Fritz Machlup, Economic Essays [review of R. F. Harrod] (1953)

Fritz Machlup’s review assesses R. F. Harrod’s Economic Essays as a valuable contribution to economic theory whose republication also establishes claims of intellectual priority. The reviewed volume contains fifteen essays: four new pieces and eleven previously published between 1930 and 1946. Machlup agrees that the older papers remain relevant, while recognizing Harrod’s wish to demonstrate his early development of hypotheses and techniques associated with imperfect and monopolistic competition. His judgment combines substantial theoretical agreement with selective reservations and criticism of the volume’s scholarly apparatus.

The review follows the collection’s thematic sequence, beginning with two memoranda submitted to Royal Commissions. “The Population Problem” concerns compulsory social insurance, contributions, benefits, and family allowances, with observations on domestic help and career women. “Equal Pay for Men and Women” disputes conventional explanations of wage differentials and proposes remedies for discrimination. Machlup calls Harrod’s alternative explanations more plausible but does not develop their reasoning. He describes the preferred proposal concretely: deductions from childless men’s wages would finance insurance-fund subsidies for fathers of three or more children. These opening notices establish the collection’s engagement with policy alongside abstract theory.

The review’s principal theoretical emphasis falls on eight essays concerning imperfect competition. Five appeared between 1930 and 1934; “Notes on Supply” and “The Law of Decreasing Cost” preceded the books of Chamberlin and Joan Robinson. Machlup explains their historical significance through the concepts they anticipated: marginal revenue, product differentiation, increasing selling costs, excess-capacity equilibria, and the relation between short-run and long-run cost curves. Harrod’s republication therefore supplies evidence of contributions that subsequently became integral to the field.

The new essays also reconsider established conclusions:

In three of his new essays Mr. Harrod proposes significant revisions of accepted theory.

Most notably, Harrod rejects the proposition that imperfect competition with free entry usually produces excess capacity. He also treats full-cost pricing as a business ritual modified by other rituals, arguing that it does not ultimately contradict the marginal principle. Machlup presents these revisions sympathetically without attempting to reconstruct their demonstrations:

I cannot, within this limited space, enumerate—let alone, discuss—the "revisions of accepted theory" which Harrod proposes; I can only say that I find myself in agreement with most of them.

That limitation matters: the review endorses the direction of Harrod’s revisions, but supplies neither a detailed derivation nor a comprehensive adjudication. Machlup is less persuaded by the formulations in “Theory of Profit,” although he judges their agreement unusually extensive for that subject. His footnote makes the theoretical proximity explicit, pointing readers to his own The Economics of Sellers’ Competition, particularly on price making and excess capacity.

Four essays address aggregate employment theory. Machlup locates “The Expansion of Credit in an Advancing Community” historically as a 1934 criticism of Hayek’s Prices and Production, preceding Keynes’s General Theory by two years. “Keynes and Traditional Theory” presents Harrod’s account of the essentials of Keynesian economics. The original “Essay in Dynamic Theory” and its new supplement are characterized chiefly through their relationship to Harrod’s book on dynamics, as preliminary and subsequent reflections. The final essay extends the collection into political thought: in challenging Hayek’s distinction between true and false individualism, Harrod differentiates meanings of those terms and warns against dogmatic exclusions from the individualist camp.

Machlup closes by connecting scholarly value with usability. He welcomes the handsome volume but criticizes missing original-publication information for four reprints and the absence of an index:

Scholarly books which deserve to be referred to by other students should be equipped with an index.

The complaint reinforces the review’s favorable assessment: these essays deserve consultation and citation, not merely sequential reading. Machlup’s central judgment is that Harrod’s collection remains useful both as a record of formative theoretical contributions and as an occasion for revising accepted doctrine, provided that its historical claims, substantive arguments, and practical accessibility receive appropriate scholarly attention.