Garett Jones on Fisher, Debt, and Deflation

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🗓️ 8 October 2012

⏱️ 61 minutes

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Summary

Garett Jones of George Mason University talks with EconTalk host Russ Roberts about the ideas of Irving Fisher on debt and deflation. In a book, Booms and Depressions and in a 1933 Econometrica article, Fisher argued that debt-fueled investment booms lead to liquidation of assets at unexpectedly low prices followed by a contraction in the money supply which leads to deflation and a contraction in the real side of the economy--a recession or a depression. Jones then discusses the relevance of Fisher's theory for the current state of the economy in the aftermath of the financial crisis.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty.
0:06.4	I'm your host Russ Roberts of Stanford University's Hoover Institution.
0:11.0	Our website is econtalk.org where you can subscribe, comment on this podcast, and find
0:16.0	links and other information related to today's conversation.
0:19.0	You'll also find our archives where you can listen to every episode we've ever done going
0:23.3	back to 2006.
0:25.4	Our email address is mailadycontalk.org.
0:28.0	We'd love to hear from you.
0:32.8	Today is September 24th, and my guest is Garrett Jones of George Mason University.
0:37.4	Garrett is currently guest blogging at Econlog.
0:40.0	Garrett, welcome back to Econ Talk.
0:41.7	It's great to be back.
0:42.9	Our topic today is debt.
0:45.3	In a recent post-edicon log, you referenced a rather remarkable paper written in 1933 by
0:50.8	Irving Fisher.
0:52.3	The title of that paper is the debt deflation theory of great depressions.
0:57.3	It was published in a kind of metric of very respected economics journal.
1:02.5	In that paper, Fisher speculated that large contractions in the economy, great depressions
1:08.2	of which he was in the middle of one in 1933 when it was published, and certainly in
1:12.8	the middle of one when he wrote the paper a little before.
1:15.8	He argued that those contractions in the economy were caused by the interaction of debt
1:20.8	and deflation.
	...

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