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Irving Fisher
Irving Fisher, 1927
Irving Fisher, 1927
Born February 27, 1867(1867-02-27)
Saugerties, New York, U.S.A.
Died April 29, 1947 (aged 80)
New York City, New York, U. Events 1560 - The Treaty of Berwick, which would expel the French from Scotland, is signed by England and the Congregation Year 1867 ( MDCCCLXVII) was a Common year starting on Tuesday (link will display the full calendar of the Gregorian calendar (or a Common year starting New York ( is a state in the Mid-Atlantic and Northeastern regions of the United States and is the nation's third most populous The United States of America —commonly referred to as the Events 1429 - Joan of Arc arrives to relieve the Siege of Orleans. Year 1947 ( MCMXLVII) was a Common year starting on Wednesday (link will display full 1947 calendar of the Gregorian calendar. The City of New York S. A.
Residence U. S.
Nationality American
Fields Economics
Institutions Yale University 1890-1935
Alma mater Yale University Ph. Economics is the social science that studies the production distribution, and consumption of goods and services. Alma mater is Latin for "nourishing mother" It was used in Ancient Rome as a title for the mother Goddess, and in Medieval D. 1891
Doctoral advisor Willard Gibbs
William Graham Sumner
Known for Mathematical economics
Fisher equation
Equation of exchange
Price index
Phillips curve
Money illusion
Fisher separation theorem

Irving Fisher (February 27, 1867 Saugerties, New York – April 29, 1947, New York) was an American economist, health campaigner, and eugenicist, and one of the earliest American neoclassical economists and, although he was perhaps the first celebrity economist, his reputation today is probably higher than it was in his lifetime. A doctorate is an Academic degree that indicates the highest level of academic achievement Josiah Willard Gibbs ( February 11, 1839 &ndash April 28, 1903) was an American theoretical Physicist, Chemist William Graham Sumner ( October 30, 1840 – April 12, 1910) was an American academic and professor at Yale College Mathematical economics refers to the application of Mathematical methods to represent economic theories and analyze problems posed in Economics. The Fisher equation in Financial mathematics and Economics estimates the relationship between nominal and real Interest rates under Inflation In Economics, the equation of exchange is the relation M\cdot V = P\cdot Q where for a given period M\ is the total A price index ( plural: “price indices” or “price indexes” is a normalized Average (typically a ''weighted'' average) of Prices for a The Phillips curve is a historical inverse relation between the rate of Unemployment and the rate of Inflation in an Economy. Money illusion refers to the tendency of people to think of currency in nominal rather than real, terms In Economics, the Fisher separation theorem asserts that the objective of a firm will be the maximization of its Present value, regardless of the preferences Events 1560 - The Treaty of Berwick, which would expel the French from Scotland, is signed by England and the Congregation Year 1867 ( MDCCCLXVII) was a Common year starting on Tuesday (link will display the full calendar of the Gregorian calendar (or a Common year starting Events 1429 - Joan of Arc arrives to relieve the Siege of Orleans. Year 1947 ( MCMXLVII) was a Common year starting on Wednesday (link will display full 1947 calendar of the Gregorian calendar. The United States of America —commonly referred to as the Economics is the social science that studies the production distribution, and consumption of goods and services. Eugenics is a social Philosophy which advocates the improvement of Human Hereditary traits through various forms of intervention Neoclassical economics is a term variously used for approaches to Economics focusing on the determination of prices outputs and income distributions in markets Several concepts are named after him, including the Fisher equation, Fisher hypothesis and Fisher separation theorem. The Fisher equation in Financial mathematics and Economics estimates the relationship between nominal and real Interest rates under Inflation The Fisher hypothesis is the proposition by Irving Fisher that the real Interest rate is independent of monetary measures especially the nominal interest In Economics, the Fisher separation theorem asserts that the objective of a firm will be the maximization of its Present value, regardless of the preferences

Contents

Biography

Early adulthood

Fisher's father was a teacher and Congregational minister, who raised his son to believe he must be a useful member of society. The young Irving had mathematical ability and a flair for invention. A week after he was admitted to Yale University, his father died at age 53. Irving carried on, however, supporting his mother, brother, and himself, mainly by tutoring. He graduated from Yale with a B. A degree in 1888, where he was a member of Skull & Bones. Year 1888 ( MDCCCLXXXVIII) was a Leap year starting on Sunday (click on link for calendar of the Gregorian calendar (or a Skull and Bones is an elite Secret society based at Yale University, in New Haven Connecticut.

