BIOGRAPHY 20. 1 Irving Fisher (1867 -1947) Irving Fisher was born at Saugerties, New York, the son of a Congregational minister. As did his father, Fisher studied at Yale. Mathematics was his favorite subject. He won first prize in a math contest even as a freshman; his doctoral dissertation,Mathematical Investigations in the Theory of Value and Prices (1892), was a landmark in the development of mathematical economics. This dissertation won immediate praise from no lesser figures than Francis Y.
Edgeworth and Vilfredo Pareto, two renowned economists. Some 55 years later, Ragnar Frisch (eventual winner of the 1969 Nobel Prize in Economic Science) would say about Fisher: “He has been anywhere from a decade to two generations ahead of his time …. it will be hard to find any single work that has been more influential than Fisher’s dissertation. ” It is no wonder that Fisher was a full professor of political economy at Yale within seven years of graduation. He stayed there during his entire career.
Fisher’s main contributions lie in the theory of utility and consumer choice, the theory of interest and capital, and the theory of statistics (index numbers, distributed lags). These contributions are reflected in such works as The Nature of Capital and Income (1906), The Theory of Interest (1907), The Purchasing Power of Money (1911) -a great pioneering venture in econometrics – and The Making of Index Numbers (1922). In the Making of Index Numbers, Fisher tested many of the formulas introduced in this chapter by the criteria also discussed here.
The few formulas that got superlative ratings (such as the Edgeworth index and Fisher’s own ideal index) include quantity (or price) weights from both of the time periods or geographic areas involved in the price (or quantity) comparison that is being made. However, the inclusion of two sets of weights tends to make the construction of such indexes costly, which is the major reason why these highly rated indexes are rarely used. (One exception: The Bureau of Foreign Commerce of the U. S.
Department of Commerce calculates monthly quantity indexes of exports and imports using Fisher’s formula. ) The works cited above established Fisher’s reputation as the country’s greatest scientific economist. As such, he served as president of the American Economic Association and was a founder and the first president of the Econometric Society. He also played a major role in the establishment of the Cowles Foundation (now at Yale) as a means to nurture mathematical and quantitative research in economics.