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typically depicted only with rising or falling lines on graphs.
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By using the util to
quantify the cubic inches by which the movement of the cisterns displaced the water
level, he was also able to render the units in which commodities were measured
(gallons, tons, yards, etc.) commensurate with the units in which prices were measured
(dollars) and thus to calculate the relationship between the movements of the cisterns
and the changes in price. Even if Fisher's util solved the problem presented by the
incommensurability of the units used in real-world economic activities, however, and
even if his mechanism enabled the student to imagine that measurable changes in the
water level of the tub were analogous to changes in prices
and
in “ levels ” of supply and
demand, neither the util nor the mechanism could really quantify desire or measure
“marginal utility.” Nor could Fisher's machine address even more fundamental problems.
It could not take account of all of the variables that factored into real-world transactions,
and it could not use the data that was available about these transactions. In order to
solve these problems, Fisher took another step in the five-year journey we are describ-
ing. He dropped the method he used in
Mathematical Investigations
, in which mathematical
calculations were used primarily to illustrate an a priori theory, and he turned to a
method by which actual buyers and sellers had long calculated value in the real world.
Using some of the insights his drawings and mechanism had given him, but relying on
this much older method to represent economic processes, Fisher discovered that he
could address questions about value in a way newly responsive to what actually occurred
in the marketplace.
Definitions, Tables, and Accounting Measurement: From Defining “ Capital ” to
Scrubbing Data
In the next important work from this period, Fisher took what may seem like an intel-
lectual detour: he surveyed the existing economic literature in an attempt to figure out
why the concept of “capital,” which had long been central to economic theory, remained
“ obscure. ”
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Tracing this obscurity to Adam Smith's discussion of “stock” in
Wealth of
Nations
, Fisher insisted that the meaning of “capital” should be generalized beyond the
restricted eighteenth-century notion of “stock” and turn instead on what Fisher called
the “time element.” In a real-world context, this time element was both captured and
affected by changes in the prevailing interest rate. Viewed in this real-world context,
Fisher explained, capital should be understood not only as the form it took at a single
moment in time, where it appeared as a “stock” or “fund,” but also in terms of the
