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
It can be written as MV +M`V` = PT. This theory showed what happens to the price level when the amount of money in circulation changes. Even though Irving Fisher only expanded and included two extra variables in the Equation of Exchange, he is usually given credit for it instead of Simon Newcomb, who came up with the original theory (MV = PT). In developing the Equation of Exchange, Irving Fisher also began working on index numbers. Before his time, the Laspeyres index and the Paasche index had been introduced. These two indices were very good at measuring changes in the cost of living from different points in time, but had some major faults. They either understated or overstated inflation. Fisher’s new price index, known as the “ideal” index, is simply the geometric mean of the Laspeyres index and Paasche formulas. However, he demonstrated that this index minimized the previous imperfections but still didn’t solve them completely. Even though imperfections were present in Fisher’s model, modern day economists believe this is inevitable, and therefore still use Fisher’s ideal index as a basis of their index number system. In addition, based on his statistical calculations he