“In the direct handling of economic life, governments are usually clumsy and ineffective. ...Their main business should be that of traffic cop, not that of driver, and above all not that of back-seat driver.”
Benjamin Anderson is a rare example of an American economist who wrote in the Austrian tradition long before Ludwig von Mises emigrated to the US. He was an indefatigable defender of market mechanisms, and was among the first to produce a systematic account of the economic causes of the Great Depression from a free-market perspective. His theoretical works, while not thoroughly Misesian, fall within the Mengerian tradition and marshal impressive arguments against Chicago School monetary economics.
Benjamin McAlester Anderson, Jr. (May 1, 1886 - January 19, 1949) was born in Columbia, Missouri, the second of four children and only son of Benjamin McLean Anderson, a businessman and politician, and Mary Frances (Bowling) Anderson. He married Margaret Louise Crenshaw in 1909 and they had four children.
Anderson entered the University of Missouri in Columbia in 1902 and was awarded the A.B. degree in 1906. He was appointed professor of political economy and sociology at Missouri Valley College in Marshall in 1906 and was named as the head of the department of history and political economy at the State Normal School at Springfield the following year.
He went on to earn his A.M. degree in 1910 from the University of Illinois and his Ph.D. in economics from Columbia University in 1911. The prestigious Hart, Schaffner & Marx prize in economics was awarded to him in 1910 for part of his dissertation that was subsequently published in 1911 as Social Value: A Study in Economic Theory, Critical and Constructive.
Social Value was an important contribution in the development of economic thought and method where Anderson developed a “truly organic doctrine of social value.” He criticized cost theories of value as a “blind thing” and other theories of social value as normative or mechanical. He criticized the older Austrian school’s theory of individual marginal utility by emphasizing the importance of what Henry Hazlitt called the essential “social conditions which go to form both the individual’s marginal valuations and prices in the Market.” Subsequent Austrian economists were quick to point out the heterogeneous influences on an individual’s marginal valuations, a view that has become the hallmark of scientific economics.
Anderson served on the faculty of Columbia University for two years and then at Harvard for five. In 1917 he published a devastating critique of Irving Fisher’s quantity theory of money, The Value of Money. Building on his concept of social value, Anderson constructed a “psychological” theory of money that emphasized the quality and the quantity of money and credit. Henry Hazlitt labeled the book “one of the classics of American economic writings.”
In 1918 he joined the National Bank of Commerce in New York City. His book, Effects of the War on Money, Credit, and Banking in France and the U.S., was published in 1919. Chase National Bank hired Anderson in 1920 as economist and editor of the influential Chase Economic Bulletin. There he wrote a stream of learned articles critical of progressive policy in such diverse areas as money, credit, international economic policy, agriculture, taxation, war, government debt, and economic planning. He was a leading opponent of the New Deal and an enthusiastic supporter of a free market gold standard. He served as president of the Economists National Committee on Monetary Policy and often testified before Congress on matters of monetary and economic policy.
Anderson’s talents and abilities are underscored by his status as a world class chess player. In fact, he wrote a “brilliant” preface to Jose’ Capablanca’s (world champion from 1921-1927) book, A Primer on Chess published in 1935. In 1939 he became professor of economics at the University of California at Los Angeles and was named the Connell professor of banking in 1946. He died of a heart attack in Santa Monica, California, just prior to the publication of his magnum opus, Economics and the Public Welfare: A Financial and Economic History of the United States, 1914-1946.
Ludwig von Mises called Economics and the Public Welfare a “great book.” Anderson wrote about a period that he had intensely studied and examined with the advantage of highly advanced economic theory. His history was a warning for future generations about the dangers of “progressive” government intervention in the economy. Writing near the end of World War II, Anderson recommended a return to free markets, sound money, and balanced budgets while dismissing the popular Keynesian notion that the end of the War would bring economic ruin without massive government intervention.
Anderson was regarded by the profession as a pariah. His unwillingness to suppress his views or soften his crushing criticisms of fashionable policies made him very unpopular among most economists and politicians. He was deprecated by progressives as old-fashioned and reactionary. History, however, seems to have vindicated his theoretical contributions and pronouncements on public policy. Ludwig von Mises, who was often a target of Anderson’s criticisms, called him “one of the outstanding characters in this age of the supremacy of time-servers.”
Anderson’s papers could not be found. No biography could be found. His two major theoretical works are Social Value: A Study in Economic Theory Critical and Constructive (1911) and The Value of Money (1917). His two major historical works are Effects of the War on Money, Credit and Banking in France and the U.S. (1919) and Economics and the Public Welfare: A Financial and Economic History of the United States, 1914-1946 (1949). In addition he wrote regularly for the National Bank of Commerce’s Commerce Monthly (1919-20), Chase National Bank’s Chase Economic Bulletin (1920-1937), Capital Research Company’s Economic Bulletin and the Commercial and Financial Chronicle. Also see his contributions to Economic Essays (in honor of John Bates Clark) edited by Jacob Hollander (1927) and Financing American Prosperity: A Symposium of Economists, edited by Paul Homan and Fritz Machlup (1945).
