Foreword

 

by Warren J. Samuels

 

It has been said of Michael Jordan, the basketball player, that he performs, relative to all other practitioners of the game, better than any other person in any field relative to others in their field. As the comedian-mathematician Tom Lehrer said of Wolfgang Mozart, it is the accomplishments of people like this that can cause one to feel inferior. In economics, in the twentieth century, that position arguably was filled by Paul Samuelson. If so, beneath Samuelson is a coterie of several dozen economists who may be lesser but who are nonetheless great economists, great in both the number and significance of their accomplishments. One of these is surely Roy Harrod. He is one of the great polymaths, generalists, or, to use Isaiah Berlin 's term, hedgehogs of our discipline. Moreover, like several eminent economists before him, he made contributions to other disciplines, such as philosophy.

Harrod made numerous important contributions to such fields as business cycle theory, economic growth theory, imperfect competition theory, and the theory of economic dynamics. He also wrote the first full-length biography of John Maynard Keynes . Harrod was a theorist's theorist but also wrote a book on inductive logic.

Harrod was fortunate in writing when he did and on the subjects on which he wrote. These subjects, due in no small part to his efforts, were becoming key fields in economic theory. One of the great accomplishments in the interpretive literature is George Shackle's account in The Years of High Theory (1967) of Harrod's teasing out of what later became known as the marginal revenue curve.

Harrod, it now can be said, has also been exceedingly fortunate in having Daniele Besomi adopt him as the subject of his major early research program as a historian of economic thought. Besomi is dedicated, insightful, persevering, and incisive in his work on and interpretation of Harrod's ideas. I have a colleague in Philosophy, Donald Koch, who is so close a student of John Dewey that he can discuss the development of Dewey's ideas on a week-by-week basis; for the interwar period, at least, Besomi comes close to this for Harrod.

Besomi's The Making of Harrod's Dynamics has received highest honors on both sides of the Atlantic from the two major organizations of historians of economic thought. His dissertation was awarded in 1997 the Joseph Dorfman Prize by the History of Economics Society as the best dissertation in the history of economic thought. His book version (published by Macmillan) won the best-book competition of the European Society for the History of Economic Thought in 2000. Most, by no means all, of Besomi's several-dozen journal articles deal with Harrod in one way or another. And now he has completed this three-volume collection of Harrod's interwar correspondence and papers.

Harrod was a neoclassical economist of striking diversity and complexity. He contributed to both the neoclassical research protocol of achieving unique determinate optimal equilibrium solutions and the neoclassical focus on an abstract a-institutional pure conceptual model of the economy. Harrod did not mechanically apply neoclassical economic theory. Like most if not all other theorists, Harrod sometimes treated economic theory as a set of tools, in the tradition of Alfred Marshall and Joan Robinson , and he sometimes treated theory as a definition of reality; it is hard to unequivocally discern which view he had when they are so deeply commingled. Often, perhaps typically, it is impossible to discern his intended degree of generalization, though much more is involved than that. His interwar work both preceded and contributed to the stabilization of economic theory. It is not clear how, or that, he would have treated stabilized economic theory differently.

(In calling Harrod a neoclassical economist, I do not intend to raise and take a position on the subtleties of a number of issues. In particular, I do not intend to pursue a neoclassical versus Keynesian dichotomy. In microeconomics and allied fields, Harrod was neoclassical or largely neoclassical, more or less in the Marshallian mode, though with relatively greater emphasis on pure conceptual, a-institutional markets and on the quest for unique determinate equilibrium--if not also optimal--solutions. This neoclassicism is the case with his imperfect competition theory, his insistence on "roundaboutness"--which Besomi tells me continued to 1961--and with themes in his trade cycle and growth theories. During the late 1930s Harrod manifested the greater or lesser hesitations and ambiguities of a neoclassicism mixed with Keynes of The General Theory, which in time were more or less reconciled, in a manner suggestive of Paul Samuelson's Neoclassical Synthesis--with lots of room remaining for conflict over details. Moreover, this was an important period in the stabilization of price theory, so the meaning of neoclassical economics itself was being worked out. Harrod himself and most commentators saw and perhaps still see him as a Keynesian; but there is much more to him, as the correspondence makes clear.)

