From Felix Schafer (15 October 1956)

From Karl Polanyi
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[22] My dear Karl,

“Many happy …

[…] For if it would not have been for you and Ilona, I would be hardly in a position to write this letter. I still remember when I met you and Ilona first. It was in February 1924 on the Socialist Students' Quarters in the seminary for Guild Socialism. You were then not yet out the "Volkswirt" - by the day Federn told me once you were the most genial, ingenious person he had ever met – and Ilona. She looked so young that I first thought she had just left secondary school. Some … […] a few [23] months old, and there was also Erszi, the faithful domestic help. […] … the economic problems of a Neurathian centralised socialist economy and of a guild socialist system. For apart from the possibility of prices and economic calculus it was the alternative between an {allout pharming} system, where human dignity might have become second, and a system preserving this value you taught us to consider as supreme. I was not mature enough then to grasp the importance of this aspect for work on economic problems. Looking back I think you have not done so badly [24] in this realm. Of course our "problem of the two goods" could have been found solved by Edgeworth's principle of recontraction and the cleaning of economic theory from value worked out by you in 1924-27 could have been done better with the aid of indifference {waves}. An article in Italien by Stutzki published in 1926, which anticipated the whole argument in mathematical form was not available. Thus you have arrived at a proposition by yourself ten years before it was published by Hicks. Likewise you were clear about the necessity to assume quantitative relations between commodities, i.e. potential prices, when you were going to derive actual prices such as e.g. in Böhm-Bawerk horse market. I still remember when you worked out this proposition generally accepted today on Klostenburg in 1927. And the theorem of purchasing power economy and exchange economy might fist into contrast between microeconomics and macroeconomics analysis, and certainly indicates a bifurcation, as [25] far as purchasing power and commodity money is concerned, through I am not so sure regarding other phenomena. Anyhow the marginal analysis is too narrow to worry about the bearing of this theorem and to do much work in marginal analysis at all, though one ought to know it. Of course I am still fascinated – and I think you too – by the elegant systems of a Walras, Menger, Marshall, Böhm-Bawerk, and other great masters. But their assumptions are necessarily unrealistic, if they want to maintain their great systems. Or what are we to think e.g. of Ohlin's theory of international trade, where the gains from free trade are so well {ellsutered}, when this theory rests upon mobility, divisibility etc of the agents of production and of commodities assumptions which never existed and are unlikely to exist in any future time? Apart from being unrealistic such theories – and they are the core of marginal analysis – are dangerous [26] because they lead to measures, which have unbearable effects. […] [27] We hope that you and your family are well. […] My wife … She spends much of her spare time in ethnological research – her old inclination – and attempts to show connections between Polynesian, Indogerman and Hebrew. Indeed translation of certain Maori incantations which cannot be understood because of archaic and sacerdotal words become possible, if these words are interpreted as having common roots with Sanskrit and Hebrew. Attempts to establish connections between those language groups go back for 100 years. But there is no systematical approach and orthodox opinion is against it. The situation might be similar to the issue regarding permanent unemployment, the classic maintaining that there could not be permanent unemployment, [28] because then wages would fall, until full employment was restored, while there was always an undercurrent – or as Keynes put it an opinion in the "underworlds" which claimed that in spite of all ____ permanent unemployment existed. […]

[29] I myself am still in the department of statistics, where I feel very well. In a few days I hope to pass Economics III and then I have finished my B.A. […]

[30] magical plays, and to transform this would in which life means that one eats up the other. Dreams like this one are of course still dreams, but I am in good company. Thus Descartes visioned the time – my wisdom stems from Philosophy I – where we will be able to repair a human body like a watch and modern philosophy … […] Unfortunately I cannot say that I have made [incomplete]

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KPA: 58/10, 22-30