Irving Fisher – USA Economic History

Irving Fisher, United States Economic History

Professor Irving Fisher (1867-1947) pub­lished his Mathematical Investigations in the Theory of Value and Prices in 1892; but later summed up his theory in several volumes: The Nature of Capital and Income (1906), The Rate of Interest (1907), Elementary Principles of Economics (1912), and The Theory of Interest (1930). Professor Fisher reasoned with admirable clarity, adopting the accountant's point of view.

The Austrian idea is the dominant one: the value of capital goods (including land) is the discounted value of their income. And a point upon which much stress is laid is that income must not be confused with the material objects (capital) which afford it, but consists of the services rendered by such objects, the element of time making the great difference. The interest rate, the determination of which Fisher would make the chief problem of economics, depends upon the "time preference" (Fisher called it "impatience") of individuals for present over future goods, — an agio theory. He undertook to explain interest rates by assuming (1) "income streams" of varying size and character, and (2) the character of individuals (such as foresight, self-control, and habit); but he does not explain the income stream, and does not allow subjective costs to function. "Investment opportunity" is made to serve in lieu of both productivity and cost, so that we have a merely individual accounting, which does not explain the determination of "opportunity."

Professor Fisher deserves credit for early discussions of the relation between the value of money and interest rates, and he did important work in support and clarification of the quantity theory of money. In his later years, he went to extremes in advocating attempts to control the general level of prices by manipulating the currency. In general, Fisher's thought shows the tendency, so common among mathematical economists, to make question-begging assumptions, and to deal with variations and "correlations" without regard for causation.