H. J. Davenport's Loan Fund Theory of Capital



 

A shorter version of this paper has been published: Gunning, J. Patrick. "Herbert J. Davenport's Loan Fund Theory of Capital." Journal of the History of Economic Thought. 20: 3 (349-69), 1998.



 

Capital Papers On the Web

          Bohm Bawerk on the origin and meaning of the word "capital"

          Frank Fetter: "Recent Discussion of the Capital Concept"

          Edward Cannan: "Early History of The Term Capital"

Related Literature

Modern Austrian Economists' Comments on Davenport's Loan Fund



 

July 27, 1998

ABSTRACT


            American Herbert Davenport's (1861-1931) loan fund theory of capital -- that is, his theory of the supply of loanable funds in an environment of free banking -- has three characteristics: (1) the praxeological idea of the entrepreneur point of view, (2) the reservation demand approach to the supply of loanable funds, and (3) the assumption that the bulk of money under a free market banking regime would consist of monetized debt.

            Every actor begins his participation in the market economy with preferences, including time preference, knowledge of past prices, beliefs about the marketability of his current wealth, and beliefs about how he can gain by saving his wealth in different ways. His estimate of the money value of his assets is his capital. The sum of the separate estimates of all the people is called private capital. Private capital is the source of funds that are ultimately used in business. Before they reach that stage, money must be lent, rights must be sold, and non-monetary wealth, especially debt, must be monetized through banks. By providing guarantee and endorsement, individuals enable bankers to monetize the debt and, by this process, to add to the loanable funds that are directly made available by savers or indirectly made available by non-banks. The resulting supply of loanable funds is partly borrowed by consumers and partly available for business. The loan fund is the amount that business borrows. Free market banks perform the combined functions of guaranteeing promises and monetizing debt. The latter function can lead to a trade cycle if too much of the new money is based on unreliable promises.

            Davenport was tagged with an undeserved reputation by Frank Fetter, in an apparently self-serving review of Davenport's major work. Fetter was a well known capital and interest rate theorist of the era. The paper provides an extended refutation of the Fetter criticism.


 


 

 

            The loan fund theory of capital was developed by unheralded American economist, Herbert J. Davenport (1861-1931). Davenport wrote three major books during an 18-year period between 1896 and 1914. Footnote The first (1896) was a treatise based on what he called the "principle of sacrifice," or subjective opportunity cost. Footnote His second book, Value and Distribution (1908), covered much of the same ground but also presented some original contributions. It marked his emergence as a professional economist, since he presented his ideas within the context of an appraisal of classical and neoclassical economic doctrine. Among other things, the book contained a penetrating, subjectivist critique of four ideas in the history of subjectivist economics: marginal utility, Bohm Bawerk's theory of capital, Wieser's theory of cost, and Fetter's theory of market interest. It also introduced the loan fund theory of capital, which is the topic of this paper. His third book (1914) was on pure economic theory. It was a tightly-knit theory of price from the entrepreneur point of view, complemented by a fully integrated theory of credit and money. It repeated some of the arguments made in the 1908 book, including those of the loan fund theory. However, because of its logical structure and its integration of price theory with the theory of money and credit, this book was his crowning achievement. It is regarded here as the primary source of Davenport's ideas on the loan fund theory.

            The "loan fund," or "loan fund capital," refers to the sum of money that individuals make available for loans. The theory of the loan fund is thus a theory of the supply of loanable funds. Three factors distinguish the loan fund theory from other theories of the loan market and of market interest rates. First, in its fully developed form, Davenport takes the "entrepreneur point of view." This is the modern praxeological approach to economic theory that regards entrepreneurship as a characteristic of all decision-making under the conditions of the market economy. Every actor, including a person who is deciding how much of his income to consume or save, acts in the role of the entrepreneur. The corollary is that the approach excludes as a matter of method individuals who do not act entrepreneurially and behavior that is not entrepreneurial.

            The second distinguishing factor is the reservation demand approach. Davenport's supply of loanable funds is the reservation demand for those funds plus the money created through banks. It "stands opposite" the market demand for loanable funds. The reservation demand is the only appropriate way to use the entrepreneur point of view. This point is demonstrated later in the paper.

            Third, Davenport included in the loan fund the funds made available by banks through their monetization of debts, i.e., through their transformation of credit into money. Writing before the emergence of the modern Federal Reserve System, Davenport assumed that banks were free to create money. Thus his theory proceeds on the assumption of free banking. Under this assumption, the combined action of banks can cause booms and subsequent recessions. The loan fund theory naturally extends into a theory of the trade cycle under a competitive banking regime. Footnote

            Davenport's name has virtually disappeared from writings on the history of economic thought. Today, he seems best known as a teacher of Frank Knight at Cornell around 1915. Footnote A possible reason is the lengthy and extremely negative review of his 1914 book by renowned capital and interest theorist Fetter.

            The purpose of this paper is to present the loan fund theory in its simplest form. The loan fund is a hypothetical sum of money, or purchasing power, that is made available for investment by lenders. The principle source of the loan fund is what Davenport called "private capital." Thus the paper begins in part 1 by developing an understanding of this concept. Part two describes the reservation demand approach and its relevance to the supply of loanable funds. Part 3 presents Davenport's theory of money based mostly on how debt becomes monetized. Part 4 discusses Fetter's highly negative review of Davenport's theory.

 

 

1. PRIVATE CAPITAL AND THE ENTREPRENEUR POINT OF VIEW

 

            Private capital consists of everything that every individual, acting entrepreneurially, calculates as purchasing power. To make this calculation, an individual is assumed to attach appraisals to rights that he believes to be marketable. Where it is appropriate, he compares the expected market price with the expected income or utility due to retaining the rights. To make this comparison, one must use capital accounting. Thus, the notion of private capital presupposes the individual's use of capital accounting.

 

The Capitalization Process

            In chapter fourteen of his 1914 book, entitled "Capitalization vs. Cost as Determinant of Price," Davenport shows how ordinary decision making in a market economy, interpreted within the opportunity cost framework, entails capitalization. "The capitalization process is the sole method by which...future facts transform themselves into immediate paying dispositions."(ibid.: 218)

            Chapter 15 in that book is about this process. The capitalization process refers to the appraisal of non-perishable goods.

