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Irving Fisher

Original nameIrving Fisher

American master of monetary theory, synthesizer of the quantity theory of money

Those Who Argued Over Markets for a Century · Critics & the Macro Debate
Monetary TheoryQuantity TheoryInterestAmerica

Who they are

One of the foremost American economists of the early twentieth century, a founder of modern monetary theory. He expressed the 'quantity theory of money' in a precise formula (the equation of exchange, MV=PT), setting out systematically the relation between the money supply and the price level, and deeply influencing Friedman's later monetarism. He was also a master of interest theory. Yet this master of finance came to grief in his own field: days before the 1929 crash he publicly declared that 'stock prices have reached a permanently high plateau,' whereupon the Depression struck and he was nearly ruined — the man who understood money best could not see through that bubble of the century.

Primary sourcesIrving Fisher, The Purchasing Power of Money, The Theory of Interest

Key stories

"Stocks Have Reached a Permanent Plateau"

In October 1929, days before the Wall Street crash, the then-eminent Fisher publicly declared that 'stock prices have reached what looks like a permanently high plateau.' The words were scarcely out when the market collapsed and the Depression swept in; his judgment became one of the most famous wrong predictions in the history of economics, and he himself was nearly bankrupted. The lesson: no theory, however deep, can master the collective blindness of a market in a frenzy.

Version differences

Fisher’s famous misjudgment of a "permanent plateau" before the 1929 crash is stated here as fact.

Relationships

Mentor
💵Milton Friedman　the quantity theory of money deeply shaped Friedman’s monetarism

Echoes today

Below are how modern works borrow or reinterpret this name or story — not the original material. The two differ, so keep them apart.

The quantity theory of money and the "Fisher equation"Fisher’s equation of exchange (MV=PT) is the classic expression of the quantity theory of money, deeply influencing Friedman’s monetarism; his interest and debt-deflation theory is still an important cornerstone of macroeconomics.
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