Table Of ContentTHE VALUE OF MONEY
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THE
VALUE OF MONEY
BY
B. M. ANDERSON JR., PH. D
ASSISTANT PROFESSOR OF ECONOMICS, HARVARD UNIVERSITY
AUTHOR OF “SOCIAL VALUE”
NEW YORK
THE MACMILLAN COMPANY
1917
All rights reserved
COPYRIGHT 1917
BY THE MACMILLAN COMPANY
Set up and electrotyped. Published May, 1917.
TO
B. M. A., III
AND
J. C. A.
WHO OFTEN INTERRUPTED THE WORK
BUT NONE THE LESS INSPIRED IT
PREFACE
The following pages have as their central problem the value of
money. But the value of money cannot be studied successfully as an
isolated problem, and in order to reach conclusions upon this topic, it
has been necessary to consider virtually the whole range of economic
theory; the general theory of value; the rôle of money in economic
theory and the functions of money in economic life; the theory of the
values of stocks and bonds, of “good will,” established trade
connections, trade-marks, and other “intangibles”; the theory of credit;
the causes governing the volume of trade, and particularly the place of
speculation in the volume of trade; the relation of “static” economic
theory to “dynamic” economic theory.
“Dynamic economics” is concerned with change and readjustment
in economic life. A distinctive doctrine of the present book is that the
great bulk of exchanging grows out of dynamic change, and that
speculation, in particular, constitutes by far the major part of all trade.
From this it follows that the main work of money and credit, as
instruments of exchange, is done in the process of dynamic
readjustment, and, consequently, that the theory of money and credit
must be a dynamic theory. It follows, further, that a theory like the
“quantity theory of money,” which rests in the notions of “static
equilibrium” and “normal adjustment,” abstracting from the
“transitional process of readjustment,” touches the real problems of
money and credit not at all.
This thesis has seemed to require statistical verification, and the
effort has been made to measure the elements in trade, to assign
proportions for retail trade and for wholesale trade, to obtain, indicia of
the extent and variation of speculation in securities, grain, and other
things on the organized exchanges, and to indicate something of the
extent of less organized speculation running through the whole of
business. The ratio of foreign to domestic trade has been studied, for the
years, 1890–1916.
The effort has also been made to determine the magnitudes of
banking transactions, and the relation of banking transactions to the
volume of trade. The conclusion has been reached that the
overwhelming bulk of banking transactions occur in connection with
speculation. The effort has been made to interpret bank clearings, both
in New York and in the country outside, with a view to determining
quantitatively the major factors that give rise to them.
In general, the inductive study would show that modern business
and banking centre about the stock market to a much greater degree than
most students have recognized. The analysis of banking assets would go
to show that the main function of modern bank credit is in the direct or
indirect financing of corporate and unincorporated industry.
“Commercial paper” is no longer the chief banking asset.
It is not concluded from this, however, that commerce in the
ordinary sense is being robbed by modern tendencies of its proper
banking accommodation, or that the banks are engaged in dangerous
practices. On the contrary it is maintained that the ability of the banks to
aid ordinary commerce is increased by the intimate connection of the
banks with the stock market. The thesis is advanced—though with a
recognition of the political difficulties involved—that the Federal
Reserve Banks should not be forbidden to rediscount loans on stock
exchange collateral, if they are to perform their best services for the
country.
The quantity theory of money is examined in detail, in various
formulations, and the conclusion is reached that the quantity theory is
utterly invalid.
The theory of value set forth in Chapter I, and presupposed in the
positive argument of the book, is that first set forth in an earlier book by
the present writer, Social Value, published in 1911. That book grew out
of earlier studies in the theory of money, in the course of which the
writer reached the conclusion that the problem of money could not be
solved until an adequate general theory of value should be developed.
The present book thus represents investigations which run through a
good many years, and to which the major part of the past six years has
been given. On the basis of this general theory of value, and a dynamic
theory of money and exchange, our positive conclusions regarding the
value of money are reached. On the same basis, a psychological theory
of credit is developed, in which the laws of credit are assimilated to the
general laws of value.
In a final section, the constructive theory of the book is made the
basis for a “reconciliation” of “statics” and “dynamics” in economic
theory—an effort to bring together the abstract theory of price (i. e.,
“statics”) which has hitherto chiefly busied economists, and the more
realistic studies of economic change (i. e., “dynamics”) to which a
smaller number of economists have given their attention. These two
bodies of doctrine have hitherto had little connection, and the science of
economics has suffered as a consequence.
This book was not written with the college student primarily in
mind. None the less, I incline to the view that the book, with the
exception of the chapter on “Marginal Utility,” is suitable for use as a
text with juniors and seniors in money and banking, if supplemented by
some general descriptive and historical book on the subject, and that the
whole book may very well be used with such students in advanced
courses in economic theory. I think that bankers, brokers, and other
business men who are interested in the general problems of money,
trade, speculation and credit, will find the book of use. Naturally,
however, it is my hope that the special student of money and banking,
and the special student of economic theory will find the book of interest.
The book may interest also certain students of philosophy and
sociology, who are concerned with the applications of philosophy and
social philosophy to concrete problems.
My obligations to others, running through a good many years, are
very great. With Professor E. E. Agger, I talked over very many of the
problems here discussed, in the course of two years of close association
at Columbia University, and gained very much from his suggestions and