                Each individual has his own peculiar limitations upon his total immediate fund for investment, -- his own peculiar stress of present need, his own peculiar prospects of future plenty or of future lack. But each arrives at his total present bid for the series of payments, the annuity under consideration.(ibid.: 223)

 

[T]he capitalization process has...to do neither with the market rentals upon durable goods nor with the market rates of interest upon different classes of loanable funds, but only with the way in which the possessors of the goods arrive at their reservation prices, and the bidders at their offer prices.(ibid.: 233)



            We might distinguish the capitalization process from the "market process." We could say that the former refers to a set of mental acts that occur prior to exchange; while the latter refers to the acts that occur after individuals have decided to exchange. In the capitalization process, some individuals plan to become suppliers while others plan to become demanders. In the market process, the actions that cause these plans to be realized or frustrated are carried out. The capitalization process results in price offers that reflect each person's reservation demand (see below); the market process is marked by actual prices at which goods, including contracts and debts, are exchanged.

 

Private Capital as a Subjective Phenomenon

            Private capital is in no way objectively measurable; the appraisals of individuals are likely to differ. In fact they must differ if the concept of entrepreneurship is to imply an assumption about human differences. Because of the human differences in appraisals, the different private capitals of different individuals cannot legitimately be summed. Private capital is a purely subjective idea.

 

Historical Origin

            By using the term "private capital," Davenport could emphasize that he was speaking of the different amounts of money that different individuals believed they could access. This was consistent with the American usage of the term "capital" during the 19th century. Whereas Europeans tended to regard capital as a factor of production, a produced means of production, or sustenance during a production period; Americans tended to use the businessperson's idea of capital.(Fetter 1927: 122-3) To the businessperson, capital refers to the funds available for his business investment.

            However, Davenport's usage was broader than that described by Fetter. Especially in his 1914 book, Davenport was referring to that which anyone in the market economy, businessperson or not, would regard as productive of future income. This is clear from the quotations earlier in this part. Capital, to Davenport, signifies a potential source of loan funds, not a supply of loan funds. Footnote I argue in part 3 that Fetter's failure to recognize this fact was a cause of his misunderstanding.

 

Private Capital vs. Capital as a Factor of Production: the Role of Entrepreneurship

            The American economists' propensity to think of capital as money or saleable wealth made them receptive to the subjectivist program of “homogenizing” the classical division of the factors of production. One of the aims of both the marginalism and subjectivism of the 19th century was to combine the separate theories of capital, wages, and rent into a general theory of price. The proponents of this theory maintained that in a pure market economy (as opposed to the capitalist societies that we observe in everyday life), the distribution of incomes (and therefore of the goods) among people is not determined by the class of the people, by the physical properties of the factors that the people supply, or by the history of the factor (whether it is "natural" or previously produced). Rather it is determined by the contribution of the peoples' factors to the satisfaction of consumer wants, as reflected in the effective demands for goods. The prices of all types of what the classical economists called land, capital, and labor -- and, therefore, the incomes of the owners of these factors -- are similarly determined. In this sense, advocates of marginalism and subjectivism sought to “homogenize” the classical division.

            Although the 19th century critics of classical economics showed that the classical distinction among the factors was untenable, many of them still depicted the market process through which factor prices are determined as a mechanical one. This was most evident in the writings of the mathematical economists like Walras. However, it was also a characteristic of the more subjectivist writers. Even the latter spoke as though the price of the factors could be traced to marginal utility. They were apparently not sufficiently self conscious to realize the method they had used to refute the classical distinction. They believed that the basis for their more correct understanding was marginal utility (or, for Menger, subjective utility). In fact, it was their assumption that the individuals involved in the pricing process look upon all factors in a similar way. These individuals appraise the factors with an eye toward consuming them, using them in a production process, or selling them. In short, the market process through which the factor prices are determined is an "entrepreneurial process." But the marginal utility and subjectivist economists of the 19th century only had a dim vision of this process. Davenport's vision was sharp enough that it led him to the logical conclusion that the traditional definition of capital had to be abandoned.

            Davenport did not have this vision at the beginning of his work. His 1896 book shows little tendency to abandon the traditional definition of capital. In his 1908 book, however, he showed his awakening. He systematically refuted a series of arguments in favor of retaining the distinctions among factors. The following are illustrative. "[I]f productive factors are to be distinguished according to technological considerations, not two or three but countless categories of productive factors will have to be recognized."(1908: 128) "Technological classification, then, on the basis of the supply outlook, is a hopeless undertaking."(ibid.: 35) Distinctions based on origin are also incorrect because it is impossible to tell the origins of the factors of production.(ibid.: 136-40) Although this was an improvement, he did not in 1908 seem to fully realize that the ultimate argument against dividing factors into classes is that when one adopts the entrepreneur point of view, the only characteristic of a factor that is important it its propensity to yield future income. Footnote Although factors may have different physical characteristics, the demand for them is always based on the income they are expected to help the entrepreneur earn. Still, the "capital fund of the entrepreneur" in 1908 was not the same as "entrepreneur capital" in 1914. At the earlier time, it referred to the wealth possessed by business entrepreneurs.

            This had changed radically by 1914. Here, for the first time, he used a concept of entrepreneurship that encompasses all of human action. He points out that it "often clarifies the argument to regard all employers of labor, middlemen or other, and all self-employed laborers, whether or no they sell their product, as entrepreneurs."(ibid.: 128) This broader notion of entrepreneurship comes through clearly in his chapter on "the distributive process":

In the main, then, the process is captained by the entrepreneur, is guided and supervised by him, and worked out through him. It may, indeed, be said to be entirely so worked out and guided, if only the concept of entrepreneurship be given its proper extension. All employers of labor or of instrumental goods for hire are entrepreneurs, no matter whether the prospective product is to be offered for sale or not. If it have no sale price, it is because it has a reservation price; it is still a price product. The client of the lawyer or the patient of the doctor, the master in his hiring of his house servants or his valet, the employer of labor in the raising of garden products for the home table, are all bidders for factors of production and are entrepreneurs for this -- and for every other -- purpose of economic analysis.(ibid.: 139)



Thus, by 1914, "the entrepreneur point of view" refers to the point of view of each separate actor who contemplates acting in the market economy. This is the notion of the entrepreneur function, which was suggested by Ludwig von Mises at a much later date. Footnote

            In his discussion, he points out that entrepreneurs appraise all factors of production according to the same principles. Thus, there are no grounds in the theory of the market economy for calling capital a distinct factor of production. This leaves him free to use the term "capital" to refer, on the one hand, to the private sources of funds that individuals believe they possess (private capital) and, on the other hand, to the funds available in the loan market (loan fund capital -- see below). Footnote

 

 

2. THE RESERVATION DEMAND THEORY

 

            Having appraised all of his rights, the owner of saleable property proceeds to make plans to use the property himself, to make funds available to be borrowed by others, and/or to seek loans from others. To understand the relationship between private capital and loan fund capital, one must first appreciate Davenport's reservation demand theory.

