654. H. Richter-Altschäffer to Harrod , 8 April 1937 [a]

[Replies to 640 ]

care of American Embassy, Berlin

8 April 1937

Dear Mr. Harrod,

This is to thank you for your kind and interesting letter of March 1st. You are surely right in assuming that our minds are moving in the same general direction. This is even true to a much greater extent than I have enabled you to gather from my somewhat sketchy statement of February 4th. [1] It is exactly such things as you mention, viz. rates of growth [b] of the various magnitudes in the system and the consistency of these rates, that I believe are the true object of analysis for the dynamic department of economic theory. And surely there is some measure of uncertainty in the static sector as well. But I think that the domain of "uncertainty par excellence" is the dynamic sector--the sector which is concerned with the phenomena of growth, saving, capital creation and their causal or lack of causal interrelations. Thus I should say that I do not class economic processes and factors as dynamic or static according to whether [c] they do or do not depend on expectation, but rather that I draw the line as between the economic process induced by, and equivalent to "ultimate demand", and those processes the initiating force of which is not "ultimate demand" but entrepreneurial [d] expectation of what ultimate demand at some distant future is likely to be. Surely, there is uncertainty in both fields of the economy--but while in the static field uncertainty is accidental, it is fundamental in the dynamic field. In other words, I think what uncertainty there is in the static sector does not impair the possibility to theorise as if there were no uncertainty at all, while in the dynamic field uncertainty is the essence of the problem. I believe you are quite right to think that the existence of that uncertainty will present great difficulties to the dynamic theory. Indeed, the difficulties may be so great that it will not be possible to establish, for the dynamic sector, "laws" of the same comprehensive scope as have been established under static assumptions. We may only succeed to state certain tendencies leading up to certain economic constellations--from which there may be no cogent tendency to further transformation or regression. If this be our result, the case for economic interventionism will be theoretically established.

It has been very interesting, indeed, to have your statement. I shall not fail to get hold [e] of your book Trade Cycle, [2] of which I had heard already. I hope we shall keep in touch with each other from time to time, and that I may have an early opportunity of making your personal acquaintance. Are you planning to attend the meeting of the Econometric Society next fall, in Geneva?

Sincerely Yours,

Hand Richter-Altschäffer

Mr. R.F. Harrod, Christ Church, Oxford, England.

  1. 1. Letter 622 .

    2. Harrod, The Trade Cycle ( 1936:8 ).

    1. a. ALS, two pages on two leaves, in HP IV-974. The author's name is printed on the sheet, but not his address. A photostat of a Cc is also preserved in the same file: this was sent by Richter in 1957 (see the Cc of a TL by Harrod to Richter, dated 23 August 1957, in HP IV/772-777).

      b. Ts: «growths».

      c. Ts: «according as».

      d. Ts: «enterpreneurial».

      e. Ts: «get a hold».

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