Fisher's best subject was mathematics, but economics better matched his social concerns. Mathematics is the body of Knowledge and Academic discipline that studies such concepts as Quantity, Structure, Space and Economics is the social science that studies the production distribution, and consumption of goods and services. He went on to write a doctoral thesis combining both subjects, on mathematical economics. Irving was granted the first Yale Ph. D. in economics, in 1891. Year 1891 ( MDCCCXCI) was a Common year starting on Thursday (link will display the full calendar of the Gregorian calendar (or a Common His advisors were the physicist Willard Gibbs and the economist William Graham Sumner. Josiah Willard Gibbs ( February 11, 1839 &ndash April 28, 1903) was an American theoretical Physicist, Chemist William Graham Sumner ( October 30, 1840 – April 12, 1910) was an American academic and professor at Yale College Fisher did not realise at the outset that there was already a substantial European literature on mathematical economics. Nevertheless, his thesis made a contribution European masters such as Francis Edgeworth recognised as first rate. Francis Ysidro Edgeworth (8 February 1845 &ndash 13 February 1926 made significant contributions to the methods of statistics during the 1880s He constructed a wonderful machine of pumps and levers to complement and illustrate his thesis. While his books and articles on economic topics exhibited unusual (for the time) mathematical sophistication, Fisher always wished to bring his analysis to life and to present his theories in a very lucid manner.

This research into basic theory did not touch the great social issues of the day. Monetary economics did and this became the main focus of Fisher’s work. In the 1890s the United States was divided over the question of the monetary standard. Should the dollar float, be fixed in terms of gold or silver, or some combination of the two? To opt for one system was to choose between West and East, farmer and financier, debtor and creditor, …. Fisher’s Appreciation and interest was an abstract analysis of the behaviour of interest rates when the price level is changing. It emphasised the distinction between real and monetary rates of interest which is fundamental to the modern analysis of inflation. However Fisher believed that investors and savers—people in general—were afflicted in varying degrees by “money illusion”; they could not see past the money to the goods the money could buy. Money illusion refers to the tendency of people to think of currency in nominal rather than real, terms In an ideal world, changes in the price level would have no effect on production or employment. In the actual world with money illusion, inflation (and deflation) did serious harm.

Later life

Fisher was a prolific writer, producing journalism, as well as technical books and articles, addressing the problems of the First World War, the prosperous 1920s and the depressed 1930s. Fisher was an enthusiastic supporter of Herbert Hoover. Herbert Clark Hoover (August 10 1874 &ndash October 20 1964 was the thirty-first President of the United States (1929–1933

Economic theories

Money and the price level

Fisher's theory of the price level was the following variant of the quantity theory of money. In Economics, the quantity theory of money is a theory emphasizing the Positive relationship of overall prices or the nominal value of expenditures to the Let M=stock of money, P=price level, T=amount of transactions carried out using money, and V= the velocity of circulation of money. Fisher then proposed that these variables are interrelated by the Equation of exchange:

MV=PT. In Economics, the equation of exchange is the relation M\cdot V = P\cdot Q where for a given period M\ is the total

Later economists replaced the amorphous T with Q, real output, nearly always measured by real GDP.

Fisher was also the first economist to distinguish clearly between real and nominal interest rates:

r = (1 + i) / (1 + inflation) − 1

where r is the real interest rate, i is the nominal interest rate, and inflation is a measure of the increase in the price level. The " real interest rate " is approximately the Nominal interest rate minus the Inflation rate (see Fisher equation and below for exact equation In finance and economics nominal interest rate or nominal rate of interest refers to the rate of Interest before adjustment for inflation (in contrast with the When inflation is sufficiently low, the real interest rate can be approximated as the nominal interest rate minus the expected inflation rate. In Economics, the inflation rate is a measure of Inflation, the rate of increase of a Price index (for example a Consumer price index) The resulting equation bears his name.

