Irving Fisher

Irving Fisher ( 27 as February as 1867 , Saugerties , New York – 29 as April as 1947 , New York) was an economist, statistician , inventor , and eugenicist American who helped spread economic ideas neoclassic in United States . 1

Several concepts take its name from it, such as Fisher ‘s equation, Fisher ‘s hypothesis, Fisher ‘s rate, and Fisher ‘s separability theorem .


Although Fisher was a great theoretical economist, he was not always equally good in his analysis of economic reality, and as a stock-market speculator he was catastrophic. In the autumn of 1929 he publicly declared that the quotations had reached their level of maximum stability; On the basis of this presupposition, he lost, in addition to his reputation as an economist, almost all his family patrimony.

Work and thought

His first theoretical contribution to economics is to be found in his doctoral thesis of 1892, ” Mathematical Investigations in the Theory for Value and Prices “, which contains a complete exposition of Leon Walras theory of general economic equilibrium , although, and this is what Surprisingly, in the preface he declared that he did not know the work of Walras. Its main points of reference are to be found in Jevons , Auspitz and Lieben.

Because of his extraordinary mathematical knowledge (the great physicist of thermodynamics Gibbs was his mentor), Fisher gave very modern formulations for his time: he was the inventor of economic indexes and a pioneer of econometrics .

His interests in economics were very similar to that of another great American economist of the same time John Bates Clark ( 1847 – 1938 ). However, their approaches were different, Fisher was less concerned with the search for an ethical basis of the market and more about the validity of hypotheses and the correctness of reasoning.

Fisher equation

Fisher’s equation, in financial mathematics , calculates the relationships between real and nominal interest rates, considering inflation . It is used to calculate the internal rate of return of an investment .

Yes {\ Displaystyle r} The real interest rate; {\ Displaystyle i}The nominal interest rate; Y{\ Displaystyle \ pi}The inflation rate , Fisher’s equation is: 2

Fisher’s hypothesis considers that the real interest rate is independent of monetary measures and is not determined by the nominal rate. 2

Fisher’s theorem

Fisher postulates that the entrepreneur’s goal is to maximize his “rate of return on costs” and thus to achieve the highest present value of his investment. Since the Fisher rate is the rate of return that equals in present value all costs with all revenues, which is equivalent to the internal rate of return 4 or the rate of return that equals the present values ​​of the cash flows of all The projects being considered. 5

The separability theorem states that a firm can ensure that its owners achieve their optimal position in terms of market opportunities by financing their investment with a certain proportion of credit and own funds obtained internally.

Deflation of the Debt

Following the Great Depression , Fisher explained an explanation of the crises and the economic cycle , known as the “theory of debt deflation”, 6 which attributed the crisis to the explosion of a credit bubble, Series of effects that have a negative impact on the real economy:

  1. Cutting costs and liquidation sales to pay off debts and interest.
  2. Contraction of the money supply in the form of reduction of bank loans.
  3. Fall in the price level of the assets.
  4. Even greater fall in equity net of companies and consequent increase in bankruptcies .
  5. Fall of the profits of the investors.
  6. Reduction of production, trade and employment.
  7. Pessimism and loss of confidence.
  8. Accumulation of money neither spent nor invested.
  9. Fall in nominal interest rates and an increase in real interest rates adjusted by deflation . 6

These phenomena are linked in the form of a vicious spiral that is expressed in the economic depression , in which the debtors between the more they pay the more they owe. 6


In the political arena, Fisher was a supporter of eugenics , staunch defender of prohibitionism and a very versatile writer.

Although after his death Fisher’s work was widely admired, 7 Fisher was criticized in life. Joseph Schumpeter would come to posthumously say ” probably some future historians will consider Fisher as the greatest American scientific economist there has been to this day .” Referring to Fig.

Some publications

Fisher, Irving Norton, 1961. A Bibliography of the Writings of Irving Fisher (1961) compiled Fisher’s son; Contains 2425 entries.

