. Robertson also cited Plumptre's criticism in correspondence with Keynes (in Keynes's Collected Writings (1971-89) vol. XIV, p. 98n), and later in his Essays in Monetary Theory (New York and Toronto: Staples Press, 1940), p. 25. Plumptre's paper does not seem to have been published.

    11. A. Marshall, Money Credit and Commerce (1923).

    12. D. H. Robertson, A Study of Industrial Fluctuations. An Inquiry into the Character and Causes of the so-called Cyclical Movements of Trade, London: King & Son, 1915.

    13. Harrod, "Mr. Keynes and Traditional Theory" ( 1937:4 ), p. 77.

    14. Harrod, "Mr. Keynes and Traditional Theory" ( 1937:4 ), p. 76.

    1. a. ALI, two pages on one leaf, in HP IV-990-1069d/43. The annexe transcription of Pigou's note, in Robertson's hand, one page, is in the same file HP IV-990-1069d/43.

      b. Ms: «evidence what».

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