CLOSING THE MODEL? THE HARROD–MARSCHAK CORRESPONDENCE ON THE DRAFT OF THE “ESSAY IN DYNAMIC THEORY”

Abstract

During August and September 1938, Harrod discussed a first draft of his “Essay in Dynamic Theory” with Keynes and Marschak. The aim of this paper is to discuss Harrod’s correspondence with Marschak in the light of the subsequent interpretations of the “Essay.” Firstly, we show how Marschak focused on some of the features of Harrod’s theory that would later give rise to widely different interpretations and some misunderstandings. Three issues in particular have been broadly debated in the literature: the concept of warranted rate of growth; instability; and non-linearity. Secondly, we show that a possible reason why Harrod neglected Marschak’s remarks lies in their respective methodological approaches. While Marschak tried to frame Harrod’s theory by means of a closed model, Harrod thought that the analysis of equilibrium and of the succession of states belonged to separate stages; this made building a complete model difficult at this stage, when he was presenting a “new tool of analysis.” In spite of their respective conflicting approaches, Marschak’s comments remain of great importance, and if Harrod had followed some of his advice, his theory would probably have improved in several respects, and certainly it would have been clearer and less ambiguous.