Einstein, Fisher, science and the Great Depression

The paper investigates Albert Einstein’s and Irving Fisher’s respective interpretations of the Great Depression as organised around the roles of technological progress in their accounts. Einstein and Fisher shared a sustained interest in the role of applied science in accounting for the economic conditions that prevailed between the late 1920s and mid-1930s, from the distinct perspectives of the natural scientist and the economist. A letter from Einstein to Fisher – the only recorded correspondence between the former and an economist on economic issues – discussed for the first time here sheds new light on their frameworks. Although Fisher stayed away from Einstein’s under-consumption stance and focused on debt-deflation cycles started by technical inventions, the paper documents how Einstein incorporated deflation as part of his own argument. It is shown how Einstein’s standpoint on technological unemployment had much in common with key aspects of the German treatment of under-consumption coming from Rodbertus and Luxemburg through Lederer and Neisser. During the New Deal, technological unemployment and under-consumption, as argued by Einstein, became influential, which led to Fisher’s criticism.