            The reservation demand for any exchangeable item is the owner's opportunity cost of making it available for sale. The opportunity cost may consist of the owner's estimate of the next best price offer, his personal use value, or his estimate of its contribution to revenue in a production-sales project he has in mind. It all depends on the individual's perceived opportunities.

            Davenport is not the only writer in the history of thought to employ the reservation demand approach. During the same year that Davenport published Economics of Enterprise, Phillip Wicksteed published a paper in which he submitted the approach as an alternative to Marshall's supply-demand models, claiming that the latter was more helpful in elucidating true market interaction.(Wicksteed 1914: 15-20) Footnote Wicksteed, however, did not apply the approach to the loan fund and he did not explicitly acknowledge the importance of the entrepreneur function, a subject to which we now briefly turn.

            To make the transition from private opportunity cost to market exchange, one must simultaneously conceive of all markets, all goods, all factors of production, and all wants, as they are interrelated in the appraisals of all market participants. To do this, one needs to divide human behavior into functional categories. Footnote In this scheme, the notion of entrepreneurship takes on a broader meaning than that of the businessperson. It refers to all action that can be called distinctly human in relation to the conditions of the market economy. To comprehend this, one must contrast a mechanical equilibrium containing robots with what we know from experience and intuition about how entrepreneurship-possessing human actors would act under the conditions of the market economy.(Gunning 1990: chapter 6)

            The idea of reservation demand in relation to entrepreneurship was nowhere better developed than in Davenport's theory of price. Footnote To Davenport, the reservation demand approach complemented the entrepreneur point of view, which every owner of private capital can be assumed to take. In this paper, we are interested in how the entrepreneur point of view leads private capital to become part of the loan fund, or loan fund capital.

            Considered as reservation demand, the supply of loan funds must be traced back from (1) the hypothetical decisions of all those who make funds available for loans to (2) the ultimate decision-makers whose appraisals of rights lead them to participate in the market economy at some level. This includes the banker, the endorser, the middleman, and the ultimate "saver." Here we focus on the ultimate saver. A person's ultimate saving, as it is directly relevant to the loan market, consists of money that he already possesses plus money that he acquires by selling assets.

            Thus, Davenport imagined that the supply of loan market funds originated with the choices of individuals acting in the role of saver-entrepreneurs. He conceived of the ultimate savers as doing three things that affect loan markets. First, they make part of their respective private capital available through loan markets directly to borrowers in the form of loanable funds. Second, they allow some of their capital to be used as guaranty for loans. And third, they lend money to intermediaries. Footnote

 

The Rates of Interest

            Davenport's use of the reservation demand idea had a profound effect on his approach to interest rates. In an ongoing market economy, individuals have the opportunity to use the market interest rate in making appraisals. However, the market interest rate is not a given. It is constantly changing. It is a price, determined simultaneously with other prices. Although appraisement requires the appraiser to use an interest rate in his calculation, the interest rate he uses may turn out to differ from the rate that he would have used if he had more information about future economic conditions. He is also likely to find out that the actual rate that prevails when he gets around to making his decision is different from the one that he used in making the appraisal. Finally, the market rate refers only to the money that can be earned through lending and that must be paid for borrowing. Individuals who have personal uses for their money or rights that they believe will yield a higher rate must also use their personal discount rate in their calculations. Accordingly, the personal rates of each individual may enter into his calculations at the same time as the expected market interest rate. And, since at least some individuals take their personal rates of discount into account when they make their calculations, those personal rates are partly communicated in the market rates of interest that others use in making their calculations.

            Davenport compared this view with what he called the current doctrine. The currently held doctrine maintains that there is "a market rental and a market rate of discount."(1914: 225) Davenport says that his doctrine diverges from this in two ways. It maintains (1) "that not one market earning power, but the different earning powers to the different individuals, most motivate the respective individual price offers; and (2) that not the market rate of interest, but the different rates of discount of the different individuals must be the rates -- if any rates there are -- by which the respective earning powers are discounted in the different individual price offers."(ibid.: 226) Davenport's view is concerned with "the processes of the ultimate investor or consumer." The currently accepted doctrine "adopts the attitude of the broker or speculator."(ibid.: 227) In short, the popular view that ultimate savers capitalize their assets by using the current equilibrium market interest rate(s) is not the proper starting point for economic analysis. He does not refer to Fetter in making this point, but he evidently has him in mind, among others. Fetter is discussed below.

 

 

3. FROM PRIVATE CAPITAL TO THE LOAN MARKETS:

DAVENPORT'S THEORY OF CREDIT AND MONEY

 

            Before discussing Davenport's theory of credit and money, it is necessary to lay some groundwork. For didactic purposes, we can identify two ways in which individual decisions cause private capital to become part of the loan fund (i.e., the sum of the money that is made available to borrowers in loan markets). First, an individual who possesses private capital may make funds available directly. In this case, after he appraises his goods and rights and after he possibly sells off some of his possessions, he decides to make a money loan to a borrower. The loan may be made through an intermediary who may or may not endorse the borrower's repayment note. Second an individual may offer his money or saleable assets as guaranty for the creation of money. He may do this directly (1) by printing money himself or (2) indirectly either (a) by offering his endorsement on others' promissory notes or (b) by transforming a non-money asset into a money asset through his guarantee in some other way. Footnote

            Let us consider a variation on the second way, one that is similar to a case that we shall discuss below. Suppose that you sell a product that you have produced on credit to Mr. Smith. Mr. Smith gives you a promissory note for ten ounces of gold to be paid after a period of one year. You take that promissory note to Bank A for discount where you receive, say, $4,000 in bank notes (circulating money that would otherwise have been used by the bank for some other purpose -- e.g., to make a loan). The promissory note then forms the basis for the bank's decision to make $3,000 of its own, new bank notes available in the loan market. In doing this, Bank A, in effect, offers its own endorsement of Mr. Smith's promise to pay off the notes. We refer to this case as monetizing debt. Bank A monetized part of the debt of Mr. Smith. It printed money in the form of new bank notes.