Harrod also understood that policy as to institutions had to be made, indeed was going to be made and, further, believed that an important function of economists--in their social role as persons of expert knowledge--was to try to influence the making of policy. And he understood, I think, that different formulations of grand theory had different meanings. For example, the warranted-growth form of his growth theory was different from that growth theory as an explanation of growth. The former worked with the relationship between achieved capital-output ratio and saving-income ratio; the latter, as Joan Robinson admonished, gave effect to the institutions and choices underlying and generating technology, investment, saving and income. Both relate to Harrod's understanding of the role of limiting conditions in matters of policy--if not also in matters of theory.

Harrod was both a policy wonk and a public intellectual; in both respects he, like many of his economist colleagues, was part of the total process of governance. He was a member of the university trained and positioned elite that comprised part of the extended personnel of governance.

Harrod's and others' reactions to and the general aftermath of the Munich agreement with Adoph Hitler, including Harrod's efforts to work out a reorganization of political parties, are fascinating reading.

The user of these volumes will find a treasure trove of materials. The most obvious are the sets of correspondence between Harrod and other leading economists of the period. These include G. Haberler , R. F. Kahn , N. Kaldor , J. M. Keynes , F. H. Knight , A. D. Lindsay , J. Marschak, E. H. Phelps Brown , F. Ramsey , D. H. Robertson , and J. Robinson,

The correspondence covers most if not substantially all of the principal topics of theory and paradigm development during this--as it turned out--rich and highly formative period of economic theory. These include, in no particular order: period analysis, the meaning and possibilities of ex ante-ex post analysis; the relation of macroeconomic theory to varieties of the quantity theory; the possibility, nature and content of plural methodologies (methodological pluralism), and the philosophy and methodology of economics generally; the nature and distributive consequences of invention; population and population policy; the terms, theory and definitions of neoclassical concepts, e.g., the relationships between the definitions, assumptions, mathematical logic, and realism of the theory of the firm, monetary theory, and what became macroeconomic theory; the significance for understanding and applying the technical relationships of economic theory in the face of variable behavior by economic actors; the nature and content and relation of special to general cases; the nature and domain of liquidity preference; the precise nature and complications of the savings-investment relationship; the genesis and role of interest rates; the empirical work of the Oxford Economists' Research Group (and others, including the Oxford Institute of Statistics) in contributing to the statistical and behavioral factors affecting, for example, investment decisions; international economic policy and finance; the language of equilibrium economic theory coupled with--and enabling, channeling and constraining--the analysis of problems of disequilibrium economic theory; and so on.

Clearly present is the tortuous process of the working out of and understanding elements of Keynes's General Theory. The same applies to both the meaning of Harrod's own The Trade Cycle; specifically whether it dealt with the business cycle or growth or both, and the development of economic theory in general, especially the uneven paths of acceptance. Many of Harrod's interests and work--in public finance, international trade, growth theory, macroeconomics, and so on--relate and contribute to his concern with economic development. One interesting aspect thereof is his widespread, and self-conscious, deployment of Marshallian economic theory; another is his shift to the aggregates of growth theory.

The notion of tortuous process applies to both the development of economic theory and Harrod's own life. He had two nervous breakdowns, apparently precipitated by his having to cope with his mother 's own mental illness in conjunction with problems in his own private life. Harrod seems frequently to be struggling with a tendency to depression.

Among other things, the reader is bound to notice the shortness of publication lags in professional journals and the importance of exchanges among economists in The Times, The Economist, the New Statesman and Nation, and the Manchester Guardian.

Different readers will find their attention riveted to or whetted by different tidbits in these archival materials. Among those that caught my attention are the following, identified by letter number.

--How, with the rise of academic economics, "Now imperceptibly the professional interest has come to absorb everything, and the important questions are discussed as mere pastime in an odd hour off" ( 80 R).

--That, in the view of Phelps Brown, "it should be the function of an Oxford school of economics to find out facts as well as to argue from premisses" ( 181 R);

--That, says D. H. Robertson about the "natural" rate of interest, "I find myself in an increasing fog as to what that concept means!" ( 234 ).

--That, already in early 1933, Robertson argued that the idea that the Cambridge Economic Handbooks series should "contain nothing but `generally accepted doctrine' has become impossible of fulfillment with the (let us hope temporary) attenuation of the body of the latter" ( 276 ).

