## Intellectual Biography of Irving Fisher

Irving Fischer is one of the most outstanding economists of the neoclassical direction. He was one of the first who developed the quantitative theory of money (Fischer’s scales). In his works, he considered such directions as the theory of consumer behavior, capital, and interest, and also made his contribution to the field of statistics. Applying the mathematical methods in the economic theory, which allowed him to unite the theory with the methods of the quantitative analysis, he noted a special nature of the impact of changes in the economy on an economic variable. In his works, he developed and classified hundreds of formulas, having subjected them to various checks. Practically all modern researches in the field of indexes are guided by his monumental analysis. Fisher’s model allows economists to analyze the process of choice-making between consumption and saving by rational customers. Unlike the liberal direction of the Cambridge school, Fischer considered his concepts at the macroeconomic level. Undoubtedly, those researchers who treat and consider the earlier offered directions of the economic thought are based in many respects on Fisher’s postulates and consider them as the main ones.

## Intellectual Biography of Irving Fisher

The American scientist Irving Fischer (1867-1947) entered the history of economic thought by his research of “a purchasing power of money”, “the exchange equation”, and the offers connected with “absolute money” and “the constructive taxation.” The historical merit of Fischer consists, first of all, in the fact that he found an accurate logical expression of the essence of the quantitative theory of money which developed in 1800 - 1873 at the time of J. Mill. Also, Fischer created the concept of economic interests and was the first president of the International Econometric Society founded in 1931. In the late 1950s, after Fischer’s death, his works started to receive wide popularity that substantially corrected his professional reputation. The next wave of interest to the theory of debt deflation is observed in connection with the new world crises. Moreover, Fischer’s work about the quantitative theory of money led to the foundation of the school of economic thought known as “monetarism.” The glorified economist and the Nobel Memorial Prize Laureate Milton Friedman called Fischer to be “the greatest economist ever brought into the world by the United States” (J? n I? a, 2002). The given research paper will discuss the intellectual contribution of Irving Fisher to world economic thought as well as the potential response of the economist to the current world crisis.

## Fisher’s Contribution to the Economic Science

The mathematics was the most interesting subject for Fisher, but the economy more corresponded to his aspiration to serve society. He wrote the doctoral dissertation on the mathematical economy – the boarder of both sciences. Irving graduated from the Yale University with the Doctor’s degree. Since 1890, Fisher started teaching at Yale University, in 1898 he became the professor of the political economy and an honored professor in 1935. Between 1896 and 1910, Fisher was the Yale Review editor and took an active part in a set of scientific organizations, institutes, and charitable organizations. At the stage of the historical development of econometrics, Fisher was one of the main supporters of this direction. Besides, Fisher was a prolific writer and journalist, worked at a considerable number of technical books and articles; he was interested in the problem of World War I, the prosperity of the 1920s, and the following depression of the 1930s (Bryer, 2012).

Being a mathematician, a statistician, a businessman, a reformer, and a teacher, Fisher was a person of versatile interests. However, his passionate hobbies concerning the problems of hygiene and abstention made him an odd fellow in the opinion of society, and the Fisher’s fuss with the compensated dollar and 100% money threatened to eclipse his important theoretical research in the view of economists. Only in the following years, his views of capital, interest, and money started attracting the deserved attention. Fisher’s contribution to statistics and the theory of indexes was considerable. Applying the mathematical methods in the economic theory, he tried to unite the theory with the methods of the quantitative analysis. He considered statistics not simply as a convenient tool, but as a component of the economic analysis (Rowles, n.d.).

## The Most Important Literary Works of Irving Fisher

In his book The Making of Index Numbers, Fisher developed and classified a large number of formulas, subjected them to various checks. Modern research in the field of indexes is guided by his analysis. Fisher compared various formulas, making different schedules for the same data set in 1913-1918. Having empirically studied the scales and deviations, he deduced 47 formulas and coordinated them with one another. Then, he reduced their number up to 13, then up to 8, and eventually came to the “ideal” formula. Fisher did not consider that it was the only formula that can be used; it simply gave a smaller divergence and distortion than the others (Rowles, n.d.).