 

Monetizing Debt

            To understand the meaning of the monetizing debt, imagine a commodity money economy. Individuals borrow and lend the commodity money (gold). Thus there are debts. There may be clearinghouses for such loans. However, the clearinghouses do not substitute their promises, or debt, for the debt of the lender. Nor do they provide the services of endorsement, surety, or guaranty. They perform the simplest kind of brokerage service: arranging deals between prospective borrowers and lenders of gold. Assume for the moment that the other services go unperformed. In such a situation, a person could buy goods in two ways: with gold or with a promise to pay gold. By assumption, a person could not buy goods with other peoples' promises to pay gold. There would be debt but the debt would not be monetized.

            A reputable individual (or consortium) could cause (or be a major contributing factor in causing) this debt to be monetized. He could do this in one of at least two ways. The first is through endorsement. An individual could indicate his confidence in the debtor by endorsing the debt with his signature or stamp. We could go on to assume that the act is recognized in the courts as making him liable to pay if the original promiser does not. However, the knowledge that the individual faces social sanctions may be sufficient. A variation of this is for the individual to promise in a public announcement that he has guaranteed, or insured, specific loans or classes of loans. Given that the individual is indeed reputable, there is every reason to believe that the endorsed debts would begin to circulate as currency, side by side with the gold. In other words, there is every reason to believe that the debt would become monetized. The endorsed promises would be “as good as gold” and more convenient to use.

            A second way in which someone could monetize debt is by substituting his personal promise to pay for the promise of gold made by the original debtor. He could do this by operating a financial intermediary. Lenders to the intermediary would lend their promises to pay gold or discount the promises made to them by others, while borrowers would borrow his promises to pay gold. The classic savings and loan institution falls into this class.

            This, then, is the meaning of debt monetization. The concept includes the simple cases mentioned but it is broad enough to include the classic idea of bank money creation. To see this, we only have to recognize that when a banker creates money by lending new demand deposits, she substitutes her own previously non-circulating debt for the debt of the individual to whom she makes the loan. Thus, when a banker lends you a newly issued (created) $100 bank note in exchange for your promise to pay $105 in existing bank notes after one year, she substitutes her own debt for yours. The concept of debt monetization also includes the means of creating money that older economists used to emphasize, namely, discounting. Discounting amounts to a bank's substituting a new circulatable note for the promissory note of a presumably less reputable issuer, which cannot circulate, and which someone brings for discount. The result of the exchange is not only that a circulatable note replaces a non-circulatable note but that an exchange occurs that otherwise would not.

            With a little imagination, we can see that debt monetization even includes the case where the reputable individual or consortium issues a note of its own and uses it to purchase goods in the market without ever lending it to a borrower (i.e., the creation of an unbacked bank note for personal use). In this case, an individual or consortium can be said to monetize its own new debt.

            A person's wealth would otherwise only be usable either directly in a personal production project or as guaranty for a loan to himself from someone who knows him well. With monetization, it is used “in the market” by someone who believes that his use will yield a higher money return or utility return in terms of money.

 

Reputation

            The monetization of debt could never occur if it were not for the wealth and reputation of an individual or consortium who endorses the existing promissory notes or who issues new ones. Let us explore the meaning of this notion. Suppose that no one had such wealth or such a reputation. Then debt may still exist and people might still buy things with promises to pay gold. But this could occur only if the creditor accepted the promise of the debtor. We might say that all debt would be particular. It would be debt between a particular creditor and a particular debtor. The amount of such debt would depend upon the particular willingness to borrow and lend of the parties to each separate transaction. Several individuals might join together in a club to lend or to borrow. Lending and borrowing might even occur between clubs. But the lending would be among the familiar members of the club or between familiar clubs and it would depend on the collective willingness of club members to lend and borrow.

            What happens when debt is monetized is that a sufficient number of people have confidence that the endorser, insurer, or guarantor will make good on her promise that they willingly accept her promise in trade. They believe that others will also accept it in trade or that, if for some reason they do not, they can redeem it for the gold or other things that are promised.

 

The Service of Banks

            It is important to realize that, although "banks" in these examples create money, creating money is not a service. Some writers in monetary theory have claimed that bank money is a substitute for gold money and therefore that it saves the cost of producing the gold that would otherwise be needed in exchange. This claim is only superficially correct. To see this, we only need to appreciate the fact that one piece of gold can perform the same medium of exchange function as 1,000,000,000 pieces. The one piece only needs to be divided into a billion pieces. Prices would be one billionth as high but there would be enough money. Thus, a community gains nothing from having more of the paper money. Nor would it gain if had more gold, given that the gold is used only as a medium.

            It is true enough that when paper money based on promises is substituted for gold, some gold may shift to the ornament and industrial markets. However, the reduced gold price that provides the incentive for the shift is accomplished not by substituting paper money for gold money but by substituting promises to give up gold (i.e., debt) for gold money. The cost of performing this service is not only the tiny cost of printing paper money but also the larger cost of appraising and administering debt, on the one hand, and building a reputation on the other.

            We might call the service performed by a bank in the above examples building the level of confidence between prospective lenders and borrowers. Or we might say that the bank reduces uncertainty by shifting the uncertainty from someone who is unwilling or less willing to bear it to someone who is more willing to bear it.

            Consider an example. Suppose that A believes that the true probability that he will repay a loan of $100 after one year is .99. So A asks B for a loan at 15% interest for one year. B then appraises A's promise. She decides that the probability is .75 that he will repay in full with interest, and .25 that he will not pay anything. So B makes a counter-offer of a 40% interest rate. A declines on the grounds that the rate is too high. A potentially profitable exchange for both parties does not occur. Now add a trustworthy third party, banker C. C appraises A's probability of repayment with interest at .95 and non-repayment at .5. C offers to discount A's 15% promise at $95. That is he agrees to pay B $95 for the right to collect on A's promise. Because of the discount agreement, B accepts A's offer. Later, C uses the increase in assets to issue additional bank notes, which circulate as money. Footnote

            In this example, C's intervention facilitated trade. It made it possible for a credit exchange to occur that otherwise would not have occurred. Given that each trader is correct in his belief that the exchange will benefit him, we can say that the service performed by the bank is productive to the traders. The fact that the new bank notes circulate in exchange is superfluous. To the extent that they do not displace gold or some other circulating medium, the new money puts upward pressure on prices.

            Because the intervention facilitated trade, one might argue that purchasing power is increased. Such an argument would not, of course, be based on the increase in the quantity of bank money but on the mutual gain from trade.

