689. Harrod to E. F. M. Durbin , 11 August 1937 [a]

[Replies to a letter not found and to 679 ]

11 August 1937

My dear Durbin

I am afraid you wont get an answer to your letter of July 30 without delay. I got it as the ship was leaving Athens and it cannot be posted till Costantinople. Whether it will reach you safely from Turkey I cannot say!

I brought it on board (this is the Hellenic Travellers' Cruise on which I am taking my mother [1] ) with a view to giving it a considered reply. But the conditions are not conducive to thought. One sees sights, gets exhausted, then dozes in the sun.

The chief point of conflict between your theory and mine is that according to me the rate of increase of consumption does not slow down to the secular trend during the boom, but on the contrary such a slowing down is the signal for the crash. [2]

Perhaps I ought to distinguish 2 factors governing volume of capital output: (i) rate of increase of consumption (ii) percentage of such consumption which cannot be produced with existing machinery. In my book I only deal with (i). [3] It is possible that the rise of (ii) in the later phases of the boom might allow some slowing down of (i) without entailing a recession in the volume of capital output (which spells a crash).

I dont think that the boom can be sustained by bank inflation once there is any decline in the volume of capital goods required resulting from factors (i) and (ii). I regard the refusal of the banks to give extra credit as secondary, because I dont see how it can have a strong effect on (i) and (ii). Excuse the paucity of this comment.


Roy Harrod

  1. 1. In at least one previous occasion Harrod had lectured on board while cruising with the Hellenic Traveller's Club (G. Murray to Harrod, 3 February 1933, in HPBL Add. 71186/27-28); it is not clear, however, whether he did so also on this occasion. The trip is described in Harrod's letters to Wilhelmine Cresswell dated from 4 to 21 August 1938, in HPBL Add. Ms. 72776, ff. 84-101.

    2. See letter 679 , [jump to page] .

    3. Harrod, The Trade Cycle ( 1936:8 ), chapter II, section 1.

    1. a. ALS, two pages on one leaf, in EDP 3/5(16).

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