Edgar Lawrence Smith

Edgar Lawrence Smith (born May 6,1882; died June 19, 1971 at age 89) was an economist and author of the influential 1925 book Common Stocks as Long Term Investments, which promoted the then-surprising idea that stocks excel bonds in long-term yield. As The New York Times put it, the book "has laid down a principle which so reverses the accepted estimate of the relative investment value of bonds and common stocks as to have aroused the keen interest of Wall Street and investment bankers in general." In Smith's own summary for the Times, he wrote:

Smith said that the "bond tradition" was supported "up to 1897, when the purchasing power of the dollar reached its highest point," but failed to take into account the fact that the dollar "is a fluctuating measure of value."

John Maynard Keynes reviewed the book positively in 1925 in An American Study of Shares versus Bonds as Permanent Investments. Keynes particularly noted one novel factor affecting compound stock market returns: Smith's proposition that reinvested earnings helped increase a company's value, with retained earnings estimated at approximately 2.5% per year. The book was cited in a 1956 Financial Analysts Journal article, College and University Endowment Funds: How Much Common?, in which the gradual increased allocation to stock investment by college endowment funds between 1926 - 1943 is seen as recognition that "Conclusions by Smith are review-worthy for the one very good reason that they have been fully substantiated in the intervening years, now a little more than thirty."

His 1940 book ''Tides in the Affairs of Men. An Approach to the Appraisal of Economic Change'' sought to establish a connection between the pattern of economic booms and collapse and meteorological factors.

Books

 * Common Stocks As Long Term Investments, originally published 1924, reprinted (2003) by Kessinger Publishing, ISBN 0-7661-6073-4
 * Tides in the Affairs of Men. An Approach to the Appraisal of Economic Change, originally published 1940, reprinted (1989) by Fraser Publishing, ISBN 0-87034-090-5