            We can imagine an institutional framework in which the guaranty function would be performed without creating additional currency. This is a system in which guaranty-type institutions were prohibited from creating money on the grounds that freedom to create credit money is likely to cause a future situation in which users of the credit money would lose their anticipated purchasing power when a careless banker (or set of bankers) went bankrupt. Such a framework would not stop people from relying on promises. Creditors would still bear the risk-uncertainty associated with their loans. They could still go bankrupt. But it would, theoretically at least, allow users of currency to avoid the risk-uncertainty associated with the bankruptcy of the credit money issuer. Footnote , Footnote The theoretical market economy contains no such restrictions, however. As a result, monetized debt must be included in the loan fund.

 

Davenport on Credit and Money

            Apparently because of the importance Davenport attached to credit as a basis for money creation, he began his discussion of credit in his 1914 book with a chapter he entitled "The Discharge of Debts." He summarized the chapter as follows:

(1) That if credit relations are to exist, the use of a standard of deferred payments is

                       a necessity;

(2) That it is practicably inevitable that the medium through which current exchanges

                       take place, namely, money or its equivalent, would be the medium in which deferred

                       payments are stipulated;

(3) That whether the medium be stable or unstable is important only in relations of

                       deferred payment, or in relations essentially similar;

(4) That money must be a defective standard of deferred payments because of its inevitable instability -- because,

in other words, it does not promise an equality between the loan as made and the loan as repaid;

(5) That neither the instability to be avoided in the standard, nor the equality to be sought through the standard,

can have any reference to value; nor can this stability or this equality find its test in labor or pain or sacrifice, but only in utility.(ibid.: 236)



The significance of this chapter lies with Davenport's belief that in order to trace private capital to the loan fund, one must understand how, in a free banking regime, money depends on credit. And to do this, one must understand the factors involved in monetary instability (points #4 and #5 in the above quotation).

            So in the next chapter, which is about five times as long as other chapters, he proceeds to describe money, credit, and banking. The chapter covers liquidity preference, loanable funds theory, Gresham's law, the quantity theory of money, and the trade cycle. Davenport's essential point, as stated above, is that when banks produce credit money, they do two things: (1) they facilitate trade by underwriting the credit of customers Footnote and (2) they add to the amount of circulating currency. During a recession, banks stop doing both things. How can a recession be prevented?

By one device or another the banks should be held to the responsibilities of their function -- the supplying at all times, and especially in times of stress, of all that credit in guarantee of which any applicant is able to offer the adequate security and for which he stands ready to pay the ruling rates of interest.(ibid.: 295)



Apparently, Davenport felt that the Federal Reserve Act would add sufficient elasticity to credit money to enable the banking system to avoid the kinds of collapses that had characterized earlier depressions. Footnote The chapter is detailed and systematic, although in some places a bit obscure.

 

The Trade Cycle

            Davenport's theory of the trade cycle is a monetary theory. As such it is akin to the Austrian theory. However, whereas the Austrians focused on the structure of production, Davenport stressed the structure of credit. To readers familiar with the Austrian theory, I can state the difference simply by considering Davenport's critique of the view that an increase in the quantity of money can solve the problem of recession. Davenport says that those who hold this view do not realize that "it is the shape of the pyramid, and not the size of it, which is matter of concern." Mises (1983) and Hayek (1933) made similar statements. However, whereas for the Austrians, the "pyramid" refers to the structure of production, Davenport had in mind the "volume of credit relatively to money"(1914: 284; 1896: 278). More specifically, he was writing about the entire interdependent complex of credit and the money that is created on its foundation.

            What causes a recession? In the classic case, the simple answer is: additional money that is not supported by reliable promises to pay. Too many of the "important" promises that form the foundation for money have not been soundly evaluated. A certain measure of unreliable promises can exist without being accompanied by a sharp reduction in money and credit. But when the measure becomes too large, moneychangers intervene to drive insolvent and untrustworthy endorsers into bankruptcy. If the number of these is large, there is a recession.

            It is noteworthy that Davenport used time preference to explain why in the depths of the depression, after prices and wages have reached an apparent bottom, people still do not spend their money. He said that the people are psychologically disposed to regard the distant future as overwhelmingly important relative to present consumption. The depression will be over only when their time preference changes. He says that because "the doctrine of capitalization...bases itself upon the individual processes lying behind the reservation prices of the sellers and the bidding prices of the buyers,..the analysis must therefore be psychological rather than logical in emphasis..."(1914: 233-4) This view is fully consistent with his view of the capitalization process.

            He supplies the following remarkable analysis of why a general fall in prices may not stimulate the demand for consumers goods. First he characterizes the trough of a cycle as a situation in which "Foreseen future needs are outranking in the present estimate the actual present needs.(ibid.: 302-3). Falling prices necessarily result." However, falling prices do not get rid of the glut, since the problem is the "current psychological attitude."(ibid.: 303) There is, as he puts it, underconsumption. He attributes underconsumption to a time preference that differs from what it would be under ordinary circumstances.

            Seen in a different light, the problem is that people don't want to spend their money. The precautionary and speculative demands for money outweigh the transactions demand. Davenport asks rhetorically:

What...if the possessors of goods really do not want to barter for other goods, but only to get hold of money and, for the time being, stop there? What if for a while the intermediate [money] is...held as provision against the pressure of creditors, or for the purpose of later speculative purchases, or for some other end remote enough so that the money has lost temporarily its function of serving as intermediate in the exchange of present products against other present products?(ibid.: 301)


 

 


The Credit Basis of Money

            It seems that the most difficult idea to grasp in Davenport's loan fund theory is the notion that most of the loanable funds are the result of monetizing the debt. Davenport discusses this in his 1908 book (162-70) and again in his 1914 book.(337-42) He uses the same example in both books. We have already shown how debt monetization occurs. However, it may be worth presenting Davenport's story because it was the source of an error in interpretation made by Fetter, which will be discussed below. To avoid Fetter's difficulty, we shall proceed slowly.

            The example is of a railroader who wants to finance a railroad in a community that initially has no money. Davenport wanted to show how debts could form the basis for a new money that could be lent to the railroader to finance the construction. The first step is that a cattle baron who owns many head of cattle sells his cattle on credit to other farmers. In return for the cattle, the farmers give him IOUs. In the original example, the IOUs are denominated in a standard currency, which presumably exists elsewhere. This is not a necessary feature of the example and it is distracting. We could just as readily assume that the debt is denominated in real property, promises of work, or any thing that is valued. Indeed, this is precisely what we must do if we aim to fully understand Davenport's example. Accordingly, in this presentation we shall assume that the IOUs are denominated in goods and, as a result, not exchangeable elsewhere.

