Irving Fisher (1867-1947)

Article excerpt

Irving Fisher was born in Saugerties, New York, on 27 February 1867; he was residing in New Haven, Connecticut at the time of his death in a New York City hospital on 29 April 1947.

Fisher is widely regarded as the greatest economist America has produced. A prolific, versatile and creative scholar, he made seminal and durable contributions across a broad spectrum of economic science. Although several earlier Americans, notably Simon Newcomb, had used some mathematics in their writings, Fisher's dedication to the method and his skill in using it justify calling him America's first mathematical economist. He put his early training in mathematics and physics to work in his doctoral dissertation on the theory of general equilibrium. Throughout his career his example and his teachings advanced the application of quantitative method not only in economic theory but also in statistical inquiry. He, together with Ragnar Frisch and Charles F. Roos, founded the Econometric Society in 1930; and Fisher was its first President. He had been President of the American Economic Association in 1918.

Much of standard neoclassical theory today is Fisherian in origin, style, spirit and substance. In particular, most modern models of capital and interest are essentially variations on Fisher's theme, the conjunction of intertemporal choices and opportunities. Likewise, his theory of money and prices is the foundation for much of contemporary monetary economics.

Fisher also developed methodologies of quantitative empirical research. He was the greatest expert of all time on index numbers, on their theoretical and statistical properties and on their use in many countries throughout history. From 1923 to 1936, his own Index Number Institute manufactured and published price indexes of many kinds from data painstakingly collected from all over the world. Indefatigable and innovative in empirical research, Fisher was an early and regular user of correlations, regressions and other statistical and econometric tools that later became routine.

To this day Fisher's successors are often rediscovering, consciously or unconsciously, Fisher's ideas and building upon them. He can be credited with distributed lag regression, life cycle saving theory, the 'Phillips curve', the case for taxing consumption rather than 'income', the modern quantity theory of money, the distinction between real and nominal interest rates, and many more standard tools in economists' kits. Although Fisher was not fully appreciated by his contemporaries, today he leads other old-timers by wide and increasing margins in journal citations. In column inches in the Social Sciences Citation Index (1979, 1983) Fisher led his most famous contemporaries, Wesley Mitchell, J. B. Clark, and F. W. Taussig in that order, by rough ratios 5:3:1:1 in 1971-5 and 9:3:1:1 in 1976-80. Much more than the others, moreover, Fisher is cited for substance rather than for history of thought.

For all his scientific prowess and achievement, Fisher was by no means an 'ivory tower' scholar detached from the problems and policy issues of his times. He was a congenital reformer, an inveterate crusader. He was so aggressive and persistent, and so sure he was right, that many of his contemporaries regarded him as a 'crank' and discounted his scientific work accordingly. Science and reform were indeed often combined in Fisher's work. His economic findings, theoretical and empirical, would suggest to him how to better the world; or dissatisfaction with the state of the world would lead him into scientifically fruitful analysis and research. Fisher's search for conceptual clarity about 'the nature of capital and income' led him not only to lay the foundations of modern social accounting but also to argue that income taxation wrongly puts saving in double jeopardy. Fisher turned his talents to monetary theory because he suspected that economic instability was largely the fault of existing monetary institutions. …