--Harrod's insistence, to Kaldor, in 1933 that "Changes of taste & means of production seem to be likely to grow greater not less and our studies should be directed towards the equilibrium not of a stationary [i.e., static] state but of a regular advance" ( 327 ; see also 607 ).

--Robertson's statement that "I think you idealise the state of the other sciences! Surely physics above all is in much the same state as we are, i.e. different people trying to build workable pictures--which don't always fit in together--because the real world is too complicated to be studied directly" ( 373 ).

--Robertson's statement that he "only feel[s] a little envious of you, and Maynard, and Robbins, and my young Communist friends, and everybody else who feels clear that he knows what ought to be done and inspired by missionary zeal to proclaim it! Perhaps it is my particular function to keep alive the right of the professional economist not to give advice!" ( 380 ).

--Gottfried Haberler's lament that a letter from Harrod "strikes me as if it were written in a strange language which I cannot understand. Some economic friends of mine read it, but they could not enlighten me; they felt the same way as I did" ( 384 ; see also 393 ).

--And Harrod's cry to Kahn along similar lines, neglecting, like Haberler, that technical definitions embody or give effect to theories and models: "Is all the old terminology now to be scrapped? This makes a severe demand on the general public. If the Treatise [Keynes's Treatise on Money] is to be put in cold storage for a year, what are we to teach? We have not only to consider the truth, but education which is done through standard terms and concepts. If the language is perpetually to be altered, progress is hardly possible. Language is one thing and truth another. If the old truth is untrue it must be cast out. But if the old language is inconvenient, it must not necessarily be changed. For the inconvenience of change may be greater than the superior convenience of the new terminology" ( 389 ; see also 392 , 397 , and compare 394 : "I quite agree that it is not possible to find out something about the real world by re-defining them. But it may be possible to explain a discovery already made by using terms defined in a somewhat different way."). Harrod also reports to Haberler that Marschak "agreed with me that S I implies an unnatural definition of S or I" ( 398 ). Harrod also wrote that "I dropped the definition [of saving] not because it is itself a faulty one--on the contrary I think it very neat--but because Robertson and Haberler don't like it. Definitions are things to be agreed about not fought over. I am perfectly willing to be accommodating" ( 414 ).

A student of the linquistic issues raised in the Keynesian Revolution--and by Thomas Kuhn's theory of scientific revolutions in general--will find rich veins of raw materials here.

A student of methodology will likewise find interesting materials with which to work out Harrod's views on rationalism and empiricism, or deduction and induction--in part, the conduct of theory to create tools, define reality, constrain the identification of "facts," and channel policy. (Harrod wrote to Marschak in early 1937 that his "natural bent is towards private cogitation and I have had little experience of empirical work"--and wondered if he could join in some such work at the Oxford Institute of Statistics: 613 ; see also 790 ).

--Kahn identified the problem from the opposite position, saying in 1934, apropos of the new Keynesian ideas then being worked out, that "To elucidate them and similar doctrines in terms of the `savings' of the Treatise is an awful job" ( 391 ).

--Perhaps the single most dramatic, if not ironic, statement in the collection is this admonition by Haberler to Harrod: "I think, if you could bring yourself to conceive of saving, investment, income etc., as flows of money in time, you would get things straight" ( 396 ). Harrod replied, "I should like to say that I do always think of income, savings and investment as flows in time" ( 399 ).

A close second in degree of drama and irony is one which may require knowledge of the linguistic ventures of several U.S. politicians (William Jefferson Clinton on the meaning of "is" and Gary Condit on the meaning of "relationship") and was also produced by Haberler based on an argument by Harrod: "what the word `can' may mean" ( 429 ; see also 428 ).

--Kahn wrote to Harrod in late 1934 that "Maynard's stuff is the kind of stuff which makes sense to the layman even if it is not acceptable by the sophisticated economist whose system does not really admit of the existence of unemployment. ... the number of Cambridge economists ... who can really be regarded as Maynard's supporters is a vanishingly small quantity. Such as we are, we do very much look to you as a leader in what must after all be described as a fight" ( 402 ).