            The next step is that the cattle baron approaches a prospective banker (there are no existing bankers in the community because there is no money). He proceeds to ask the banker to discount his IOUs. The banker agrees and, in exchange for the IOUs, issues to the cattle baron notes drawn on her new bank. The first, brand new bank notes are then loaned to the railroader who can use them to purchase the resources he needs to build the railroad.

            Note that this example neatly combines the development of credit with the emergence of money. It emphasizes the banker's role as an endorser. Indeed, it is only our assumption that the banker's endorsements make his promises acceptable in exchange that enables us to deduce that the IOUs to the cattle baron could become the basis for money.

            Thus we see that a distinguishing feature of Davenport's loan fund theory is that credit forms the basis for money. In his theory, the bulk of the money made available to borrowers is the loan money was created by banks and backed by credit. Thus, the structure of credit referred to above in the discussion of the trade cycle forms the basis for the money. Of course, bankers may also issue money that is not backed by credit. It is not easy to tell whether banks are only performing their function of producing money based on credit or whether they are, in addition, creating unbacked money. Depressions occur because they do both and/or because if they are only issuing money based on credit, they over-appraise the promises of the primary debtors and they do not possess sufficient guaranty to protect users of their money.

 

Private Capital, Loan Fund Capital, and Abstract Capital

            Let us review the sequence of events that takes place as some portion of private capital (i.e., privately appraised wealth) makes its way into the hands of market entrepreneurs. To do this, we must think of the owners of private capital simultaneously as (1) abstainers, (2) lenders, (3) owners of promises that are discounted at banks and (4) suppliers of guaranty for loanable funds. In thinking of them as abstainers, we conceive of their reservation demands for goods in the near future as opposed to the distant future. The money they make available depends upon their “psychological” disposition to consume or save. In different terms, it depends on their time preference. In thinking of them as lenders, or suppliers of loanable funds, we conceive of their function as appraisers of the promises made directly to them by borrowers.

            In thinking of individuals as suppliers of discounted promises to banks, we conceive of their function as appraisers of promises made by others to them and by others to still others. We conceive not only of the individuals who appraise the promises made directly to them but also of the specialists in appraisement, who simultaneously appraise the promises that are brought to them for discount. Indeed, we conceive of a network of promises and appraisals. At the top of the hierarchy of promises are those made by people whose appraisals, wealth and/or integrity engender enough confidence to warrant their becoming monetized. For these, individuals feel so confident in their appraisals that they treat the promises as money. As performers of this function, individuals act as entrepreneur-appraisers and of endorsers. Thus, the loan fund theory conceives of individuals not only as appraisers of goods but also as appraisers of promises and endorsers.

            In thinking of individuals as suppliers of guaranty, we conceive of their function as guarantors. As performers of this function, they act as entrepreneur-uncertainty-bearers.

            When the savers make their money available and when banks perform their service of transforming discounted promises and other guaranty into money, loanable funds become available. To the extent that these funds are not borrowed by consumers, they constitute the loan fund -- i.e., the money that market entrepreneurs proceed to use in their everyday activities.

            In his 1908 book, Davenport expressed these ideas by using the term "mobility." He began by discussing private capital. "[A]ll wealth is capital in the measure and degree of its market price." Therefore, all capital is mobile from the private point of view. However, an individual may decide not to make her private capital available either directly or indirectly to borrowers. Accordingly, "[c]omplete mobility for private purposes is, however, achieved only by the transformation of the vendible item of private wealth into the ...very commercial material or medium of which the loan fund is composed."(1908: 169-70)

            In his 1914 book, he came to refer to this fund as loan fund capital, the title of his concluding chapter on the subject. In this chapter, he focused on the fund of money that is borrowed by market entrepreneurs. "It may now be taken as established," he says, "that the 'capital' that is borrowed in the loan market is suspended purchasing power in the form of money or of credit substitutes for money...and that capital in the credit relation is something quite different from social equipment or even individual wealth in general. Much confusion could be avoided, he says, "if the term loan fund...were adopted to indicate the actual thing that is borrowed..."(1914: 343)

            Neglecting commodity money, money gets created in two ways. The first is when the endorsement, or guaranty, on promises becomes sufficient in appraisers's views that the promises come to function as a medium of exchange. The second is when, after money has been created in the first way, banks proceed to issue notes that are identical to the ones that are currently in use but which have not been appraised in the same way. Absent a banking monopoly or some kind of tacit agreement among banks to accept each others's notes regardless of the independent appraisals of experts, a particular bank could not long succeed in creating money in the latter way. The reason is that expert appraisers (moneychangers) would quickly demote the relative exchange value of a particular bank's money if it issued more notes than could be supported by the "true" exchange value of its promises.

            When banks create money in the first way, Davenport argued, they perform their legitimate function. However, when they create money in the second way they exceed their legitimate function.

            Because the money that is borrowed includes not only the funds made available directly by private wealth holders but also bank money, "[t]he abundance of loan funds is determined more by the degree of complexity in credit relations than by the existing quantity either of social or of private wealth."(ibid.: 344) And, "[t]he supply of this loan fund form of capital is thus more largely a question of the organization of banking and of the degree of banking activity than a question of the wealth of society."(ibid.: 348) He finds evidence of the loan fund theory in the writings of Ricardo, Bagehot, and Cairnes.(ibid.: 344-6)

            Davenport summarizes his chapter on the loan fund in one long sentence beginning on p. 350. Among other things, he says that

the supply of loan fund is merely the supply of present purchasing power available for lending; that this loan fund is therefore made up exclusively of rights of purchase -- rights of control or direction of men and of wealth...that the loan fund, as made up of income-earning possessions, is capital, but a peculiar kind of capital, one among many varieties, and entirely distinct from durable production or durable consumption goods or from the raw materials of industry -- a kind of capital also that has no direct dependence on the supply of production goods or of other concrete wealth in society, or even any necessary relationship to any of them...(ibid.: 351-3)

 

            Finally, it should be pointed out that Davenport was acutely sensitive in all his writings on loan fund capital to the fact that others often used a socialist concept of capital. To emphasize this, he entitled the second chapter on capital in his 1908 book "Capital as a Competitive Concept." In it, he argues that purchasing power, from the point of view of the entrepreneur, is the only concept of capital that is valid for inquiries into price and value. Footnote (1908: 143) He distinguishes this concept from the collectivist, or social, concept. For most purposes, the collectivist concept of wealth as fund "does not apply...simply because the activities of men in society are competitively and not socially organized."(italics added) "...[A] computation of competitive costs [requires] another and quite different, and even a radically inconsistent, concept of capital."(ibid.: 148-9). In 1908 he called this "entrepreneur capital," meaning funds that market entrepreneurs take as being available to be invested. In 1914, he referred to it as loan fund capital.(1914: 333-7).

