Archive for February 16th, 2009

A dead economist for our time

16 February 2009

The new Economist has a great piece on Irving Fisher, the great American monetary economist who articulated the destructive aspects of deflation better than anyone before him.  Fisher was a weird dude — eugenics and Prohibition were among his passions — but his “Debt-Deflation Theory of Depressions” (the lead article in the first issue of Econometrica in 1933)  lives on.  Virtually every monetary economist since, from Milton Friedman to Ben Bernanke, has absorbed Fisher’s lessons.  So has the Federal Reserve.  Nobody tries to defend deflation anymore.

A fine piece in the new Forbes, “The Real Lesson of the New Deal,” by ex (in more ways than one) Reaganite Bruce Bartlett, complements it nicely.  Bartlett sketches the devastating effects of deflation in the early 1930s and throws in some sensible points about policy in the Great Depression.  (Hat tip: Jeff Sachse.)

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