AMERICAN QUANTITY THEORISTS PRIOR TO IRVING FISHER’STHE PURCHASING POWER OF MONEY

Abstract

The aim of this paper is to analyze the state of the quantity theory in the United States prior to the publication of Irving Fisher’s ThePurchasing Power of Moneyin 1911. We start by presenting the participants in the monetary debate. Next, we analyze the controversies regarding prices, purchasing power of money, and credit, prior to the Gold Standard Act of 1900, in particular the opposing views of Francis Amasa Walker and James Laurence Laughlin. We then go on to study of the restatement of the quantity theory at the beginning of the twentieth century, through the introduction of credit in the analysis and the statistical tests of the exchange equations. Finally, we study the problems and management of the gold standard, focusing on the elasticity of money supply, the characteristics of the gold exchange standard, and the contrast between the fixed price of gold and its fluctuating purchasing power. We show the improvement of the quantity theory and the new issues that emerged from the rich and original American monetary debate, prior to the publication in 1911 of Fisher’s book.