13. Review of Benjamin Anderson, The Value of Money

13. Review of Benjamin Anderson, The Value of Money

January 20, 1960

Dr. Ivan R. Bierly

William Volker Fund

Dear Ivan:

While there are many interesting points and facets in Benjamin M. Anderson’s The Value of Money, I would emphatically advise against adopting it for National Book Foundation distribution.⁶⁶ The trouble is that, in relation to the two central themes of the book, the marginal utility theory of value and the quantity theory of money, Anderson comes down squarely and emphatically on the wrong side. He is determinedly opposed to the Austrian utility theory and attempts to replace it with a vague “social value” theory—and with flagrant lack of success. And the bulk of this large work is devoted to a bitter, detailed attack on the quantity theory of money, which, while incomplete in itself, is the groundwork for any correct theory of money.

In his value theory, Anderson hopelessly aligns himself with such social deterministic sociologists as Charles H. Cooley and with John Dewey. In his critique of the quantity theory, Anderson makes much shrewd headway against the mechanical, mathematical type of quantity theory, or “equation of exchange,” expounded by Irving Fisher, but these valuable passages are marred, overall, by Anderson’s hostility to the quantity theory itself. He therefore, after stoutly and erroneously maintaining that “money is capital,” concludes that the quantity theorists are wrong in thinking that, in the long run at least, it doesn’t matter for business activity how much or how little money there is in society; in attacking this truth, Anderson has to align himself with the inflationists, in maintaining that the American gold discoveries stimulated the growth of capitalism, that inflation can stimulate trade, etc.

It is certainly impossible therefore, to recommend a work whose central themes are emphatically on the wrong side of the issues, regardless of what useful points are made against the Fisher version of monetary theory during the discussion. And certainly his contentions that prices can be “active” in determining the other factors in the equation of exchange, instead of passively determined by them, are simply absurd. All in all, I must conclude that Anderson was simply not a very good or insightful economic theorist, especially when he went beyond technical banking matters and delved into general economic theory.