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Origins and Developments of Irving Fisher’s Compensated Dollar Plan

Author

Listed:
  • Jérôme de Boyer Des Roches

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

  • Rebeca Gomez Betancourt

    (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

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
    Note: View the original document on HAL open archive server: https://hal.science/hal-01500410
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    References listed on IDEAS

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    1. David E.W. Laidler, 2016. "The Golden Age of the Quantity Theory," Economics Books, Princeton University Press, edition 1, number 4959.
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    10. 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.
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    14. F. W. Taussig, 1913. "The Plan for a Compensated Dollar," The Quarterly Journal of Economics, Oxford University Press, vol. 27(3), pages 401-416.
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    Cited by:

    1. Demeulemeester, Samuel, 2024. "Investigating the “Debt-Money-Prices” Triangle: Irving Fisher’s Theoretical Journey Toward the 100% Money Proposal," SocArXiv tfm6v, Center for Open Science.

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    More about this item

    Keywords

    Quantity theory; compensated dollar; prices; gold exchange standard;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals

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