For more than forty years, Fisher elaborated his vision of the damaging “dance of the dollar” and devised schemes to “stabilise” money, i. e. to stabilise the price level. He was one of the first to subject macroeconomic data, including the money stock, interest rates, and the price level, to statistical analysis. In the 1920s, he introduced the technique later called distributed lags. In Statistics a distributed lag model explains a Time series by a series of Lags of the same variable In 1973, the Journal of Political Economy reprinted his 1926 paper on the statistical relation between unemployment and inflation, retitling it as "I discovered the Phillips curve". Unemployment occurs when a person is available to work and currently seeking work but the person is without work. In economics inflation or price inflation is a rise in the general level of prices of goods and services over a period of time The Phillips curve is a historical inverse relation between the rate of Unemployment and the rate of Inflation in an Economy. Index numbers played an important role in his monetary theory, and his book The Making of Index Numbers has remained influential down to the present day. A price index ( plural: “price indices” or “price indexes” is a normalized Average (typically a ''weighted'' average) of Prices for a

The theory of interest and capital

While most of Fisher's energy went into "causes" and business ventures, and the better part of his scientific effort was devoted to monetary economics, he is best remembered today for his theory of interest and capital, studies of an ideal world from which the real world deviated at its peril. His most enduring intellectual work has been his theory of capital (economics), investment, and interest rates, first exposited in his The Nature of Capital and Income (1906) and elaborated on in The Rate of Interest (1907). Investment or investing is a term with several closely-related meanings in Business management, Finance and Economics, related to saving Interest is a fee paid on borrowed capital Assets lent include Money, Shares, Consumer goods through Hire purchase, major assets His 1930 treatise, The Theory of Interest, summed up a lifetime's work on capital, capital budgeting, credit markets, and the determinants of interest rates, including the rate of inflation. In Economics, capital or capital Goods or real capital refers to items of extensive value Capital budgeting (or investment appraisal is the planning process used to determine whether a firm's long term Investments such as new machinery replacement machinery new The bond market (also known as the debt, credit, or fixed income market) is a Financial market where participants buy and sell Debt Interest is a fee paid on borrowed capital Assets lent include Money, Shares, Consumer goods through Hire purchase, major assets In economics inflation or price inflation is a rise in the general level of prices of goods and services over a period of time

Fisher saw that subjective economic value is not only a function of the amount of goods and services owned or exchanged but also of the moment in time when they are purchased. A good available now has a different value than the same good available at a later date; value has a time as well as a quantity dimension. The relative price of goods available at a future date, in terms of goods sacrificed now, is measured by the interest rate. Relative price is the Price of a commodity such as a good or service in terms of another ie the ratio of two prices Interest is a fee paid on borrowed capital Assets lent include Money, Shares, Consumer goods through Hire purchase, major assets Fisher made free use of the standard diagrams used to teach undergraduate economics, but labelled the axes "consumption now" and "consumption next period" instead of, e. g. , "apples" and "oranges. " The resulting theory, one of considerable power and insight, was exposited in considerable detail in The Theory of Interest; for a concise exposition, click here.

This theory, since generalized to the case of K goods and N periods (including the case of infinitely many periods) using the notion of a vector space, has become the canonical theory of capital and interest in contemporary economics; for an exposition see Gravelle and Rees (2004). In Mathematics, a vector space (or linear space) is a collection of objects (called vectors) that informally speaking may be scaled and added The nature and scope of this theoretical advance was not fully appreciated, however, until Hirshleifer's (1958) reexposition, so that Fisher did not live to see this theory's ultimate triumph.

