Economics and the Public Welfare. Benjamin M. Anderson

really belongs to neither school, but if he leans a bit, it is in the direction of the Austrians. His criticism of Keynes (Chapter 60, titled “Digression on Keynes”) is worth the price of the book. It is a first-rate critique of Keynes and the Keynesians written at the Keynesian zenith by an able, stimulating, and effective monetary economist. It could stand by itself—which, perhaps, is the reason it is labeled a digression—because it is theoretical rather than historical. Perhaps this is also why Henry Hazlitt included the chapter in the book The Critics of Keynesian Economics (New Rochelle, N. Y.: Arlington House, 1977). Anderson spent a great deal of time, thought, and effort analyzing Keynes’ General Theory. He recognized it immediately as a serious and basic challenge to orthodox economic thought; and he provided one of the earliest of the cogent, persuasive critiques and one that is likely to last well into the future. Anderson also found much to criticize in the works of Irving Fisher, for example, whom Professor Milton Friedman labels the “greatest American economist,” and in those of Laughlin Currie, a classic figure among the early members of the Chicago school. It is not too brazen to predict that there will continue to be substantial and substantive differences between these two schools of monetarist economic thought. In this book Anderson provides a great quantity of historical material, both empirical and theoretical, of greater value to the Austrian than the Chicago side. It should prove of great value to future authors of Ph.D. theses on monetary economics.

      To present and future economic historians, this is an immensely valuable addition to the financial and monetary history of the United States, written by a distinguished scholar, historian, banker, financier, and economist. Benjamin M. Anderson, Jr., did more than record and study the historical events; he participated in many of them. Although this is not a fully satisfactory substitute for a study of the complete file of the Chase Economic Bulletin over the same period, it is more readily available and probably more readable. When it was first published, Economics and the Public Welfare did not receive the attention it so richly deserves. Such is not a unique experience for writers of economic treatises. As Keynes himself wrote, and as so many others have so frequently quoted, “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” Let us hope that, at least in this case, Keynes’ observation may be proved correct.

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Preface

      This book is the outcome of studies which began in 1914 and have been carried through systematically since that date. As assistant professor of economics at Harvard University, the author taught money and banking from 1914 to 1918 and, both in his lectures and in published articles and books, recorded the significant economic and financial developments of World War I. A summary of these studies appeared in his Effects of the War on Money, Credit and Banking in France and the United States, published by the Carnegie Endowment for International Peace in 1919. From 1918 to 1939 he acted as economist for the National Bank of Commerce in New York (1918-20), and the Chase National Bank (1920-39). During these years he was in intimate contact with bankers, investment bankers, brokers, and industrialists throughout the country, and with bankers throughout the world, with the Federal Reserve System and with foreign central banks, with government officials and leading journalists of many countries, as well as with academic students in the United States and abroad.

      He wrote down and published at the time—first (1919-20) in Commerce Monthly, issued by the National Bank of Commerce in New York, and second, in the Chase Economic Bulletin (1920-37), issued by the Chase National Bank of the city of New York—records and discussions of the period. And he recorded confidential memoranda for the use of his associates—many of which are still too confidential to be used except as background—the information that came to him from conferences in his own bank and from conferences as he traveled in Europe or to the leading cities of the United States. His banking contacts in the United States included not merely the chiefs of great banks, but also a multitude of American country bankers (an extraordinarily able group of men) who kept him informed regarding conditions in American agriculture and the industries of the smaller places.

      As professor of economics at the University of California since 1939 he has retained close contact with American bankers and with men in public

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      life and, to the extent that communication has been feasible during the war period, also with foreign bankers and men in public life. And he has continued to publish discussions of the developments of World War II and of postwar problems, particularly in the Economic Bulletin issued by the Capital Research Company, Los Angeles, the Commercial & Financial Chronicle, the Hearings of the Senate Finance Committee and the Senate Committee on Banking and Currency, and in documents issued by the Economists’ National Committee on Monetary Policy.

      There is a great fraternity of bankers both in the United States and in the world outside. They trust one another. They tell one another the truth regarding highly confidential matters. They go far out of their way to be of service to one another and to one another’s customers. The author is grateful that they still include him in this great fraternity.

      This book, therefore, represents, not the researches of a scholar remote from the field of activity, working primarily with the documents and the writings of other men, but rather, in very considerable measure, the records and recollections of a participant in the history.

      The field of the drama which the present volume undertakes to present is too vast for any man to say (as Aeneas said to Dido regarding the events of the Trojan War), “All of which I saw and a great part of which I was.” Certainly the present writer could make no such statement. But he does feel justified in saying, “Much of which I saw and of which I was a small part.”

      The volume contains a good many disclosures of information confidentially obtained, in cases where the author feels sure that no harm can be done to the sources from which he obtained the information. Where references are made to private conversations with men still living, either their names are not used or the author has reason to believe that they will not object.

      The author is indebted to far too many men, for information and help, over the years, to make it possible to list them. He has tried to make such a list and has found it to be a vast catalog of names in New York, in Washington, in virtually every other major American city, and in the financial centers and capitals of Europe, Asia, and other parts of the world.

      The author is deeply indebted to the president, vice presidents and junior officers of the National Bank of Commerce in New York (1918-20), who initiated him into practical banking, taking him into their intimate confidential relationships and having him sit with them in their conferences with important industrial and commercial customers and with important visiting American and foreign bankers.

      His greatest debt, of course, is to the great Chase National Bank of the city of New York. For nineteen years (1920-39) this institution was his laboratory. The successive chiefs, the vice presidents, many of the directors, most of the junior officers, and men in virtually every department of the bank supplied him with information and opened their records freely to

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      him. He could sample the routine or leave it alone. He was called into conferences where major questions of policy were to be determined. Its foreign offices also were his laboratories. He will always retain a deep affection for this great institution and for the men in it.

      The author gratefully acknowledges the help of his wife, who has given a critical reading to every page of this book, through its several revisions, as she has done for virtually everything else he has written for over three decades, and who has saved him from many errors in form, tone, and substance.

      He wishes to acknowledge the help of his colleague at the University of California at Los Angeles, Professor Warren Scoville, who has read critically