Foster and Catchings

Pre-Keynesian American underconsumption theorists.

In their undergraduate years at the turn of the century, William Trufant Foster and Waddill Cathings had been classmates together in at Harvard.  Foster went on to become an college educator, while Catchings had gone into finance.  In 1919, they came together again at the Pollack Foundation for Economic Research - Catchings providing the economic expertise,  Foster providing the expository rhetoric - and promptly set about addressing the post-war slump.

Foster & Catchings main theses were worked out in Profits (1925) and Money (1928).  They argued that insufficient consumer income is what leads to collapses in consumption and hence profits, prices and outputs.  They base their theory on a primitive but clumsy version of a multiplier-accelerator mechanism.   If retained company profits are hoarded (rather than being lent out), then consumer income is insufficient for consumers to absorb output. They argued that even if the firm invests this hoarded money itself (and thus pays the income out to workers), the problem is not solved: increased investment increases demand, yes, but it also pushes out output even further.  The imbalance between aggregate demand and supply, Foster and Catchings argue, will thus maintain itself. 

Their theory contains a fatal flaw in the "long-run", but seen in a short-run, dynamic manner, it is reminiscent of that of Malthus during the General Glut controversy.  They publicly offered a cash award to any economist who could prove their argument flawed. Dozens upon dozens of people submitted proofs (e.g. Friedrich Hayek, 1929), but while they acknowledged minor errors, Foster and Catchings maintained that their central thesis remained correct.  Apparently, Foster and Catchings had early sympathizers in Paul H. Douglas and Charles F. Roos.

William Trufant Foster, 1879-1950.

W.T. Foster earned a B.A. and M.A. in Englsh from Harvard, where he first met Catchings.  Foster went on to become an innovative educator, he was the first president of Reed College (f.1910) - and the writer of its "fight song"!  Foster resigned from Reed in 1919, and joined forces with Catchings at the Pollack Foundation for Economic Research..

Major Works of W.T. Foster

• Argumentation and Debating, 1908 [bk]
• Essentials of Exposition and Argument, 1911 [bk]
• Administration of the College Curriculum, 1911 [bk]
• The Social Emergency: Study in sex hygiene and morals, 1914 [bk]
• Shall we Abandon the Gold Standard?, 1922.
• Edison-Ford Commodity Money, 1923.
• Profits, with W. Catchings, 1925.
• Business Without a Buyer, with W. Catchings, 1927.
• Money, with W. Catchings, 1928.
• The Road to Plenty, with W. Catchings, 1928.

Waddill Catchings, 1879-1967.- (1)

Harvard-trained economist, financier and businessman.  As a young, up-and-coming financier, Catchings had made his name helping reorganized troubled corporations. Famously, Catchings replaced Henry Goldman as senior partner of Goldman Sachs in 1918 and transformed the fledgling brokerage into a huge investment trust, establishing the Goldman Sachs Trading Corporation (effectively, a hedge fund), and nurtured its meteoric rise during the boom years of the 1920s, holding nearly half-billion dollars in assets. Catchings' fund was wiped out during the crash of 1929. Catchings would later become the head of Muzak Corp., who's business was largely sending centrally-played music by telephone wires to loudspeakers owned by subscribers, usually restaurants and hotels.

Major Works of Waddill Catchings

• Profits, with W.T. Foster, 1925.
• Business Without a Buyer, with W.T. Foster, 1927.
• Money, with W.T. Foster, 1928.
• The Road to Plenty, with W.T. Foster, 1928.
• Obvious Facts of Business, 1936.
• Progress and Plenty, 1939
• Bias Against Business, 1956
• Do Economists Understand Business?, 1955.
• Money, Men and Machines, with C.F. Roos, 1958.

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