Introduction
Irving Fisher was justly acclaimed as âthe greatest of Americaâs scientific economistsâ by Joseph Schumpeter (1954, p. 872). His outstanding scientific contributions ranged from the Fisher relation between interest rates in any two standards (e.g. real and nominal, gold and silver, two different currencies); to the Fisher diagram for intertemporal allocation; to the Fisher ideal index number . His reputation within the discipline of economics has recovered from association with his varied efforts at economic and social reform, some prescient and others not, and from being spectacularly wrong about the stock market in October 1929.
Irving Fisher was born in Saugerties-on-Hudson, in the Catskills of New York, on February 27, 1867, the son of George Whitefield Fisher, a Congregational minister who had graduated from Yale College and Yale Divinity School and edited the Yale Literary Magazine. Fisher grew up in Peace Dale, Rhode Island, where Whitefield Fisher became minister in 1868 as the choice of Rowland Hazard, the local woolen mill-owner and Allied Chemical cofounder whose daughter Margaret married Irving Fisher in 1892. Fisherâs background in the provincial intellectual isolation of a seaside Rhode Island mill-town has been contrasted with the cosmopolitan environment of his European contemporaries (e.g. by Robert Dorfman 1995) but Rowland Hazard was a friend of John Stuart Mill , whom he visited in Avignon and with whom he corresponded about American monetary history. When Whitefield Fisher was Congregational minister in Cameron, Missouri, Irving graduated from the Smith Academy in St. Louis, better known as the school where T. S. Eliot (nephew of Irving Fisherâs lifelong best friend Will Eliot and grandson of the academyâs founder) was a classmate of Groucho Marx. Irving Fisher entered Yale College in September 1884, just two months after his father died from tuberculosis, and combined study with mathematics tutoring to help support his mother and younger brother. He was chosen for Skull and Bones and elected to Phi Beta Kappa, won a race rowing a single scull, won mathematics prizes (including one with funding for graduate study), and was class valedictorian, graduating with the highest honors of his year. However, his classmate, lifelong friend and rival Henry Stimson became chairman of the Phi Beta Kappa chapter and defeated Fisher in the pre-graduation oratorical contest (and went on to achieve more worldly success, as William Howard Taftâs Secretary of War, Herbert Hooverâs Secretary of State and Franklin Rooseveltâs wartime Secretary of War1). Fisher graduated with a BA in 1888 and with a PhD in mathematics and political economy in 1891, Yaleâs first doctorate in political economy or economics, with a path-breaking thesis Mathematical Investigations in the Theory of Value and Prices, supervised jointly by mathematical physicist Josiah William Gibbs and political economist William Graham Sumner . He spent his entire career at Yale, as a limited-term instructor of mathematics, then (after a year travelling in Europe and meeting such leading economic theorists as Francis Ysidro Edgeworth , Vilfredo Pareto and Matteo Pantaleoni) with a permanent appointment as assistant professor of political and social science from 1895 until he was promoted to full professor of political economy in 1898 (skipping the rank of associate professor), retiring in 1935.
Fisherâs mathematical training, commitment to neoclassical economics, and interest in formal theory and quantitative methods made him an anomaly among Yale economists of his time (see Barber 1988). William Graham Sumner , the Professor of Political and Social Science, who had written on the history of American currency and the history of banking, was a celebrity who had outraged Yaleâs president, a Congregational minister, by assigning readings from Herbert Spencer; outraged the captains of industry who sent their sons to Yale by denouncing tariff protection, and opposed American expansionism in the Spanish-American War, becoming a vice-president of the Anti-Imperialist League. A social scientist who was the second president of the American Sociological Society (soon changed to Association), Sumner was not a technical economist, had never studied or taught political economy before leaving the Episcopal ministry to take his chair, and in 1891 withdrew from teaching political economy to focus on sociology and anthropology. Two Yale economics teachers, Arthur Twining Hadley and Henry W. Farnam , rose to the presidency of the American Economic Association before Fisher did, but, unlike Fisher, were more prominent in university administration than in research. Farnam , president of the American Economic Association in 1911, second president of the American Association for Labor Legislation and for many years secretary of Yale University, took his doctorate at the University of Strasbourg in 1878 (when Strasbourg was German and when Gustav Schmoller taught there) with a dissertation on the doctrines of Colbert and Turgot, and was strongly influenced by the German historical school. He appears in the AEA Index of Economic Journals only for his AEA presidential address, but he published in the Yale Review until 1911. Arthur Twining Hadley , AEA president in 1898, dean of the Yale graduate school from 1892 to 1895 and president of Yale from 1899 to 1922 (the first Yale president who was not a Congregational minister and the last to lack any degree beyond the BA), wrote a notable book on the economics of railroads in 1886 (see Cross and Ekelund 1980) and an introductory textbook, but he withdrew from research while presiding over the university. Farnam , the son of a railroad entrepreneur, was a generous and influential donor: he paid for the construction of Fisherâs hydraulic model of general equilibrium , donated his professorial stipend to create a position for Hadley , financed (and with the other Yale economists, editing from its foundation in 1892 until 1911) the Yale Review, funded the establishment of the American Economic Review during his year as AEA president (at which time the Yale Review became a literary journal, so as not to compete), and gave the university both Farnam Gardens and the mansion that is now the official residence of the universityâs president (Barber 1988). Because of their role as university administrators, Hadley and Farnam were far more prominent in the Yale community than Fisher, but they were not engaged in publishing economic research in the way that Fisher was.
