On Harrod’s Deliberate Misrepresentation of Keynes’s Liquidity Preference Theory of the Rate of Interest After August 30th, 1935: Lying to Ralph Hawtrey in June, 1951 and in His Biography of Keynes in 1951

Abstract

In his August 30th, 1935 letter to Keynes, Harrod not once, but twice, conceded that Keynes had radically reconstituted the classical and neoclassical theory of the rate of interest by pointing out that the standard theory was one equation short. However, by adding the missing Liquidity Preference equation, Keynes had shown how a quantitatively, determinate equilibrium position could be specified in Aggregate Income (Effective Demand)-interest rate space. However, from this date on, Harrod backtracked and worked feverously to undermine this admission on his part to Keynes, due to his own extreme petty and trite jealousy and envy of Keynes’s world renown recognition as the world’s greatest living economist. Harrod successfully carried out his subterfuge and sabotage in (a) his 1937 Econometrica paper, (b) his correspondence with Hawtrey in 1951, and (c) in his 1951 biography of Keynes. Harrod allied himself with the Pseudo Keynesians (Joan Robinson, Richard Kahn, Austin Robinson) on the issue of what determines the rate of interest by supporting the Joan Robinson claim that the rate of interest in Keynes’s theory was determined solely by the demand and supply of money. Hutchison had pointed this out in 1977 but was unaware of how closely Harrod was involved with the Pseudo Keynesians.