--Harrod wrote to Kahn, apropos of the rate of interest not being determined by the supply and demand for saving (the paradox in question), that "If a proposition is true, it must clearly be advocated whether paradoxical or not. But the paradox can often by eliminated by a change of form or re-definition of certain terms. What I plead is that great efforts should be made to eliminate the paradoxical element wherever possible" and that "By equilibrium economics I dont think I meant the economics of full employment, on the contrary I think equilibrium economics has failed to analyse the conditions of full employment, but rather I meant the body of theory connected with marginal economics" ( 405 ). Apropos of the former, Harrod also wrote to Keynes that "You may wonder why I lay such stress on a point that merely concerns formal proof rather than the conclusions reached. I am thinking of the effectiveness of your work. Its effectiveness is diminished if you try to eradicate very deep-rooted habits of thought, unnecessarily" ( 460 ; see also 461 , 462 , 470 , 471 , 495 , 496 ).

--Harrod, very much concerned about under-population of Britain, argues that "The facts among all western peoples indicate that mother love is not enough to produce sufficient offspring" and that "I am all for ... family allowances. But are they enough? It certainly is not enough partly to cover expenses of upbringing. You have got to make child rearing a profitable trade as it was in the old days of child labour" ( 408 ). (This Beckerian view reinforces the claim that Harrod was, in part, neoclassical. See also in re press item 13 , infra.)

Harrod's concern reached beyond under-population. He wrote to Joan Robinson that "I dont think the human race will be extinguished. What is much more likely in my view is that natural selection will get to work again and cause the survival of those races whose ideals and social institutions are adapted to large families. And in that process of survival I foresee a return of a dark age, the persecution of women, purdah rigidly enforced, violent intolerance, a recrudescence of crude religious superstition and probably a glorification of war" ( 735 ). He also wrote to her that "I have some (not excessive) British patriotism which makes me unwilling to leave it to other races to do the surviving. Yet unless we reverse the present trend very quickly, we are handing the <ball> to other races!" ( 739 )

--Keynes wrote to Harrod that "You say in one passage that I am doing great violence to the fundamental ground-work of thought in getting rid of supply and demand analysis. But I am doing no such thing. I am substituting demand and supply analysis for liquidity preference instead of that for saving" ( 470 ). [Ditto in re Keynes et al.] Elsewhere Keynes wrote Harrod that "I say, therefore, that it is nonsense to assume at the same time that income is constant and that the propensity to save and the schedule of the marginal efficiency of capital are variable" ( 472 ).

--Apropos of Harrod's empiricism in relation to theory and model construction, he wrote to Robertson that "I also suspect that economics will sink deeper and deeper into some sort of scholastic morass until we all become Wesley Mitchells. And that is rather gloomy. I just cant become a Wesley Mitchell, so what am I to do? [n/p] My only ray of sunshine is Maynard's book" ( 477 ; see also 867 ). This book, he says, in another letter to Robertson, he "should compare it with Ricardo clearing up the mess left by Adam Smith" ( 479 ).

--Harrod wrote E. F. M. Durbin that "I confess that I dont think very much of the results of a `century of scientific thought.' Economics--as you with your scientific training must know quite well--has been much more scholastic than science. And anyhow it can all be written on the back of a postage stamp, cant it?" ( 520 ).

--Harrod wrote H. D. Henderson about Keynes's General Theory and its place, saying, inter alia, that "There is this underlying idea that this free play of supply & demand will produce an optimum condition. There has long been some skepticism about it, a certain amount of murmuring and disgruntlement, but no really coherent account of why it should not. Maynard now presents a consistent theory of under-demand. If it is true, it is surely rather important. And though open to conviction in a contrary sense I am disposed to think it is on the right lines." Moreover, "As for the gallant defence of orthodox economics, well really there is so little in orthodox economics anyway. What there is that is right is not likely to collapse under Maynard's blast" ( 542 ).

--Harrod laments to Robertson about Henderson that "His great gravamen was that I made the wholly unrealistic assumption that the entrepreneur tries to maximize profit. I dare say it is unrealistic, but what can the poor theorist do?" ( 563 ).

