795. D. H. Robertson to Harrod , 23 July 1938 [a]

[Replies to 789 , answered by 798 ]

Trinity [College, Cambridge]

23 July 1938

My dear Roy,

I'm sorry we didn't meet more during the last few days,--but you saw how it was,--too many foreigners to be polite to. [1]

I've now read the enclosed [2] carefully.

(I) Sentence on bottom of my p. 2.

(a) Omission. (i) I agree that, having mentioned the behaviour of stocks in connection with prices, I should perhaps also, for completeness, have mentioned them in connection with the rate of interest. (ii) And I agree further that, for a complete account of the behaviour of the rate of interest throughout the expansion, such part of the savings made out of increased incomes as, at any moment, are being offered on the capital market is also relevant. I have dealt with this later in connection with "forced Levies", [3] & thought myself justified here in confining attention to the initial sources of fact (I do not agree that I have "used them twice over".)

(b) Commission. This raises an old bone of contention, and I must refer you in particular to the comment on p. 126 of my review of your book on p. 145 of that book: [4] and to p. 430 of my [b] article in E.J. Sept. 1937. [5] It seems to me quite misleading to say that the borrower's demand for funds is "met by" the ex-post savings of those into whose hands the money passes when the loan is spent: it is "met by" the lender & by no one else!

Keynes appears to me, by his rediscovery of what he is pleased to call "finance", [6] to have surrendered, without realising it, the untenable position which you have all taken up in this matter.

(II) Normality

I am very glad you feel sympathetic here, and await your formulation [7] with interest.

My two fundamental objections to the neo-Keynesian analysis have always been

(1) its substitution of comparative statics for true dynamics in the treatment of short period situations, which I regard as reactionary.

(2) Its complete and unnecessary throwing overboard of the whole notion of long-period or normal, which I regard as unduly revolutionary.

Yours ever


  1. 1. Harrod and Robertson both attended a meeting in Cambridge, 18 to 20 July, organized by the League of Nations to discuss Tinbergen's report on Statistical Testing of Business Cycle Theories (1939).

    2. Letter 789 --which was indeed found among Harrod's paper (see source note a to letter 789 ).

    3. D. H. Robertson, "A Survey of Modern Monetary Controversy" (1938), pp. 7-8.

    4. References are to Harrod's Trade Cycle ( 1936:8 ), and Robertson's review of it ("The Trade Cycle", 1937). The matter was discussed by Robertson on 1 April 1937, with reference to his review: see letter 648 , [jump to page] .

    5. D. H. Robertson, "Alternative Theories of the Rate of Interest. II", Economic Journal XLVII, September 1937, pp. 428-36.

    6. J. M. Keynes, "The `Ex-Ante' Theory of the Rate of Interest", Economic Journal XLVII, December 1937, pp. 663-69. The term "finance" is defined on p. 663, n. 2, as meaning "the credit required in the interval between planning and execution" of investment.

    7. Harrod, "An Essay in Dynamic Theory" ( 1939:7 ).

    1. a. ALS, two pages on one leaf, in HP IV-990-1069/56.

      b. Ms: «my my».

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