            Is there such a thing as abstract capital? When professional economists of his day spoke of capital as an abstract fund, they did not have in mind a set of private, subjective appraisals of wealth. Thus, they were not referring to private capital. Perhaps what they had in mind is the loan fund. However, the loan fund is only a portion of the private capital. In Davenport's words,

From the point of view of private competition...all capital, by virtue of its quality of vendibility is, in a sense, unspecialized, mobile, and fluid...(1908: 172) [T]he characteristics of abstractness, of homogeneity, of an entire fluidity and mobility, belong to what we have described as the loan fund, and to it solely. Nor is the size of this fund commensurate with the existing fund or total of private capital. The loan fund -- or abstract capital -- is merely a portion or subdivision of private capital.(ibid.: 173, italics added)

 

The essential and important kernel of truth in the abstract-capital concept is, then, the obscure recognition of the loan-fund fact. Abstract capital is a subhead under the private-capital concept, a competitive and not a social fact, a share and only a share, out of the private-capital aggregate.(ibid.: 174)

 

 

4. Fetter's Review

 

            The only thorough treatment of Davenport's loan theory of capital of which I am aware is Frank Fetter's 1914 book review. Footnote Fetter presented a damning criticism of the loan fund theory and argued in effect that no one should pay attention to Davenport.(1914b) The review must have been especially significant at the time given Fetter's high status as a Princeton economist and specialist in capital and interest theory.

            Fetter's fifteen page review article basically contains criticisms of Davenport on five points. They are (1) lack of scholarly attitude, (2) the definition of economics as the theory of price, (3) the inclusion of predation and exploitation in economic theory, (4) the loan fund theory of capital, and (5) where technical productivity fits into the theory of price and interest. This paper focuses on the latter two. Footnote

 

 


The Loan Fund Theory

            In criticizing Davenport, Fetter referred to "the loan fund theory of interest," rather than the loan fund theory of capital. This presumably reflects Fetter's view that if Davenport's theory does not properly explain interest, it must be wrong. Fetter's main critique is of debt monetization. Recall Davenport's example of a railroader who wanted to finance a railroad in a community that initially has no money. Sales of cattle by a cattle baron on credit created IOUs that were the basis for a bank's creation of money. One of the crucial features of the example was the prime endorser character of the banker. Without the trustworthiness and/or guaranty of the banker, no new money could be created. Fetter apparently failed to see this. He objected that "the loan fund consists of what lenders have to lend, not of what the debtors owe."(Fetter 1914b: 558) In his view, the cattle baron could simply lend his cattle to the railroader. Then the railroader could exchange the cattle for the resources he needs.(ibid.: 557, bottom) But, of course, without money, the railroader would face the coincidence-of-wants problem. This problem does not exist if the banker's deposit credits are accepted in exchange, as Davenport assumes they would be by virtue of his (partly implicit) prime endorser assumption.

            Another way to look at the problem is to assume that after the cattle baron had lent his cattle to the railroader, the railroader could easily sell the cattle for IOUs, just as the cattle baron did. How then could the railroader use the IOUs to purchase the materials and labor he needs to build his railroad. Again, the prime endorser and the media of exchange he produces are needed.

            Fetter either failed to appreciate the prime endorser assumption or he did not see the difference between trading cattle for resources and trading money for resources. However, Davenport did not state the problem as clearly as I believe it has been stated here. Unless one is predisposed to think of the new banker as a prime endorser, he may easily conclude, as Fetter did, that in Davenport's example, money "magically appears."(ibid.: 557).

            The fundamental problem with Fetter's assessment appears to be his failure to describe the loan fund theory as Davenport presented it. Instead, Fetter criticized particular passages as though they could stand alone. Since the element that distinguishes Davenport's 1914 book from his 1908 book is the systematic unfolding of the implications of adopting the subjectivist point of view, this approach cannot help but lead to error. It is possible that this error is fully traceable to Fetter's failure to accept Davenport's starting point: the reservation demand approach (Fetter 1914b: 554-5) and the entrepreneurial point of view. Unless one accepts this starting point, it is difficult to make sense of the role of banking (i.e., endorsement) that Davenport regards as essential to the loan fund theory. Fetter did not discuss banking, credit, or guaranty in his review. Without appreciating Davenport's ideas about these things, he would not have been able to understand Davenport's theory of interest. Footnote

 

The Theory of Interest and Technical Productivity

            Fetter criticized Davenport for holding the "fundamental fallacy of the technical productivity theory of interest."(Fetter 1914b: 562) In a section entitled "Interest Not Mere Perspective," Davenport had tried to justify his belief that technical productivity affected the rate of interest. He did this by using an imaginary construction in which prices were held constant. Fetter argued that such an image was inappropriate for the task. Since Davenport did not explain the image in sufficient detail, it is difficult to dispute Fetter's criticism. But Fetter failed to get to the heart of the disagreement. I shall attempt to do so here.

            Before proceeding, it is important to point out that both authors criticized the naive technical productivity theory. Not technical productivity but (estimated) value productivity is what counts. But to calculate value productivity, one must have knowledge of technical productivity. The question is only where knowledge of technical productivity fits into the theory of market interest. Fetter argues that whereas time preference is prior to enterprise, knowledge of technical productivity is secondary. Footnote In his view individuals own the factors of production and proceed to capitalize them on the basis of their time preference (rate of time discount). The result is a set of offer prices from factor-owners. Alternatively, we could characterize the result as a set of supply schedules of factors. Enterprise takes these factor prices (costs) as a starting point in calculations of profitability. Interaction among enterprisers, in light of the offered prices of the factors, results in the exchange of factors at market prices. One of the resulting prices, as Fetter saw it, is the rate of interest on contract loans. Where does knowledge of technical productivity fit? It enters the explanation only after capitalization, through the decisions of market entrepreneurs. In short, Fetter assumes that the market entrepreneurs, but not the factor suppliers, possess knowledge of technical productivity.

