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Origins and Developments of Irving Fisher’s Compensated Dollar Plan


  • Jérôme De Boyer Des Roches

    (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine)

  • Rebeca Gomez Betancourt

    () (TRIANGLE - Triangle : action, discours, pensée politique et économique - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - Ecole Normale Supérieure Lettres et Sciences Humaines - CNRS - Centre National de la Recherche Scientifique)


In 1911, Fisher published The Purchasing Power of Money. In chapter 13 of the first edition and in an appendix in the second section of 1913, he introduced a rule to maintain the level of prices stable, called the "compensated dollar". According to this rule, the legal definition of money is changed. In other words, the weight in gold of the dollar is modified once a month in order to impede the price changes on a basket of goods. According to Fisher, this plan will offer stability in the purchasing power of money. He sought after to find an alternative system to the price fix system under the Gold Standard. He wanted to introduce a dollar fixed in his purchasing power, but variable in its metallic weight. In this paper we will focus on Fisher's analysis on the stability of money value and his position in the debate on the compensated dollar from 1909 to 1922. We will study the anticipations of Fisher's compensated dollar, the receptions and evolutions of Fisher's project, the gold exchange standard and the algebraic evidence. We also study the debate links to the question if the compensated dollar plan match or not with the quantity theory of money. We ends with the analysis of the gold price and elasticity of gold net supply, and we explain the relation between the Yellowbacks and the varying price of the gold reserve.

Suggested Citation

  • Jérôme De Boyer Des Roches & Rebeca Gomez Betancourt, 2012. "Origins and Developments of Irving Fisher’s Compensated Dollar Plan," Post-Print hal-01500410, HAL.
  • Handle: RePEc:hal:journl:hal-01500410
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    References listed on IDEAS

    1. Hall Robert, 2002. "Controlling the Price Level," The B.E. Journal of Macroeconomics, De Gruyter, vol. 2(1), pages 1-21, July.
    2. Rebeca Gomez Betancourt, 2010. "E. W. Kemmerer's contribution to the quantity theory of money," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 17(1), pages 115-140.
    3. Gomez Betancourt, Rebeca, 2010. "Edwin Walter Kemmerer And The Origins Of The Fed," Journal of the History of Economic Thought, Cambridge University Press, vol. 32(04), pages 445-470, December.
    4. Jérôme de Boyer Des Roches & Rebeca Gomez Betancourt, 2013. "American quantity theorists prior to Irving Fisher's purchasing power of money," Post-Print halshs-00823362, HAL.
    5. Hall, Robert E, 1997. "Irving Fisher's Self-Stabilizing Money," American Economic Review, American Economic Association, vol. 87(2), pages 436-438, May.
    6. Robert W. DIMAND, 2003. "Competing Visions For The U.S. Monetary System, 1907-1913: The Quest For An Elastic Currency And The Rejection Of Fisher'S Compensated Dollar Rule For Price Stability," Cahiers d’économie politique / Papers in Political Economy, L'Harmattan, issue 45, pages 101-121.
    7. Robert J. Shiller, 2002. "Indexed Units of Account: Theory and Assessment of Historical Experience," Central Banking, Analysis, and Economic Policies Book Series,in: Fernando Lefort & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Serie (ed.), Indexation, Inflation and Monetary Policy, edition 1, volume 2, chapter 4, pages 105-134 Central Bank of Chile.
    8. F. W. Taussig, 1913. "The Plan for a Compensated Dollar," The Quarterly Journal of Economics, Oxford University Press, vol. 27(3), pages 401-416.
    9. Dimand, Robert W., 2000. "Irving Fisher and the Quantity Theory of Money: The Last Phase," Journal of the History of Economic Thought, Cambridge University Press, vol. 22(03), pages 329-348, September.
    10. E. W. Kemmerer, 1905. "The Establishment of the Gold Exchange Standard in the Philippines," The Quarterly Journal of Economics, Oxford University Press, vol. 19(4), pages 585-609.
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    More about this item


    gold exchange standard; Quantity theory; compensated dollar; prices;

    JEL classification:

    • B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913


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