Transactional version of the quantitative theory of I. Fisher - Economic theory

Transactional version of I. Fisher's quantitative theory

The quantitative theory of money organically fit into the classical model of reproduction, which was based on the fact that, in conditions of perfect competition and full elasticity of prices in all markets, the system automatically, or external interference comes to equilibrium with the full use of all productive resources. This denied the possibility of general overproduction of goods, chronic unemployment, etc. The emergence and wide dissemination of the marginal utility theory in the last quarter of the 19th and beginning of the 20th century. did not touch on established schemes in the field of money theory. On the contrary, the quantitative theory received a new impetus thanks to the work of the American economist Irving Fisher (1867-1947), where the main postulates of the theory were clad in a rigorous mathematical form suitable for statistical analysis, and the work of economists at the Cambridge School, where great attention was paid to the factors of accumulation of money from economic subjects.

The transactional version of the quantitative theory of Fisher is based on a twofold expression of the amount of commodity exchange transactions: as the product of the mass of payment means and the speed of their circulation and how the product of the price level is the quantity of goods sold. The relationship of these quantities was expressed by the so-called exchange equation:

where M - the amount of money in circulation during a certain period (for example, a year); V - speed of money; P - the price level, Q - the volume of output in real terms.

The elementary event that underlies the formula is the commodity exchange transaction (transaction, with which the name of the Fisher version is associated). In the right side of the equation, the sum of the prices of all goods participating in transactions (the nominal volume of the issue) appears; in the left they are confronted by the sum of money in circulation. Based on a number of assumptions, Fisher derived the following causal relationships from this formula. He believed that the price level changes:

a) is directly proportional to the amount of money in circulation;

b) directly proportional to the velocity of money;

c) inversely proportional to the volume of trade carried out with the help of this money.

The first of these relations expresses the central idea of ​​a quantitative theory. The proportional impact of the change in the amount of money on prices is found, according to Fisher, only in the long term. As for short-term periods, the influence of money can be significantly distorted under the influence of cyclical changes in the conjuncture. During these transition periods, the laws of the quantitative theory may not work.

In analyzing the exchange equation, Fisher paid much attention to switching off factors (2 and K assuming their constancy in the short run), he argued that in the long run the volume of production is determined by technical and economic conditions (division of labor, technology, capital accumulation, geography of various natural resources), the infrastructure that determines the peculiarities of communication between producers and consumers (transport, communications, development of the credit system), changes in the nature of needs, etc. These factors change relative about slowly, for decades, and therefore, Fischer believed, their influence can be abstracted without large errors for analysis.Fisher's production is always at the maximum point.As regards transitional periods, they are excluded from consideration as atypical. prerequisites, the potential impact of money can, of course, manifest itself only in price changes, while production is determined by real factors, and the state of the monetary sphere does not influence it. An important role was played also by the interpretation of the velocity of money, which Fisher has determined by the slowly changing institutional structure of turnover, payment practices, etc. Based on the stability of payment practices, Fisher argued that the average time spent on money in the same hands is very accurately determined and that doubling the amount of money would leave the rate almost unchanged. Studies of this issue in the XX century. showed that the speed of money circulation can change significantly, reacting to sharp jumps in the money supply, especially during periods of destructive inflation. At the time of the release of Fisher's book, this was not obvious.

Fischer also excluded any possibility of the reverse effect of the total amount of transactions (P (2)) on the money part of the exchange equation.He wrote: "The price level usually serves as the only passive element of the exchange equation.It is controlled solely by other elements and the causes that cause them , but does not control them. "The arbitrariness of such an assumption is obvious: in real production conditions, a change in the price level and, accordingly, the amount of commodity exchange transactions, undoubtedly affects the need for payment facilities and, accordingly, "Fisher, however, absolutized the unidirectional influence line" money-prices. "Modern monetarists, while supporting the concept of the neutrality of money to describe the long-term relationships between money supply dynamics and price level, still recognize the impact of money supply on real values, but only in the short term period (within the business cycle).

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