71. F. Y. Edgeworth to Harrod , 24 April [1924] [a]

[Replies to a letter not found, [1] continues at 73 ]

All Souls College, Oxford [b]

24 April [1924] [2]

Dear Harrod [3]

Your arguments may be considered under two heads:

(i) Short Periods, or rather statical conditions as distinguished from developing so-called "dynamical" systems; to which relate what I have called "primary" demand and supply curves Econ Journal 1894 p. 436. [4]

(ii) Conditions and causes of the opposite character

(i) On the first subject, in your first page, the reasoning appears to me to be needlessly complex. The essential truth is that if on a market consisting of competitive dealers, say As contracting with Bs, one class of the As, say A 1 , offer to Bs better terms--<for any> assigned rate of exchange are willing to give more a (the commodity supplied by the As) in return for a unit of b--than another class A 2 ; this circumstance is to the disadvantage of the A 2 . Thus if, the As being at first, all homogeneous of the character A 2 , a certain number take on the character A 1 , the remaining A 2 will suffer. The more "voluminous" in your phrase the supply of the A 1 's of course the greater their efficacy. The amount supplied under A 1 conditions must of course be sensible. But nothing turns on the exact proportion of the population.

The principle is not affected by the circumstance that each A consists of two or more partners in a sort of "Juridical person".

Let A 1 consist of two or more partners and , jointly supplying a. If they together are content to supply more a for a unit of b than the composite A 2 they are formidable competitors of the A 2 's. The point is that on the whole <require> less than the sum of the demand made by [c] . It makes no great difference whether the willingness to take less is on the part of one partner only or of both (or in general all).

<Well> capitalist-employers being regarded with respect to international trade as partners of the employees, it makes no great difference whether the wages in one country say A, are lower or not in the Ricardian sense, provided that the firms in A 1 can offer a on better terms than does A 2 to a third country B.

The graphical illustration of competition which I subjoin (Cf E. J. 1894 p. 439 [5] ) may assist conception. It will be evident that if for whatever cause the curve OA 1 is swung outwards (so that the point A 1 where the curve is cut by a <curve> making a lower angle with OX lies further from O, the curve OAP will be similarly disturbed) [d] the point of equilibrium will be changed from P to say , the rate of exchange of a for b will be lowered to the disadvantage of A 2 supplying a.

(ii) Under the second head there is much weight in your reasoning about elasticity, the influence of opening trade on people's disposition and so forth. Such reasoning avail perhaps better to explain what has happened than to predict. It is at any rate a useful exercise which may render us more capable of dealing with concrete data

Very special evidence I think is required to show that a country is not damnified by the competition of a second country who can offer the same goods on lower terms on the international market, whose supply and demand curve is related to that of the first country at OA 1 in the figure <to> OA 2 .

I am glad to think that you keep up your interest in abstract economics and I hope that when I return to Oxford we may have opportunities of exchanging views.

Yours sincerely

F Y Edgeworth

OPB is the demand- & supply curve of the third nation. [fig. 1]

OAP represents the terms on which a is offered in exchange for b on the international market; nations A 1 and A 2 supply a to B a third nation, or the rest of the world.

Oa amount supplied at rate (tangent of) AOa = Oa 1  + Oa 2

PS I return the Paper, [6] supposing you have not a copy. [e]

  1. 1. In a previous letter of 20 April 1924 (in KHLM 151), Edgeworth acknowledged receipt of a letter from Harrod of 11 April and its enclosure, and promised that he would give his early and careful attention to Harrod's "close reasoning".

    2. Year not supplied. Harrod, however, later reported that he attended Edgeworth's lectures in 1924: see letter 106 , [jump to page] . See also note 1 to this letter.

    3. An undated note in Harrod's post-war handwriting is attached to the exchanges between him and Edgeworth (see also letter 68 ), commenting as follows: "In correspondence about International Trade, I seem to have over-tired his patience" (HP IV-305) (the remaining part of Harrod's recollection is reproduced in note 1 to letter 68 ).

    4. F. Y. Edgeworth, "Theory of International Values", part II, Economic Journal 4, September 1894, pp. 424-43.

    5. See note 4 to this letter.

    6. Harrod's paper (see note 1 to this letter) does not seem to have survived.

    1. a. ALS, 11 pages on four sheets, two of which folded in half and written on four sides, in HP IV-306.

      b. Ms: «AllSouls». Edgeworth added in the margin: "usual address".

      c. Ms: parenthesis missing.

      d. Ms: parenthesis missing.

      e. On p. 1 of the Ms.

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