Edward C. Harwood

Edward Crosby Harwood (October 28, 1900 – December 16, 1980) was an American economist, philosopher of science, and investment advisor who is most known for founding the nonprofit American Institute for Economic Research (AIER) in 1933, which survives today in Great Barrington, Massachusetts.

AIER is a scientific research organization specialized in economics.

It is one of the oldest nonprofit research organizations in the U.S. It is the parent of a for-profit subsidiary, American Investment Services, Inc.

Harwood was born in Cliftondale, Massachusetts on October 28, 1900.

His family moved to Springfield, Massachusetts, when he was a child.

His undergraduate work took place at West Point, from which he graduated as a military engineer in 1920.

His study of banking history and of the American economy convinced him in the late 1920s that the U.S. was headed for a crisis, and he predicted this in a number of his articles (see a few listed below).

By 1928, he had become so learned that his articles on business and monetary conditions were published in well-known financial periodicals of the day such as The Annalist [sic] (a New York Times Company publication later sold to Business Week), Barron's, the Wall Street Magazine, Coast Investor & Industrial Review, Bankers Magazine, and others.

By the time he was 40, more than 80 articles had been published.

Before and after two four-year stints on army bases in North Carolina and the Territory of Hawaii, he spent several years at Rensselaer Polytechnic Institute (RPI) earning his three degrees, a B.S., a M.Eng., and an M.B.A. In the early 1930s, he was appointed assistant professor of military science and tactics at the Massachusetts Institute of Technology (MIT), Cambridge, Massachusetts.

After four years there, he was sent to Boston, where he oversaw the widening of the Cape Cod Canal for the War Department's Corps of engineers.

Meanwhile, he was also appointed acting corps area engineer for the Works Project Administration's Civilian Conservation Corps program.

While living in the Cambridge area, Harwood associated with a number of businessmen and academics who were interested in his business cycle research.

One of them was Vannevar Bush, then vice president of MIT, who, along with others, encouraged him to found the scientific research nonprofit AIER.

In 1932 he wrote his first full-length book, Cause and Control of the Business Cycle, and it was published by the Financial Publishing Company of Boston, Massachusetts.

For its exposition of monetary phenomena in clear layperson's language, the book earned a recommendation of the Book-of-the-Month Club and was used as a college text by professors at Dartmouth and Stanford.

The book sets forth his economic theories and gives Harwood's intricately derived but simply illustrated graph (the Harwood Index of Inflating) showing the amount of purchasing media in circulation, divided into various subcategories that are either "inflationary" or "noninflationary," according to clearly explained definitions.

Harwood's detailed analysis of statistics and economic history led him to a number of what he considered to be "warranted assertions".

One of these was the following: that two market-evolved monetary mechanisms functioned relatively well together, and they were the cornerstones of several healthy national economies, at least up until the creation of the Federal Reserve System.

These two mechanisms were (1) the gold standard, and (2) what he called "sound commercial banking".

Sound commercial banking, in his view, required three things: (1) the separation of the commercial banking function from the investment banking function; (2) that commercial banks be the only entities allowed to create and issue self-liquidating money (or what he preferred to call "purchasing media" ) based only upon commercial transactions for things coming to market in the short term; and (3) that investment banking departments should not create money, but rather only issue credit based on real savings, which are, in fact, claims on existing things, i.e. delayed consumption.

Harwood's analysis brought him to the further conclusion that the abandonment of the gold standard, the loss of sound commercial banking principles, and the subtle growth of the Federal Reserve's powers to create money in place and stead of the commercial banks would, in the long run, disrupt monetary equilibrium and undermine the U.S. dollar.

He did so in 1933 and began publishing a newsletter for the educated layperson.

The newsletters described the ramifications of current economic events and the results of statistical research on the business cycle and various market sectors.

AIER's first booklet publication was "What Will Devaluation Mean To You?"

Soon, AIER registered with the SEC and began publishing investment advice and managing a few customer accounts.

Today, this work is carried on by a wholly owned subsidiary, American Investment Services, Inc.

Harwood became a popular speaker on the problems with monetary inflation and began touring the country and speaking to bankers associations and other professional groups.

He retired from military service in 1938 and took up full-time economic and philosophical research at AIER, which was now housed in a building just off the Harvard campus in Cambridge.

His research and writing activities were interrupted in 1941, when he re-enlisted in the army to serve two years in England and two more in the Pacific on the islands of Leyte and Luzon under General "Pat" Casey and General Douglas MacArthur.

Harwood advanced to the rank of colonel and earned the Legion of Merit and a Bronze Star Medal.

After his return, he devoted the rest of his life to his work in economics, investing, and scientific methodology.

He resided for the most part in Great Barrington, Massachusetts, and also spent time in Bermuda; Lugano, Switzerland; and Montecito, California.

He was married twice, first to Harriet Haynes with whom he had three children (Marjorie, Edward, and Richard) and then to Helen Fowle with whom he had four children (William, Eve, Frederick, and Katherine).

Harwood also established the Behavioral Research Council (BRC) in the early 1950s with two sociologists, George A. Lundberg and Stuart C. Dodd, both professors at the University of Washington.

When he died in Montecito on December 16, 1980, he had thirteen grandchildren and ten great-grandchildren.

Harwood was an autodidact in economics in the style of Henry George, although he got two Master's degrees from RPI, one in civil engineering and one in business administration.

Harwood's private studies on economics and on the philosophy of science began as a vocation in his early twenties, in the well-stocked libraries of the various Army bases where he resided.

BRC was taken over by AIER in 1984, but some of its work continues tangentially at another nonprofit entity Harwood created called the Progress Foundation (PF), now based in Zurich, Switzerland.

More specifically, today PF concerns itself with "conducting and disseminating independent research that fosters greater understanding of the factors that contribute to human progress".