ABSTRACT
Several aspects of Irving Fisher’s macroeconomic analysis appear to be in concert with classical analysis, especially his exchange equation where changes in the quantity of money affect the price level, and nominal interest rates are adjusted to reflect inflation or deflation. Fisher’s influence on Milton Friedman’s macroeconomics, which is generally perceived to be in contradiction to Keynesian macroeconomics, also carries the appearance of the classical consonance. However, several of the disputes in modern macroeconomics can be traced to some of Fisher’s arguments in contradiction to classical theories. These include his rejection of the classical “capital” supply and demand theory of interest in favor of the Austrian time-preference theory, his adoption of Böhm-Bawerk’s capital-goods conception of “capital” in reading the classical theory of interest, his definition of “stock” to mean a fixed quantity rather than the flow of funds as in classical economics, his denial of interest as a form of income separate from rent or profits, and his inclusion of savings in checkable bank deposits in the definition of money or currency Alfred Marshall pointed out some of these problems with Fisher’s work, but to which modern macroeconomics seems to have paid little attention. Recognizing Fisher’s detours from classical macroeconomics may help a successful resuscitation of classical macroeconomics.
Fisher on the classical theory of interest