Stock market crash of 1929

The stock market crash of 1929 and the subsequent Great Depression cost Fisher much of his personal wealth and academic reputation. The Wall Street Crash of 1929, also known as the ’29 Crash, the Crash of 1929, the Great Crash of 1929, the Great Crash of October 1929 He famously predicted, a few days before the Stock Market Crash of 1929, "Stock prices have reached what looks like a permanently high plateau. The Wall Street Crash of 1929, also known as the ’29 Crash, the Crash of 1929, the Great Crash of 1929, the Great Crash of October 1929 " Irving Fisher stated on the 21st that the market was "only shaking out of the lunatic fringe" and went on to explain why he felt the prices still had not caught up with their real value and should go much higher. On Wednesday the 23rd, he announced in a banker’s meeting “security values in most instances were not inflated. ” For months after the Crash, he continued to assure investors that a recovery was just around the corner. Once the Great Depression was in full force, he did warn that the ongoing drastic deflation was the cause of the disastrous cascading insolvencies then plaguing the American economy because deflation increased the real value of debts fixed in dollar terms. Deflation is the opposite of Inflation. Therefore under the usual contemporary definition of inflation 'deflation' means a decrease in the general price level. Fisher was so discredited by his 1929 pronouncements and by the failure of a firm he had started that few people took notice of his "debt-deflation" analysis of the Depression. People instead eagerly turned to the ideas of Keynes. John Maynard Keynes 1st Baron Keynes CB (ˈkeɪnz "cains" (5 June 1883 &ndash 21 April 1946 was a British Economist whose ideas Fisher's debt-deflation scenario has made something of a comeback since 1980 or so.

Personal ideals

The lay public perhaps knew Fisher best as a health campaigner and eugenicist. In 1898 he found that he had tuberculosis, the disease that killed his father. Year 1898 ( MDCCCXCVIII) was a Common year starting on Saturday (link will display the full calendar of the Gregorian calendar (or a Common Tuberculosis (abbreviated as TB for tubercle bacillus or T u' b' erculosis Bacillus --> is a common After three years in sanatoria, Fisher returned to work with even greater energy and with a second vocation as a health campaigner. He advocated vegetarianism, avoiding red meat, and exercise, writing How to Live: Rules for Healthful Living Based on Modern Science, a USA best seller.

In 1912 he also became a member of the scientific advisory to the Eugenics Record Office and served as the secretary of the American Eugenics Society. Year 1912 ( MCMXII) was a Leap year starting on Monday (link will display the full calendar of the Gregorian calendar (or a Leap year starting The Eugenics Record Office at Cold Spring Harbor Laboratory in Cold Spring Harbor New York was a center for Eugenics and human Heredity research The American Eugenics Society (AES was a society established in 1922 to promote Eugenics in the United States.

Fisher was also a strong believer in the now-ridiculed "focal sepsis" theory of physician Henry Cotton, who believed that mental illness was attributable to infectious material residing in the roots of the teeth, recesses in the bowels, and other places in the human body, and that surgical removal of this infectious material would cure the patient's mental disorder. Henry Andrews Cotton MD (1876&ndashMay 1933 was an American Psychiatrist and the Medical director of New Jersey State Hospital at Trenton Fisher believed in these theories so thoroughly that when his daughter Margaret was diagnosed with Schizophrenia, Fisher had numerous sections of her bowel and colon removed at Dr. Cotton's hospital, eventually resulting in his daughter's death. [1]

Fisher was also an ardent supporter of the Prohibition of alcohol in the United States, and wrote three short books arguing that Prohibition was justified on the grounds of both public health and hygiene, as well as economic productivity and efficiency, and should therefore be strictly enforced by American government. [2]

See also

  1. ^ Madhouse: A Tragic Tale of Megalomania and Modern Medicine, Andrew Scull, Yale University Press, 2005
  2. ^ Irving Fisher: Prohibition at Its Worst (New York: Macmillan, 1926); Prohibition Still at Its Worst (New York: Alcohol Information Committee, 1928); The Noble Experiment (New York: Alcohol Information Committee, 1930). Marginalism is the use of Marginal concepts within Economics.

Selected publications

Fisher, Irving Norton, 1961. A Bibliography of the Writings of Irving Fisher (1961). Compiled by Fisher's son; contains 2425 entries.

External links

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