GERRIT GORTER
The present study of economics did not, of course, come out of thin air. Although thinkers in classical Greece already reflected on what we now call economics, it was largely in the eighteenth century that systematic thought on the subject began.
Two conceptual tools—the economic cycle and the idea of the invisible hand—date from that century and are still in use today, both in academic research and in education.
This site contains twenty-five portraits of important economists. Each offers a biographical sketch together with an indication of his (and, in one case, her) significance for the development of economic thought. They claim no more than to provide a first introduction to the lives and works of these pioneers.
These articles originally appeared in Dutch in the Tijdschrift voor het Economisch Onderwijs and were published on the website of Gerrit Gorter. The English translations are by Folkert Gorter.
Index
François Quesnay
Adam Smith
Thomas Robert Malthus
Jean-Baptiste Say
David Ricardo
Antoine Augustin Cournot
John Stuart Mill
Karl Marx
Walras
Carl Menger
Alfred Marshall
Vilfredo Pareto Eugen von Böhm-Bawerk
Knut Wicksell
Max Weber
Irving Fisher
Sam de Wolff
John Maynard Keynes
Joseph Alois Schumpeter
Joan Robinson
Jan Tinbergen
John Hicks
John Kenneth Galbraith
Milton Friedman
Paul Samuelson
Irving Fisher
U.S.A. 1867–1947
His entire life, the American economist Irving Fisher was preoccupied with money — first with acquiring it, then with losing it, and finally with trying to win it back. But no one would have heard of Fisher if he hadn’t also been a major theorist in the field of monetary economics. Every monetary economist up to and including Milton Friedman is indebted to him.
Irving Fisher was born in 1867 in upstate New York. He studied at Yale College and developed a strong preference for mathematics. His later economic writings, accordingly, contain a substantial dose of mathematics — especially for that time. After earning his doctorate, he remained at Yale as a professor. He soon devoted himself to what would become his true area of expertise: the interrelationships between the money supply, the velocity of money, and prices. Around the age of thirty, he seemed to have it all: a professorship, a reputation for brilliance, a happy marriage, and good health.
The news that he had tuberculosis therefore came as a heavy blow. This disease was virtually a death sentence at the time, but Fisher was determined to survive. Miraculously, he did — and for the rest of his life, he remained a health nut: regular jogging, lots of fruit, no alcohol, no tobacco, and a constant craving for fresh air. Even the all-too-common side effect — a certain humorlessness — showed in Fisher.
Another defining factor in Fisher’s life was money — and not just in the theoretical sense. At the age of 43, he developed a particular card-based filing system for administrative use — the so-called Rolodex — which made him a wealthy man. Thanks to some fortunate investments, he soon became a multimillionaire. But then came the stock market crash of 1929, in which he lost most of his fortune. He was firmly convinced, however, that the market would rebound, and borrowed large sums from various sources — only to lose them just as quickly. Fisher spent the rest of his life burdened by debts he could never repay.
His principal contribution to economics was the quantity theory of money. In 1911, he published The Purchasing Power of Money, in which he examined the factors that determine the purchasing power of money — or, conversely, the price level. Of course, the relationship between the money supply and inflation had long been known — since the sixteenth century, in fact — and the concept of the “velocity” of money had also been discovered. But Fisher was the first to systematize these elements in what has become the well-known equation of exchange: MV = PQ, where M stands for the money supply, V for the velocity of money, P for the general price level, and Q for the quantity of goods traded. Seen this way, the quantity theory is little more than an identity: of course, the active flow of money equals total transactions. But if V and Q are assumed to remain relatively constant in the short term, then it becomes clear that an increase in the money supply leads to inflation.
But the quantity theory was not Fisher’s only contribution to economics. He also worked on index number theory. Anyone who has ever taken a statistics exam may recall the index number named after our economist. The distinction between flow and stock variables also originates with him. According to his own account, he came up with this distinction during a hike in the Swiss Alps, when he saw a waterfall (a flow variable) plunging into a lake (a stock variable). He also clearly articulated the difference between nominal and real interest (the latter being roughly the nominal interest rate minus inflation).
The final ten years of Fisher’s life were certainly not his best: burdened by heavy debts (he owed his sister-in-law $750,000), his house sold at auction, the loss of his wife (1940), many futile attempts to rebuild his fortune (returning to inventing, he came up with a collapsible chair that nobody wanted), and finally, cancer struck. Since death visits even the most devoted health enthusiasts, he lost the battle and died in 1947. He is widely regarded as the most important American economist of the first half of the twentieth century.