In most respects, Irving Fisher appears to be the precursor of Milton Friedman and the first monetarist. In 1911, Fisher published The Purchasing Power of Money. It was his restatement of the quantity theory of money. In 1925, he authored “The Business Cycle Largely a ‘Dance of the Dollar,’” in which he attributed business cycles to changes in the value of money.

Yet by 1933, Fisher felt the need to add some additional factors to explain the magnitude of the Great Depression. He did so in “The Debt-Deflation Theory of Great Depressions.” In his History of Economic Analysis (1964), Joseph Schumpeter states that Fisher downplayed the importance of his own theory. Schumpeter argues (1122) that the Debt-Deflation theory “applies to all recorded business cycles and is in essence not monetary at all.”

So is Fisher a monetarist or a real theorist of the business cycle?

In the Monetary History of the United States (1963), Friedman and Schwartz cite Fisher but not for his debt-deflation theory. In “Money and Business Cycles” (1963), they cite the “Dance of the Dollar” article. Perhaps Friedman and Schwartz were chary of the later Fisher for a reason.

This issue has come up again in Charles Rowley and Nathanael Smith’s Economic Contractions in the United States: A Failure of Government (Locke Institute 2009). They argue that Friedman and Schwartz overreached in their monetary explanation of the Great Depression. Rowley and Smith find the theoretical basis for the Friedman-Schwartz view to be “weak” (p. 11). And Rowley and Smith cite Fisher (1911) against Friedman and Schwartz.

My question is not rhetorical. Fisher is a complicated figure, and only becomes more so if one considers his relationship with the Austrians. Mises and Hayek had great respect for him, as did Schumpeter.

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