--Writing about Harrod's The Trade Cycle, Henderson questioned "the tone in which you [Harrod] advance your proposals of policy. As I see it, what you are doing in effect is to build up on the basis of an essentially abstract argument practical proposals of a highly eccentric and heretical character. The abstract argument necessarily involves in effect assumptions as to facts every one of which is open to dispute. In other words, your conclusions can only be appropriately of a tentative character, and some of your incidental sniffs at the practical man whether in business or in administration ... don't seem to me therefore quite in place. I don't mean that you insult him; but you use phrases implying that he is demonstrably wrong-headed" ( 569 ). In a subsequent letter Henderson partly retracted, saying "I think I exaggerated in implying that there was a general tendency to sneer at the business man in your book, ..." ( 573 ).

--Writing to Robertson about Keynes's General Theory, Harrod argued that "You say there is a well recognized and solidly founded body of doctrine, which the young may learn like Euclid: static economics. There is another very imperfectly explored field, ... dynamic economics ... [about which] it is impossible to dogmatize at this stage. The undergraduate may be encouraged to read certain representative works and told to think for themselves. Here I should observe that Maynard's work does not imply an overthrow of the static system and in this he differs from the mere scallywags like Major Douglas. The static system retains its place as a foundation. [n/p] By recognizing this distinction between the developed and the underdeveloped departments of theory it seems to me you put Maynard in his right place. The only modification in the static theory is that the doctrine of what governs the volume of saving and the rate of interest must be thrown out bag and baggage. By taking the line which I think you are inclined to take, that Maynard is a naughty boy who is upsetting the ordered development of economics, you only make confusion worse confounded. What are the poor undergraduates to think? Because after all Maynard is a clever fellow; and so are his followers" ( 607 ). Such a line likely would not have impressed Frank Knight ( 658 ).

--Lionel Robbins presents a spirited defence against Harrod's description of him as advocating "extreme laissez faire." Robbins claims that this is "a total misunderstanding of a position which is really on a plane quite different from that you are thinking of. So far as the pure theory of the economic functions of `the' state is concerned, my position is roughly that of Marshall who felt that there were so many things the state must do that it was highly desirable that they should not cumber themselves with things which could be left to others. But so far as the policy of actual states is concerned, I oppose many kinds of intervention because I see their cumulative indirect influence tending to industrial sectionalism, economic nationalism and anti-democratic developments generally. And I do this for reasons which do not seem to me to have begun to be examined seriously by the majority of English economists. My international Liberal Utopia involves, I fear, ass much hard constructive leadership on the part of statesmen as any political ideal now fashionable. But the kind of constructive effort and the sphere of its applicability seem to me to fall right outside the categories of contemporary discussion. I cannot believe that, whether this attitude is right or wrong, it is really very helpful to describe it as extreme laissez faire" ( 624 and 626 , especially note 16 ). Robbins also wrote to Harrod that "I am not opposed either to spacing out public works or to many measures designed to reduce inequality." He points to writing in which he "said that inequality was a deficiency of a system of free market ..." ( 737 ).

--One of the most suggestive if not incisive discussions of induction vis-à-vis deduction and of the role of models as the meeting-ground, as it were, of both, is to be found in an admonition by Keynes to Harrod. "It seems to me that economics is a branch of logic, a way of thinking; and that you do not repel sufficiently firmly attempts à la Schultz to turn it into a pseudo-natural science. One can make some quite worthwhile progress merely by using your axioms and maxims. But one cannot get very far except by devising new and improved models. This requires, as you say, `a vigilant observation of the actual working of our system.' Progress in economics consists almost entirely in a progressive improvement in the choice of models. [n/p] But it is of the essence of a model that one does not fill in real values for the variable functions. To do so would make it useless as a model. For as soon as this is done, the model loses its generality and its value as a mode of thought. That is why Clapham with his empty boxes was barking up the wrong tree and why Schultz's results, if he ever gets any, are not very interesting (for we know beforehand that they will not be applicable to future cases). The object of statistical study is not so much to fill in missing variables with a view to prediction, as to test the relevance and validity of the model. [n/p] Economics is a science of thinking in terms of models joined to the art of choosing models which are relevant to the contemporary world. It is compelled to be this, because, unlike the typical natural science, the material to which it is applied is, in too many respects, not homogeneous through time. The object of a model is to segregate the semi-permanent or relatively constant factors from those which are transitory or fluctuating so as to develop a logical way of thinking about the latter, and of understanding the time sequences to which they give rise in particular cases" ( 787 ). For his part, Harrod wrote, in part, that "I am not sure that I agree altogether with your hostility to the idea of economics as a natural science; tho' no doubt it has its own special modes of procedure" ( 790 ). Keynes responded, in part, that "[i]n chemistry and physics and other natural sciences the object of experiment is to fill in the actual values of the various quantities and factors appearing in an equation or a formula; and the work when done is once and for all. In economics that is not the case, and to covert a model into a quantitative formula is to destroy its usefulness as an instrument of thought" ( 791 ). Harrod replied, again in part, that "I think Tinbergen is well aware of the limited validity of his numerical co-efficients he introduces into his equations. But if after working out his equations for a number of different countries and places, he finds that certain influences, which theory deems to be present, are consistently small compared with other influences--which must also of course be justified by theory--, this must and ought to modify the emphasis we place in our general thinking on the problem" ( 799 ; see also 806 and 865 ).

