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Henry Calvert Simons
Henry Calvert Simons (/ˈsaɪmənz/; October 9, 1899 – June 19, 1946) was an American economist at the University of Chicago. A protégé of Frank Knight, his antitrust and monetarist models influenced the Chicago school of economics. He was a founding author of the Chicago plan for monetary reform that found broad support in the years following the 1930s Depression, which would have abolished the fractional-reserve banking system, which Simons viewed to be inherently unstable. This would have prevented unsecured bank credit from circulating as a "money substitute" in the financial system, and it would be replaced with money created by the government or central bank that would not be subject to bank runs.
Simons is noted for a definition of economic income, developed in common with Robert M. Haig, known as the Haig–Simons equation.
In one of his essays, A Positive Program for Laissez Faire (1934) Simons set out a program of reform to bring private enterprise back to life during the Great Depression.
Eliminate all forms of monopolistic market power, to include the breakup of large oligopolistic corporations and application of antitrust laws to labor unions. A Federal incorporation law could be used to limit corporation size and where technology required giant firms for reasons of low cost production the Federal government should own and operate them... Promote economic stability by reform of the monetary system and establishment of stable rules for monetary policy... Reform the tax system and promote equity through income tax... Abolish all tariffs... Limit waste by restricting advertising and other wasteful merchandising practices.
Henry Simons argued for changing the financial architecture of the United States to make monetary policy more effective and mitigate periodic cycles of inflation and deflation. The goal of changing the "monetary rules of the game" in this way was to "prevent... the affliction of extreme industrial fluctuations".
Simons identified a critical flaw in the existing financial system: the perpetuation of economic disturbances through "extreme alternations of hoarding and dis-hoarding" of money. He argued that short-term obligations issued by banks and other corporations created "abundant money substitutes during booms," but when demand weakened, liquidation attempts resulted in devastating "fire sales."
His analysis foreshadowed events such as the 2008 Bear Stearns bailout, which required a Federal Reserve intervention of up to $30 billion to prevent a systemic collapse of financial markets.
Simons and other economists developed the Chicago Plan, which proposed fundamental changes to the banking system:
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Henry Calvert Simons
Henry Calvert Simons (/ˈsaɪmənz/; October 9, 1899 – June 19, 1946) was an American economist at the University of Chicago. A protégé of Frank Knight, his antitrust and monetarist models influenced the Chicago school of economics. He was a founding author of the Chicago plan for monetary reform that found broad support in the years following the 1930s Depression, which would have abolished the fractional-reserve banking system, which Simons viewed to be inherently unstable. This would have prevented unsecured bank credit from circulating as a "money substitute" in the financial system, and it would be replaced with money created by the government or central bank that would not be subject to bank runs.
Simons is noted for a definition of economic income, developed in common with Robert M. Haig, known as the Haig–Simons equation.
In one of his essays, A Positive Program for Laissez Faire (1934) Simons set out a program of reform to bring private enterprise back to life during the Great Depression.
Eliminate all forms of monopolistic market power, to include the breakup of large oligopolistic corporations and application of antitrust laws to labor unions. A Federal incorporation law could be used to limit corporation size and where technology required giant firms for reasons of low cost production the Federal government should own and operate them... Promote economic stability by reform of the monetary system and establishment of stable rules for monetary policy... Reform the tax system and promote equity through income tax... Abolish all tariffs... Limit waste by restricting advertising and other wasteful merchandising practices.
Henry Simons argued for changing the financial architecture of the United States to make monetary policy more effective and mitigate periodic cycles of inflation and deflation. The goal of changing the "monetary rules of the game" in this way was to "prevent... the affliction of extreme industrial fluctuations".
Simons identified a critical flaw in the existing financial system: the perpetuation of economic disturbances through "extreme alternations of hoarding and dis-hoarding" of money. He argued that short-term obligations issued by banks and other corporations created "abundant money substitutes during booms," but when demand weakened, liquidation attempts resulted in devastating "fire sales."
His analysis foreshadowed events such as the 2008 Bear Stearns bailout, which required a Federal Reserve intervention of up to $30 billion to prevent a systemic collapse of financial markets.
Simons and other economists developed the Chicago Plan, which proposed fundamental changes to the banking system: