Hostname: page-component-78c5997874-v9fdk Total loading time: 0 Render date: 2024-11-02T20:35:14.559Z Has data issue: false hasContentIssue false
  • English
  • Français

THE INFLUENCE OF IRVING FISHER ON MILTON FRIEDMAN’S MONETARY ECONOMICS

Published online by Cambridge University Press:  10 May 2013

MICHAEL D. BORDO  and
HUGH ROCKOFF
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines the influence of Irving Fisher’s writings on Milton Friedman’s work in monetary economics. We focus first on Fisher’s influences in monetary theory (the quantity theory of money, the Fisher effect, Gibson’s Paradox, the monetary theory of business cycles, and the Phillips Curve), and empirics (e.g., distributed lags.). Then we discuss Fisher and Friedman’s views on monetary policy and various schemes for monetary reform (the k% rule, freezing the monetary base, the compensated dollar, a mandate for price stability, 100% reserve money, and stamped money). Assessing the influence of an earlier economist’s writings on that of later scholars is a challenge. As a science progresses, the views of its earlier pioneers are absorbed in the weltanschauung. Fisher’s The Purchasing Power of Money as well as the work of Pigou and Marshall were the basic building blocks for later students of monetary economics. Thus, the Chicago School of the 1930s absorbed Fisher’s approach, and Friedman learned from them. However, in some salient aspects of Friedman’s work, we can clearly detect a major direct influence of Fisher’s writings on Friedman’s. Thus, for example, with the buildup of inflation in the 1960s, Friedman adopted the Fisher effect and Fisher’s empirical approach to inflationary expectations into his analysis. Therefore, Fisher’s influence on Friedman was both indirect through the Chicago School and direct. Regardless of the weight attached to the two influences, Fisher’s impact on Friedman was profound.

Type
Articles
Information
Journal of the History of Economic Thought , Volume 35 , Issue 2 , June 2013 , pp. 153 - 177
Copyright
Copyright © The History of Economics Society 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Barsky, Robert B., and Summers, Lawrence H.. 1988. “Gibson‘s Paradox and the Gold Standard.” Journal of Political Economy 96, 3(June): 528–550.Google Scholar
Benjamin, Daniel K., and Kochin, Lewis A.. 1984. “War, Prices, and Interest Rates: A Martial Solution to Gibson‘s Paradox.” In Schwartz, Anna J., ed., A Retrospective on the Classical Gold Standard, 1821–1931. National Bureau of Economic Research Conference Report Series. Chicago and London: University of Chicago Press, pp. 587–604.Google Scholar
Burdekin, Richard C. K., James Mitchener, Kris, and Weidenmier, Marc D.. 2011. “Irving Fisher and Price-Level Targeting in Austria: Was Silver the Answer?” National Bureau of Economic Research, Working Paper 17123.Google Scholar
Cagan, Phillip. 1965. Determinants and Effects of Changes in the Stock of Money, 1875–1960. Studies in Business Cycles. Volume 13. New York: National Bureau of Economic Research, distributed by Columbia University Press.Google Scholar
Cargill, Thomas F. 1992. “Irving Fisher Comments on Benjamin Strong and the Federal Reserve in the 1930s.” The Journal of Political Economy 100, 6(Centennial Issue, Dec.): 1273–1277.CrossRefGoogle Scholar
Dimand, Robert W. 1998. “The Fall and Rise of Irving Fisher’s Macroeconomics.” Journal of the History of Economic Thought 20, 2(June): 191–201.Google Scholar
Dimand, Robert W. 1999. “Irving Fisher and the Fisher Relation: Setting the Record Straight.” The Canadian Journal of Economics / Revue canadienne d’Economique 32, 3(May): 744–750.CrossRefGoogle Scholar
Dimand, Robert W. 2000. “Irving Fisher and the Quantity Theory of Money: The Last Phase.” Journal of the History of Economic Thought 22 (3): 329–345.CrossRefGoogle Scholar
Fisher, Irving. 1894. “The Mechanics of Bimetallism.” The Economic Journal 4, 15(Sept.): 527–537.Google Scholar
Fisher, Irving. 1896. “Appreciation and Interest.” Publications of the American Economic Association 11, 4(July): 1–98.Google Scholar
Fisher, Irving. 1906. The Nature of Capital and Income. New York, London: Macmillan & Co., Ltd.Google Scholar
Fisher, Irving. 1907. The Rate of Interest. New York: Macmillan.Google Scholar
Fisher, Irving(with Harry Gunnison Brown). 1911a. The Purchasing Power of Money: Its Determination and Relation to Credit, Interest and Crises. New York: The Macmillan Co.Google Scholar
Fisher, Irving. 1911b. “Recent Changes in Price Levels and Their Causes.” Bulletin of the American Economics Association, Fourth Series, 2, 1 (April 1911): 36–45.Google Scholar
Fisher, Irving. 1913. “A Compensated Dollar.” The Quarterly Journal of Economics 27, 2(Feb.): 213–235.Google Scholar
Fisher, Irving. 1914. “Objections to a Compensated Dollar Answered.” The American Economic Review 4, 4(Dec.): 818–839.Google Scholar
Fisher, Irving. 1919. “Money, Prices, Credit, and Banking.” American Economic Review (June):407–409.Google Scholar
Fisher, Irving. 1920. Stabilizing the Dollar: A Plan to Stabilize the General Price Level without Fixing Individual Prices. New York: Macmillan Co.Google Scholar
Fisher, Irving. 1922. The Making of Index Numbers; A Study of Their Varieties, Tests, and Reliability. Publications of the Pollak Foundation for Economic Research. Volume 1. Boston, New York: Houghton Mifflin Company.Google Scholar
Fisher, Irving. 1923. “The Business Cycle Largely a Dance of the Dollar.” Journal of the American Statistical Association 18, 144(Dec.): 1024–1028.CrossRefGoogle Scholar
Fisher, Irving. 1926a. Prohibition at its Worst. New York: The Macmillan Company.Google Scholar
Fisher, Irving. 1926b. “A Statistical Relation between Unemployment and Price Changes.” International Labor Review 6 (June): 785–792.Google Scholar
Fisher, Irving. [1930] 1986. The Theory of Interest: As Determined by Impatience to Spend Income and Opportunity to Invest It. Reprints of Economic Classics. Fairfield, NJ: A.M. Kelley.Google Scholar
Fisher, Irving. 1933. “The Debt-Deflation Theory of Great Depressions. Econometrica 1, 4(Oct.): 337–357.Google Scholar
Fisher, Irving. 1935a. 100% Money; Designed to Keep Checking Banks 100% Liquid; To Prevent Inflation and Deflation; Largely to Cure or Prevent Depressions; And to Wipe Out Much of the National Debt. New York: Adelphi.Google Scholar
Fisher, Irving. 1935b. “Are Booms and Depressions Transmitted Internationally through Monetary Standards?” International Statistical Institute Bulletin 28: 1–29.Google Scholar
Fisher, Irving. 1936. “100% Money and the Public Debt.” Economic Forum Spring (April–June): 406–420.Google Scholar
Fisher, Irving, Cohrssen, Hans R. L., and Fisher, Herbert Wescott. 1933. Stamp Scrip. New York: Adelphi Company.Google Scholar
Fisher, Irving, and Fisher, Herbert Wescott. 1934. Mastering the Crisis, with Additional Chapters on Stamp Scrip. London: G. Allen & Unwin Ltd.Google Scholar
Fisher, Irving, Fisk, Eugene Lyman, and Incorporated Life Extension Institute. 1915. How to Live; Rules for Healthful Living, Based on Modern Science. New York and London: Funk & Wagnalls Company.Google Scholar
Friedman, Milton. 1948. “A Monetary and Fiscal Framework for Economic Stability.” American Economic Review 38, 3(June): 245–264. Reprinted in Essays in Positive Economics. Chicago, London: University of Chicago Press, pp. 133–156.Google Scholar
Friedman, Milton. 1952. “The Expected-Utility Hypothesis and the Measurability of Utility.” The Journal of Political Economy 60, 6(Dec.): 463–474.Google Scholar
Friedman, Milton. 1953. “The Case for Flexible Exchange Rates.” In Essays in Positive Economics. Chicago, London: University of Chicago Press, pp. 157–203.Google Scholar
Friedman, Milton. 1956. “The Quantity Theory of Money—A Restatement.” In Studies in the Quantity Theory of Money. Economics Research Studies of the Economics Research Center of the University of Chicago. Chicago: University of Chicago Press, pp. 3–21.Google Scholar
Friedman, Milton. 1959. A Program for Monetary Stability. The Millar Lectures. Volume 3. New York: Fordham University Press.Google Scholar
Friedman, Milton. 1962a. “The Interpolation of Time Series by Related Series.” Journal of the American Statistical Association 57, 300(Dec.): 729–757.CrossRefGoogle Scholar
Friedman, Milton. 1962b. Capitalism and Freedom. Chicago: University of Chicago Press.Google Scholar
Friedman, Milton. 1968. “The Role of Monetary Policy.” The American Economic Review 58, 1(March): 1–17.Google Scholar
Friedman, Milton. 1969. The Optimum Quantity of Money, and Other Essays. Chicago: Aldine Pub. Co.Google Scholar
Friedman, Milton. 1970a. “A Theoretical Framework for Monetary Analysis.” The Journal of Political Economy 78, 6(Nov.–Dec.): 1385–1386.Google Scholar
Friedman, Milton. 1970b. The Counter-Revolution in Monetary Theory. Institute of Economic Affairs. Occasional Paper 33. London.Google Scholar
Friedman, Milton. 1972. “Have Monetary Policies Failed?” The American Economic Review 62, 1/2 (March 1): 11–18.Google Scholar
Friedman, Milton. 1974. Monetary Correction. IEA Occasional Paper No. 41. Reprinted in Monetarist Economics. London Institute of Economic Affairs. Oxford: Basil Blackwell, 1991.Google Scholar
Friedman, Milton. 1975. Unemployment versus Inflation—An Evaluation of the Phillips Curve. IEA Occasional Paper No. 44. Reprinted in Monetarist Economics. London Institute of Economic Affairs. Oxford: Basil Blackwell, 1991.Google Scholar
Friedman, Milton. 1988. “Money and the Stock Market.” The Journal of Political Economy 96, 2(April): 221–245.CrossRefGoogle Scholar
Friedman, Milton. 1990a. “Bimetallism Revisited.” The Journal of Economic Perspectives 4, 4(Autumn): 85–104.Google Scholar
Friedman, Milton. 1990b. “The Crime of 1873.” The Journal of Political Economy 98, 6(Dec.): 85–104.Google Scholar
Friedman, Milton. 1991. Monetarist Economics. London Institute of Economic Affairs. Oxford: Basil Blackwell.Google Scholar
Friedman, Milton. 1992. Money Mischief: Episodes in Monetary History. New York: Harcourt Brace Jovanovich.Google Scholar
Friedman, Milton. 2006. The Optimum Quantity of Money: With a New Introduction by Michael D. Bordo. New Brunswick: Aldine Transaction.Google Scholar
Friedman, Milton, and Savage, L. J.. 1948. “The Utility Analysis of Choices Involving Risk.” The Journal of Political Economy 56, 4(Aug.): 279–304.Google Scholar
Friedman, Milton, and Schwartz, Anna Jacobson. 1963a. “Money and Business Cycles.” The Review of Economics and Statistics 45, 1, Part 2, Supplement (Feb.): 32–64.Google Scholar
Friedman, Milton, and Schwartz, Anna Jacobson. 1963b. A Monetary History of the United States, 1867–1960. National Bureau of Economic Research. Studies in Business Cycles. Volume 12. Princeton: Princeton University Press.Google Scholar
