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Economic Quarterly

Summer 1993

Irving Fisher and His Compensated Dollar Plan

Don Patinkin

In 1913 – following a 40-year period during which prices steadily declined for the first 25 years and then rose by 50 percent in the remaining 15 – Irving Fisher presented his compensated dollar plan for stabilizing the price level. This presentation had many puzzling features, starting with the fact that it failed to reflect the quantity-theory approach that Fisher had so vigorously expounded in his classic 1911 work on The Purchasing Power of Money. As a result of criticisms, Fisher subsequently modified his plan, and with the increasing importance of Federal Reserve monetary policy after World War I, effectively abandoned it in the 1930s – though in recent years it has received renewed, though not always accurate, attention.

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