Primary school
  • 1892. Mathematical Investigations in the Theory of Value and Prices . 9 Scroll to chapter links.
  • 1896. Appreciation and Interest . Link.
  • 1906. The Nature of Capital and Income . 10 Scroll to chapter links.
  • 1907. The Rate of Interest . 10 Extracts from Preface and Appendix to ch. VII.
  • 1910, 1914. Introduction to Economic Science . Section links.
  • 1911a, 11, 1922, 2nd ed. The Purchasing Power of Money: Its Determination and Relation to Credit, Interest, and Crises . Scroll to chapter links from Library of Economics and Liberty (LE & L). Full text of 1920 edition online via Federal Reserve Bank of St. Louis.
  • 1911b, 1913. Elementary Principles of Economics . Scroll to chapter links.
  • 1915. How to Live: Rules for Healthful Living Based on Modern Science (with Eugene Lyon Fisk). Link.
  • 1918, “Is ‘Utility’ the Most Suitable Term for the Concept Is It Used to Denote?” Am. Economic Review , p. Pp. 335-37]. Reprinted.
  • 1921a. “Dollar Stabilization,” Encyclopædia Britannica 12th ed. XXX, p. 852-853. Page reprints LE & L links .
  • 1921b, The Best Form of Index Number, American Statistical Association Quarterly . 17 (133) p. P. 533-537 .
  • 1922. The Making of Index Numbers: A Study of Their Varieties, Tests, and Reliability . 12 Scroll to chapter links,
  • 1923, “The Business Cycle Largely to ‘Dance of the Dollar’,” Journal of the American Statistical Association , 18, p. 1024-28. Link.
  • 1926, “A Statistical Relation between Unemployment and Price Changes,” International Labor Review , 13 (6), p. 785-92 reprinted 1973, “I Discovered the Phillips Curve: A Statistical Relation between Unemployment and Price Changes,” J. of Political Economy , 81 (2, part 1) p. 496-502 .
  • 1927, “A Statistical Method for Measuring ‘Marginal Utility’ and Testing the Justice of a Progressive Income Tax” in Economic Essays Contributed in Honor of John Bates Clark .
  • 1928, The Money Illusion, New York: Adelphi Company. Scroll to chapter-preview links.
  • 1930a. The Stock Market Crash and After .
  • 1930b. The Theory of Interest . 13 Chapter I. Chapter links , each numbered by paragraph via LE & L.
  • 1932. Booms and Depressions: Some First Principles . Full text online via the Federal Reserve Bank of St. Louis.
  • 1933a. “The Debt-Deflation Theory of Great Depressions,” Econometrica , 1 (4) p. 337-357 via Federal Reserve Bank of St. Louis.
  • 1933b. Stamp Scrip . Full text online
  • 1935. 100% Money . Full text online
  • 1942. “Constructive Income Taxation: A Proposal for Reform.” New York: Harper & Brothers.
  • 1996. The Works of Irving Fisher. Edited by William J. Barber et al. 14 v. London: Pickering & Chatto.
  • Fisher, Irving. (1892). Mathematical Investigations


  1. Back to top↑ Keen, Steve. Growth Theory. In King, JE The Elgar Companion to Post Keynesian Economics (2nd edition). Edward Elgar. Pp. 271-277. ISBN  978-1-84980-318-2 .
  2. ↑ Jump to:a b Fisher, Irving (1930). The Theory of Interest. The Macmillan Company. ISBN 978-0879918644 .
  3. Back to top↑ Barro, Robert J. (1997). Macroeconomics. The MIT Press. ISBN 978-0262024365 .
  4. Back to top↑ Plaza Vidaurre, Marco Antonio. “The principle of marginal capital efficiency and long-term expectations” .
  5. Back to top↑ Barfield, Jeses T. et. to the. Cost Accounting: Traditions and innovations. : G-12. Fifth edition, Thomson, 2005.
  6. ↑ Jump to:a b c Fisher, Irving (1933) ” The Debt-Deflation Theory of Great Depressions “; Econometric .
  7. Back to top↑ E. Screpanti & S. Zamagna (1993): An Outline of the History of Economic Thought , ISBN 978-0-19-927914-2 .
  8. Back to top↑ J. Schumpeter (1954): History of Economic Analysis . Barcelona: Editorial Ariel, second edition, 1982.
  9. Return to top↑ Fiske, Thomas (1893). “Review: Mathematical Investigations in the Theory of Value and Prices by Irving Fisher” . Bull. Amer. Math. Soc. 2 (9): 204-211. doi : 10.1090 / s0002-9904-1893-00145-6 .
  10. ↑ Jump to:a b Wilson, Edwin Bidwell (1909). “Review: The Nature of Capital and Income (1906) and The Rate of Interest (1907) by Irving Fisher” . Bull. Amer. Math. Soc. 15 (4): 169-186. doi : 10.1090 / S0002-9904-1909-01728-8 .
  11. Back to top^ Wilson, Edwin Bidwell (1914). Review: The Purchasing Power of Money by Irving Fisher . Bull. Amer. Math. Soc. 20 (7): 377-381. doi : 10.1090 / s0002-9904-1914-02503-0 .
  12. Back to top↑ Crathorne, AR (1924). «Review: The Making of Index Numbers by Irving Fisher» . Bull. Amer. Math. Soc. 30 (1): 82-83. doi : 10.1090 / s0002-9904-1924-03859-2 .
  13. Back to top↑ Roos, CF (1930). “Review of Theory of Interest by Irving Fisher .” Bull. Amer. Math. Soc. 36 (11): 783-784. doi : 10.1090 / s0002-9904-1930-05048-x .