From The Trade Cycle to the 'Essay in Dynamic Theory'. The Harrod-Keynes correspondence, 1937-1938

History of Political Economy 27:2, 1995, pp. 309-343


In 1937 and 1938, Harrod's book on The Trade Cycle and his "Essay in Dynamic Theory" were the subject of an extensive correspondence between Harrod and Keynes, characterized by many misunderstandings, fallacies and omissions, concessions and resistance on both parts revealing important details of the evolution of Harrod's approach to economic dynamics. The first inquiry of this article is into the causes of incomprehension, apparently due to Harrod and Keynes different but unexpressed views about the role of time in economics, and to Harrod's changed notion of dynamic analysis.

In the 1936 book, Harrod discussed the determinants and the consequences of the decisions to save and invest. In the 1939 article, his variables only registered ex-post the effects of some unexplored cause. Therefore the acceleration principle and investment changed their analytical status, and expectations disappeared from view. Moreover, because of the change in perspective he introduced in 1939, Harrod had to limit his analysis to a single point in time. Keynes, of course, did not like the new set-up, but could not identify its methodological ground because Harrod's formulation seemed to express causal relationships while concealing the absence of time. The second aim of this essay is therefore to explore the methodological aspect of the Harrod-Keynes debate, which shall unveil the reasons for the failure of Harrod's dynamics to provide the intended "mental revolution”.