Fisher defined capital as the reserves of the riches at the moment, including in this concept both natural and cost aspects, most emphasizing the first aspect. Skillfully using the accounting methods, Fisher explained the essence of the economic ideas with their help. The simple differentiation of the wealth types did not seem sufficient for Fisher, as he understood the importance of the accurate distinction between stocks and streams. These ideas gained further development in the work The Nature of Capital and Income, where interest rates were put into dependence by size, structures, and distributions in time of a flow of income. Moreover, the book contains an attempt to find out the nature of wealth, property, claims of property, services, and usefulness (Rowles, n.d.; Bryer, 2012).

In The Theory of Interest (1930), Irving Fisher defined the “standard of the income over expenses,” which, being used at the calculation of the specified cost of all expenses and the current cost of all incomes makes these sizes equal. Fisher explained that the number of investments carried out in any sphere depended on the standard of the income (minus expenses), taken in comparison with the interest rate. In order to stimulate new investments, “the standard of the income (minus expenses) should exceed interest rates” (Fisher, 1930, p. 5).

Fisher believed that interest as a price paid for money can be interpreted through purchasing power. As the interest rates are inversely proportional to the bank reserves, they, apparently, tend to be changed in direct dependence on the offer of money. The small reserves and high-interest rates indicate the growing income and prosperity, and bank rates reflect the acceleration of the income flow in these conditions. It led to the emergence of ideas about a real rate of interest, which can be established with the help of indexes (Fisher, 1930, p.9).

In his book The Purchasing Power of Money, Irving Fisher researches the principles and facts concerning the purchasing power of money, as they attract every inhabitant of the civilized world. With each fluctuation of the wave of prices, millions of people receive benefits, and other millions sustain losses. Within the hundreds of years, the world suffered from the periodic changes in the price level causing crises and stagnation in the industry. Only owning to the knowledge comprising the principles and the facts, such fluctuations can be prevented or weakened in the future, and only due to this knowledge, the losses which these fluctuations bring can be avoided or lowered. The disasters from the changeable monetary unit belong to the number of the most serious economic problems with which the civilization should struggle, and a practical problem, namely how to find the way out of this difficulty, has an international value.

## The Potential Respond of Irving Fisher to the Crisis

The World Economic Crisis started in 2008 and has not finished up to the present time. It is considered to be “the global recession.” According to Irving Fisher, the fast change of credit in comparison with the money supply is the main cause of a crisis and recession. The characteristic behavior of an interest rate in the transitional period is explained by it. The essence of the theory of business cycles of Fisher consists in it. The economist considered that crises are only “dances of a dollar.” The concept of a cycle as the self-arising phenomenon was considered as a myth by Fisher. A small “reflation” was the only necessary correcting means. Although the reasons for misbalance are diverse, the main reasons for them are connected with the debts and elimination of debts. In other words, the relationship of debtors and creditors is revealed in a cycle. The top rotary point reflects the general aspiration to the liquidation of obligations; this process can happen at such a speed that the purchasing power of the remaining debts will increase – in other words, the prices will quickly fall. According to Fisher, a fast intervention of the central banks is everything necessary for the suspension of falling (Nakamura, 2013).

## Conclusion

To sum up, at the beginning of his activity, Fisher condemned the expansion of the state regulation as he considered that the control over corporations and such measures as doles direct the country to socialism. One class will have an opportunity to dominate over another one, and there consequently will arise an abuse of power and corruption. The correction of the existing evils demands the creation of volunteer societies, which would teach the lowest classes to defend their own interests. However, in the following years, Fisher recognized the need for a more uniform distribution of the income and objected to the fulfillment of the principle of “laissez faire” in state policy. An inheritance tax is not an instrument of oppression; on the contrary, it is a way to the expansion of economic democracy. The same belongs to the growing dispersion of joint-stock property. Fisher was on the way to understanding of the idea of the mixed economy. Despite the fact that Irving tried to cover different areas of economy, his important merit consists in the fact that he paid a special attention of the public opinion to the becoming aggravated problems of prices and inflations.

More than 60 years passed after the death of Irving Fisher, but he is still discovered in different countries. Today, the history of the Great Depression with the ideas of Fisher is studied; his offers concerning tax reform are fulfilled in practice. The offer about 100% currency provision is included inline the agenda of each considerable central bank. The delay with the realization of a 100% covering is caused, first of all, by the fact that it will lead to the weakening of the power of banks.