In these and other respects, it is remarkable that economists made advances without much explicit agreement as to what they were doing methodologically, i.e., without agreement as to the epistemological meaning of what they were doing.

Numerous other noteworthy statements abound, including (again, references are to letter numbers): statements on the position of the Liberal Party concerning principles versus class and, apropos of India and Egypt, opposition to "(a) imposition of western ideas on the peoples and (b) capitalist exploitation" ( 7 R); Harrod's rejection of a fellowship because it required his affirmation to being a Christian ( 23 R); how the teaching of Marshall was long absent from the Oxford curriculum ( 45 R); that German economics, in 1923, was laden with "sweeping generalizations" ( 48 R); how a group, meeting in 1924, on currency issues "all disagree on simple things" ( 67 R); the conflict between competition and rules in the determination of international wage rates ( 89 R and 92 R); the meaning of "neutral money" (e.g., 339 ); Kahn's and others' critique of Hayek and his followers (e.g., 382 ); the distribution of opportunity "of man as he grows richer ... to set aside something to give him an `unearned' livelihood however small ... [thereby having] a paradise of small capitalists" ( 406 ); Harrod telling Keynes in 1935 that "still another work, a Manual of Elements, will be wanted" ( 461 ) so that people can understand the General Theory--thereby anticipating works by Joan Robinson, Dudley Dilliard and Lawrence Klein; the nature of money and its relation to banks and bank lending (e.g., 481 - 487 etc.); Robertson's dictum that economics should now be divided into three domains--Stationariness, Progress and Fluctuation ( 717 ); and Harrod's use of balance of power theory in evaluating, in 1938, Britain's relations with Russia (as he called the USSR) vis-à-vis Hitler ( 845 , 847 ).

The foregoing come from the correspondence. From Harrod's essays, one finds others.

--In the very first paragraph of the first essay one reads: "The magic harmony of the economic laws! In some we still delight. The composition as a whole is now, alas, spoilt for us; we have been educated into abhorring its cheap and sentimental facility ... I shall speak not altogether unkindly of it [the concept of the division of labor], for I believe that in its innermost essence the hand of our divine master is revealed, but I want to find that essence and to disgust you with parts which you have hitherto taken pleasure in" (essay 1 ).

--Students of the legal-economic nexus and of politics will be particularly interested in essays 12 and 21 .

--Essay 22 is a splendid interpretation and critique of socialism in general and of Karl Marx's ideas in particular.

--Harrod's concerns about low population growth are articulated in several press items. In press item 13 , we find the following: "Sir Walter Langdon-Brown writes that `people are not going to be bullied or bribed into having children.' I agree that they will not be bullied. But the bribe is a different matter." In press item 19 concern over differential growth rates of different classes is added to that over aggregate population level (as in press item 17 and passim).

Besomi's collection is a major archival contribution to the history of economic thought of the interwar period. If one recollects the importance and utility of the collected correspondence and papers of John Maynard Keynes, one can anticipate something of the resources that Besomi has herein provided. We know more about the development of Keynes's economics than of anything else of such magnitude and importance. This is largely because of the vast, long-lasting interactions among a dozen or more individuals--individuals who, often despite their relative propinquity, put down their ideas in correspondence. The range of relevance of this collection is, however, much wider than Keynesian macroeconomics. These materials provide much insight coupled with great opportunity for hypothesis formation concerning what all manner of economic theory meant to Harrod's contemporaries and how economic theory was worked out during this period of high theory.


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