6. Fighting Money Illusion: The Fisher Ideal Index Number

Fighting Money Illusion: The Fisher Ideal Index Number: If governments would not stabilize the price level, Fisher would combat The Money Illusion (the title of his 1928 book) by educating the public about how the purchasing power of money changed. Since governments did not then provide price indices, an Index Number Institute (located in the basement of Fisher’s home) would calculate a weekly wholesale price index, accompanied by a weekly newspaper article by Fisher on price changes, using the “Fisher ideal index” (the geometric mean of the Paasche and Laspeyres indices), the index number formula that Fisher’s Making of Index Numbers (1922) had shown came nearest to satisfying a set of seven statistical criteria chosen by Fisher and that in recent decades has come to be increasingly adopted by governments. Beyond education about price-level fluctuations, Fisher also pioneered indexation, persuading Rand Kardex to issue bonds indexed to Fisher’s price index.