            As opposed to this, Davenport treats each actor as an entrepreneur. Each actor's entrepreneurship simultaneously uses knowledge of preferences, including his own time preference (personal rate of discount), and knowledge of the means available to satisfy wants, including knowledge of technical productivity. He calls the use of such knowledge to attach prices to goods "capitalization." Having capitalized, an individual may enter the loan market directly with his savings. Or he may discount notes receivable with banks who use them as a basis for creating loanable funds. Or he may use his saleable assets either as a basis for borrowing new money or as guaranty for someone else's borrowing. Each person, in his role as an entrepreneur, has a use for the funds that he may loan, a use that may include causing a good to be produced and sold. The ultimate result of the interaction among individuals acting in these roles is a supply, partly through intermediaries, of loan fund. This supply, combined with another set of individual acts, namely, the demand for loanable funds, determines the market rates of contract interest. Thus, knowledge of technical productivity (or more correctly, expectations of technical productivity) plays a primary and fundamental role in determining the market rate of interest. Its role begins at the very start of the capitalization process when the entrepreneurship of each individual appraises his private capital. Footnote

            If we leave out money and credit, which Fetter did, the fundamental difference between Fetter and Davenport on the interest theory was this. Davenport saw knowledge of technical productivity as part of the capitalization process, which occurs before the market process. Fetter, on the other hand, saw it as part of the market process, which occurs after the capitalization process.

 

 


 

4. CONCLUSION

 

            Davenport's theory of loan fund capital contained three ideas that distinguished him from others: his strict subjectivism as indicated by the notion of private capital, his reservation demand approach to the supply of loanable funds, which relies on the praxeological concept of entrepreneurship, and his theory of the monetization of the debt in a free banking system. His idea that banks provide two services: (1) endorsement, surety, or guaranty and (2) money creation seems to be immanently relevant to modern efforts to analyze a liberalized credit and banking structure. However, Davenport has been virtually ignored in recent professional economics.


References



Blaug, M. (1985) Economic Theory in Retrospect. (Fourth edition) London: Cambridge University Press.


Clark, John. B. (1899). The Distribution of Wealth: A Theory of Wages, Interest and Profits. New York: Macmillan.


Clark, John B. (1899). "Natural Divisions in Economic Theory." Quarterly Journal of Economics. 13 (January): 187-203.


Clark, J. Maurice. (1914) "Davenport's Economics." Political Science Quarterly. 29 (2).


Davenport, Herbert J. (1896) Outlines of Economic Theory. New York: Macmillan.


Davenport, H. (1898) Outlines of Elementary Economics. New York: Macmillan.


Davenport, H. (1908). Value and Distribution. Chicago: University of Chicago Press.


Davenport, H. (1914). Economics of Enterprise. New York: Macmillan.


Davenport, H. (1916) "Fetter's 'Economic Principles.'" Journal of Political Economy 24 (April): 313-362.


Davenport, Herbert J.(1935) The Economics of Alfred Marshall. Ithaca, New York: Cornell University Press.


Fetter, Frank A. (1904). The Principles of Economics, with Applications to Practical Problems. New York: The Century Co.


Fetter, F. (1914a). "Interest Theories, Old and New." American Economic Review 4 (March): 68-92.


Fetter, F. (1914b). "Davenport's Competitive Economics." Journal of Political Economy 22 (June): 550-65.


Fetter, Frank. (1927) "Clark's Reformulation of the Capital Concept." In Jacob H. Hollander, ed. Economic Essays Contributed in Honor of John Bates Clark, New York: Macmillan. Reprinted in Fetter (1977). Capital, Interest, and Rent. Kansas City: Sheed Andrews and McMeel.


Gunning, J. Patrick (1990). The New Subjectivist Revolution: An Elucidation and Extension of Ludwig von Mises' Contribution to Economic Theory. Savage, Maryland: Rowman and Littlefield.


Gunning, J. Patrick (1997). "Ludwig von Mises's Transformation of the Austrian Theory of Value and Cost." History of Economics Review. 26 (Summer).


Gunning, J. Patrick (1998). "Herbert J. Davenport's Transformation of the Austrian Theory of Value and Cost." in Malcolm Rutherford (ed.). The Economic Mind in America: Essays in the History of American Economics. London: Routledge.


Hayek, F. A. (1933) The Monetary Theory of the Trade Cycle. London: J. Cape.


Hoxie, Robert F. (1905) "Fetter's Theory of Value." Quarterly Journal of Economics. 19 (February).


Johnson, Alvin S. (1914) "Davenport's Economics and the Present Problems of Economic Theory." Quarterly Journal of Economics. (28): 417-46.


Mitchell, Wesley. (1914) Book review of H. J. Davenport's The Economics of Enterprise. American Economic Review. 9 (September): 602-5.


Robbins, Lionel. (1930) "The Economic Works of Philip Wicksteed" Economica 10: 245-58 In Robbins (1974) Economic Science and Political Economy: Selected Articles. Edited by Susan Howson. London: Macmillan.


Salerno, Joseph T. (1991) "Commentary: The Concept of Coordination in Austrian Macroeconomics." In Richard M. Ebeling (ed.) Austrian Economics: Perspectives on the Past and Prospects for the Future. Hillsdale, Michigan: Hillsdale College Press.


von Mises, Ludwig (1966). Human Action: A Treatise on Economics. Chicago: Henry Regnery Company.


von Mises, Ludwig (1983) "The 'Austrian' Theory of the Trade Cycle." In The Austrian Theory of the Trade Cycle and Other Essays. Washington, D.C.: Ludwig von Mises Institute for Austrian Economics, Inc. Originally published in German in 1936.


Wicksteed, P. (1914) "The Scope and Method of Political Economy in the Light of the `Marginal' Theory of Value and Distribution." Economic Journal 24 (March): 3-26.


Wicksteed, P. (1933) The Common Sense of Political Economy. London: Land Humphries. Originally published in 1910.


Wieser, Friedrich von. (1956) Natural Value. Translated by A. Malloch and edited by William Smart, New York: Kelley and Millman. First published in German in 1888.




Gunning’s Address


J. Patrick Gunning
Visiting Professor
U.S. Coast Guard Academy
Management Department
15 Mohegan Avenue
New London, CT 06320

Please send feedback:

Email: gunning@nomadpress.com
Go to Pat Gunning's Pages