The Value of Money

Metadata

Gutenberg ID

34823

Title

The Value of Money

Language

en

Book source

Project Gutenberg

Description max 80 words

Benjamin M. Anderson Jr. challenges static economic theories, arguing that modern commerce centers on dynamic change and speculation. This rigorous analysis of money, credit, and value offers bankers and economists a fresh perspective on the psychological forces driving trade.

Summary up to 500 words

In *The Value of Money* (1917), Benjamin M. Anderson Jr. challenges the prevailing static economic theories of his era, particularly the 'quantity theory of money,' by arguing that economic value is not a fixed material fact but a dynamic social and psychological phenomenon. Drawing on his earlier work in *Social Value*, Anderson posits that all economic values are rooted in 'folk psychology'—a collective mental system influenced by laws, morals, public opinion, and social prestige rather than mere marginal utility or labor cost. Anderson contends that the vast majority of modern trade consists not of simple retail exchanges but of dynamic readjustments driven by speculation. Through extensive statistical analysis of banking transactions, stock market activity, and clearings between 1890 and 1916, he demonstrates that modern banking primarily finances corporate industry and speculative ventures rather than ordinary commerce. He asserts that the main function of money and credit is to facilitate these continuous processes of economic change. Critiquing the 'quantity theory of money,' Anderson argues that it relies on abstract notions of static equilibrium and 'normal adjustment' that fail to account for the transitional processes of readjustment that actually drive business life. He rejects the idea that trade volume is determined solely by physical capacities or technique, emphasizing instead the role of psychological factors and social institutions. Anderson concludes that a valid theory of money must integrate these psychological realities. He advocates for a dynamic theory where speculation is recognized as a central engine of economic prosperity rather than a dangerous anomaly. Furthermore, he suggests that Federal Reserve Banks should be permitted to rediscount loans on stock exchange collateral to better serve the economy. Ultimately, Anderson seeks to reconcile 'statics' and 'dynamics' in economic science, arguing that the essence of society is psychological and that economic values are parts of a living, pulsing social mind.

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Categories

• Money