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Irving Fisher Contributions Essays

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Hundreds of individuals have impacted economics throughout its vast history. Only a handful of these individuals are household names recognized with economics today. However, many lessor known economists have made lasting impressions, often making attributions to the theories we know today. One of these individuals who influenced economics in this way was Irving Fisher. Irving Fisher was a very unique and brilliant man. He attended Yale University where he studied mathematics. He later used this background and applied it to economics, earning a PhD in economics, the first from Yale University. His study of mathematics played a crucial role in how his theories evolved. Almost all of his work involves mathematical computations to express…show more content…
Fisher explains that when the equilibrium between these two factors exists, the interest rate is thus determined. This theory of interest is still how we determine interest, even after about 100 years have passed since its introduction. Clearly this theory was well ahead of its time. In addition, Fisher stated that the real rate of interest generated by the interaction between the impatient rate and opportunity rate was not always the nominal rate due to inflation. He stated that the nominal rate minus the inflation rate equals the real rate that you are expected to earn. This relationship is known as the Fisher Effect and is a major principle in economics and finance in everyday calculations.
From these same works Fisher also developed the concept of the expenditure tax. The expenditure tax is different from the income tax because one is only taxed on income minus one’s net savings, rather than one’s whole income. Fisher believed the income tax induced bias against saving and created double taxation on both the income you earned initially and the income you earn from investing or saving money. Irving Fisher also made major contributions in to monetary economics. He expanded the old quantity theory of money by introducing the equation of exchange (MV = PT) in The Purchasing Power
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