Friedman, Milton, and Schwartz, Anna Jacobson. 1964. “The Monetary Studies of the National Bureau.” In The National Bureau Enters Its Forty-Fifth Year. 44th Annual Report. National Bureau of Economic Research (June), pp. 10–19.Google Scholar
Friedman, Milton, and Schwartz, Anna Jacobson. 1970. Monetary Statistics of the United States: Estimates, Sources, Methods. National Bureau of Economic Research. Studies in Business Cycles. Volume 20. New York: National Bureau of Economic Research.Google Scholar
Friedman, Milton, and Schwartz, Anna Jacobson. 1982. Monetary Trends in the United States and the United Kingdom, Their Relation to Income, Prices, and Interest Rates, 1867–1975. Monograph. National Bureau of Economic Research. Chicago: University of Chicago Press.Google Scholar
Hall, Robert E. 1997. “Irving Fisher‘s Self-Stabilizing Money.” Papers and Proceedings of the Hundred and Fourth Annual Meeting of the American Economic Association. The American Economic Review 87, 2(May): 436–438.Google Scholar
Hetzel, Robert L. 1985. “The Rules versus Discretion Debate over Monetary Policy in the 1920s.” Federal Reserve Bank of Richmond Economic Review 71, 6(Nov.): 3–14.Google Scholar
Keynes, John Maynard. 1930. A Treatise on Money. Reprinted by Royal Economic Society. New York: Harcourt, Brace and Company, 1971.Google Scholar
Keynes, John Maynard. 1936. The General Theory of Employment, Interest and Money. London: Macmillan and Co., Ltd.Google Scholar
Laidler, David. 1991. The Golden Age of the Quantity Theory. Princeton, NJ: Princeton University Press.Google Scholar
Laidler, David. 1993. “Hawtrey, Harvard, and the Origins of the Chicago Tradition.” The Journal of Political Economy 101, 6(Dec.): 1068–1103.Google Scholar
Mints, Lloyd W. 1945. A History of Banking Theory in Great Britain and the United States. Chicago, IL: University of Chicago Press.Google Scholar
Mints, Lloyd W. 1950. Monetary Policy for a Competitive Society. New York: McGraw-Hill.Google Scholar
Nelson, Edward. 2007. “Milton Friedman and U.S. Monetary History: 1961–2006.” Federal Reserve Bank of St. Louis Review 89, 3(May): 153–182.Google Scholar
Patinkin, Don. 1969. “The Chicago Tradition, the Quantity Theory, and Friedman.” Journal of Money, Credit and Banking 1, 1(Feb.): 46–70.Google Scholar
Patinkin, Don. 1993. “Irving Fisher and His Compensated Dollar Plan.” Federal Reserve Bank of Richmond Economic Quarterly 79, 3(Summer): 1–33.Google Scholar
Phillips, A. W. 1958. “The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957.” Economica 25, 100(Nov.): 283–299.Google Scholar
Samuelson, Paul A., and Solow, Robert M.. 1960. “Analytical Aspects of Anti-Inflation Policy.” Papers and Proceedings of the Seventy-second Annual Meeting of the American Economic Association. The American Economic Review 50, 2(May): 177–194.Google Scholar
Simons, Henry C. 1936. “Rules versus Authorities in Monetary Policy.” The Journal of Political Economy 44, 1(Feb.): 1–30.Google Scholar
Simons, Henry C. 1945. “The Beveridge Program: An Unsympathetic Interpretation.” The Journal of Political Economy 53, 3(Sept.): 212–233.Google Scholar
Snyder, Carl. 1934. “On the Statistical Relation of Trade, Credit, and Prices.” Review of the International Statistical Institute 2, 3(Oct.): 278–291.Google Scholar
Stabile, Donald R., and Putnam, Bluford H.. 2002. “Irving Fisher and Statistical Approaches to Risk.” Review of Financial Economics 11: 191–203.Google Scholar
Steindl, Frank G. 1995. Monetary Interpretations of the Great Depression. Ann Arbor: University of Michigan Press.Google Scholar
Wicksell, Knut. 1907. “The Influence of the Rate of Interest on Prices.” The Economic Journal 17, 66 (June): 213–220.Google Scholar