Ideas in Circulation: the Reception of Fisher in Argentina

FLORENCIA SEMBER

Lyon

Congreso; International Conference of the Centennial Anniversary of the Purchasing Power of Money by Irving Fisher; 2011

Université Lumière Lyon 2

The reception of The Purchasing Power of Money in Argentina is not a case of "passive" reception of ideas. It was diffused in Argentina by Alejandro Bunge, statistics professor at the University of Buenos Aires and head of the National Statistical Office, who was above all interested in the part dealing with the construction of index numbers and statistical verification. In these years, he was concerned mainly with two questions. The first one was the increase in the cost of living, which he tried to estimate through calculations of the real wage and of price indexes. The second one was the concern about the valuation of the national and individual wealth. The objective was to estimate which were the resources of the government, and how they could be increased by the way of new taxes. He had been working on its own trying to estimate variations in the purchasing power of money, and in fact had sent his work to Fisher. Fisher wrote back and the two met in 1920. Bunge´s most prominent student was the famous Argneitne economist Raúl Prebisch, who was asked by his teacher to study Fisher´s work and write a review of Stabilizing the Dollar. Unlike his teacher, Prebisch was mostly interested in the first part of The Purchasing Power of Money. He applied Fisher´s description of the transition periods to the explanation of the Argentine economic cycle, but adapting it to the Argentine reality. In the Argentine case, the variations in the quantity of money were produced mainly by oscillations in the balance of payments, which to a great extent were exogenous. The effects of the oscillations of the balance of payments on gold movements, the rate of exchange and on subsequent changes in the balance of trade were based on the works by Taussig (1917) and Williams (1920). The internal process of expansion and contraction during the ascending and descending phases were based on Fisher. After the Great Depression Prebisch had abandoned some of his previous ideas, but he still used the equation of exchange as an instrument of analysis. He presented a coefficient of expansion, based on it, and put forward a more systematic explanation of the working of the economic cycle in an open economy as the Argentine one. Moreover, he used the coefficient to explain how the gold was distributed unevenly between different countries.