Closest to Fisher were two Yale assistant professors who had taken Yale BAs and PhDs, John Pease Norton , author of a thesis on Statistical Studies of the New York Money Market (Norton 1902), and Harry Gunnison Brown , who assisted Fisher with The Purchasing Power of Money , but neither remained long on Yaleâs faculty and Brown became a Henry Georgist single-taxer. James Harvey Rogers , a 1916 Yale Ph.D. (and a student of Pareto in Lausanne, as well as of Fisher), returned in 1930 as the first Sterling Professor of Economics and was sympathetic to Fisherâs work and to his leadership of the Econometric Society , publishing an article on fractional-reserve banking in the inaugural volume of Econometrica. Rogers became a special advisor to the Roosevelt Administration (apart from Fisher and Rogers, the other Yale economists bitterly opposed the New Deal) but died in an airplane crash in 1939. Economics at Yale would have been transformed if Fisher had succeeded in enticing Wesley Mitchell from Columbia to a Yale professorship in 1913, or Ragnar Frisch to stay permanently after his visiting position in 1930â1931, or Joseph Schumpeter to join Yale instead of Harvard when he left Bonn for North America in 1932, but the only consequence of these efforts by Fisher was that the University of Oslo had to create a personal chair to keep Frisch from leaving. Schumpeter organized a celebration of Fisherâs 75th birthday at Harvard in 1942 because it was evident that Yale would do nothing (see Fellner et al. 1967 for how the attitude of Yaleâs Economics Department to Fisher changed dramatically over the quarter century from 1942).
Throughout his career (except from 1898 to 1904, as he recovered from tuberculosis), Fisher was a prolific author, pouring forth books and articles scholarly, semi-scholarly and popular. His sonâs Bibliography of the Writings of Irving Fisher (Fisher 1961) is, at six hundred pages, more than twice the length of his biography My Father Irving Fisher (I. N. Fisher). His books, including three opposing the repeal of Prohibition (largely on the grounds that workers were more productive when sober), two urging the United States to join the League of Nations (a League which be believed with some justification to have been his idea), and one on a new world map projection to eliminate the Mercator projectionâs exaggeration of the area of countries far from the Equator, in addition to his economic books, were accompanied by journal articles, newspaper pieces, interviews, speeches, and Congressional testimony. The present book is about Irving Fisher the economist, but he was also determined to improve the world, whether the world wanted to be improved or not: âPerhaps Iâm a Don Quixote but Iâm trying to be a Paul Revereâ (see Dimand 2013). He induced the Yale football team to adopt a low-protein diet and wrote up the results in the Yale Medical Journal, and he was happy to answer journalists who wished to know whether âYes, we have no bananasâ was grammatical (according to Fisher, that depended on the question to which the phrase was a response). His greatest best-seller, reaching its twenty-first edition in 1946, was not an economics book but a guide on How to Live. Although Fisher was eager to humbly acknowledge himself a follower of illustrious predecessors in economics (LĂ©on Walras and Francis Ysidro Edgeworth for general equilibrium , Simon Newcomb for the equation of exchange and for the compensated dollar , Edgeworth and Correa Moylan Walsh on index numbers, John Rae and Eugen von Böhm-Bawerk on capital theory...