Gottfried Haberler’s 1934 review examines Harrod’s treatment of comparative costs, monetary adjustment, currency management, and tariffs. Appreciation of analytical originality accompanies criticism of exposition, theoretical integration, and institutional feasibility. Haberler establishes this qualified admiration at the outset:
The author has not taken his task lightly and has not written a conventional text-book.
The book’s ambition nevertheless creates difficulties for its intended readership. Haberler regrets the absence of guidance for supplementary reading and questions whether compressed theoretical exposition can serve specialists and beginners simultaneously. His assessment of the comparative-cost chapter crystallizes this concern:
In this respect I venture to say that this chapter is too elementary for the expert, but too short and too abstract for the beginner and general reader.
Before considering trade theory, Haberler disputes Harrod’s understanding of scientific recommendations and value freedom. Economics can identify means appropriate to a stipulated end without scientifically establishing which ends should prevail. Appeals to national welfare conceal choices among competing valuations; even measures of production presuppose valuation. This does not render practical analysis impossible:
Happily, there are some valuations which are so generally accepted that they can be treated as the established values.
Accepted purposes can provide premises for economic reasoning without becoming scientifically demonstrated ethical conclusions. Haberler separates this methodological disagreement from his judgment of Harrod’s subsequent analysis.
The treatment of comparative costs receives qualified approval. Comparing production costs within each country does not eliminate the problem of valuing heterogeneous factors, because their relative values can change when international trade begins. Haberler argues that Harrod’s conditions for realizing gains from trade need a clearer grounding in opportunity cost. Connecting price ratios with substitution ratios would explain why adjustment to world-market prices yields gains, rather than merely specifying the conditions under which those gains occur.
Haberler welcomes Harrod’s distinction among homogeneous internationally traded goods, differentiated goods with less integrated markets, and goods excluded from international trade. This classification permits analysis through sectional price levels instead of relying exclusively on general price levels. Yet the monetary discussion leaves a central connection unexplained: how comparative advantages become the absolute money-price differences that direct exports. Haberler proposes strict quantity theory as an initial approximation, to be qualified subsequently. Without such a bridge, comparative-cost theory and the monetary mechanism remain insufficiently integrated.
His discussion of gold-standard adjustment combines an expository objection with a substantive concern about time. After an export decline, gold outflows, falling prices and incomes, and reduced imports offer an intelligible framework, provided that monetary changes are translated into changes in demand. Haberler finds Harrod’s income-based account unnecessarily complicated and rejects instantaneous transition. Drawing on Neisser’s distinction between emergency reserves and cash held for expenditure between income payments, he stresses that receipts and expenditures unfold over time. In the transfer analysis, he also finds inadequate attention to the expansion of demand in the receiving country, which facilitates the corresponding movement of goods.
Currency management introduces both policy choices and institutional constraints. Stabilizing domestic prices may conflict with maintaining fixed exchanges. Although Haberler accepts much of Harrod’s reasoning, he disputes the necessity of small annual exchange corrections to prevent cumulative maladjustment. Changes in demand, harvests, technology, and wages already require substantial adjustments. An economy unable to accommodate modest changes exhibits a deeper lack of elasticity that currency management cannot simply remove.
The review concludes by testing monetary proposals against political and administrative feasibility. Haberler doubts whether authorities could make the necessary decisions and secure international agreement. Coordinating tariff changes, domestic prices, and exchange rates would require an understanding difficult to reconcile with protectionist politics; the tariff chapter also seems too compressed to persuade readers not already committed to free trade. His preferred emphasis is greater adaptability of wages and other costs, alongside restraint of misguided intervention. The review thus joins praise for analytical ingenuity to an insistence that trade theory explain monetary adjustment and that monetary reform confront economic rigidities.
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