784. Harrod to N. Kaldor , 22 June 1938 [a]
[Replies to 783 , answered by 785 ]
Christ Church, Oxford #
22 June 1938
My dear Kaldor
If I have paid insufficient attention to your letters, I apologize. But I assure you that I have read them through more often than twice.
To me you have appeared to be changing your assumptions in the course of your argument: to you I seem to have been guilty of contradictions of which I am not aware.
I fear that this may go on and I therefore would like to begin in a new way and set out the minimum claims of both parties, to see if I can secure your agreement so far. If we agree on these, it may not be so hard to proceed.
1. On your side you claim and I do not dispute that a rise of interest entails a fall of wages and vice versa (i) in the system as a whole assuming constant returns and (ii) for a particular firm assuming (a) constant returns (b) infinitely elastic demand and (c) demand price fixed at a given level independent of the cost of production. It is when we remove these assumptions that difficulties begin. I grant the degree of symmetry of capital and labour entailed by the foregoing propositions.
2. On my side I claim that if an entrepreneur is seeking the way of mixing labour (which stands for all factors other than waiting) and waiting in such a way as to produce any number n of units of the commodity in the cheapest way, he can determine this unequivocally if he knows the supply schedule of waiting and quite regardless of the price of labour. To do this sum he can set down p 1 p 2 p 3 ... as the prices of successive units of labour, where p may have any value. Per contra if he knows the value of the p's but does not know the cost of successive units of waiting, he is quite unable to determine the cheapest method. This is the fundamental [b] a-symmetry, which in my opinion is of great importance. I will not deduce corollaries for fear of getting onto debatable ground. Do you agree so far?
- a. ALS, three pages on two leaves, in NKP NK/3/30/86/21-23. Photocopy in HP NC.
b. Ms: «fundament».
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