Insights on deflation theory

Vol. 38 No. 2 (2018)

Apr-Jun / 2018
Published February 26, 2020

How to Cite

Asensio, Angel. 2018. “Insights on Deflation Theory”. Brazilian Journal of Political Economy 38 (2):338-57.

Insights on deflation theory

Angel Asensio
Professor of Economics at the Université Paris XIII, France.
Brazilian Journal of Political Economy, Vol. 38 No. 2 (2018), Apr-Jun / 2018, Pages 338-357


Irving Fisher offered a ‘tentative’ debt-deflation theory of great depressions rather than a fully consistent theory of his ‘creed’: “I say "creed" because, for brevity, it is purposely expressed dogmatically and without proof. (…) it is quite tentative” (Fisher 1933, p 337). The paper argues that prominent authors who strived to explain his ideas within the Walrasian apparatus could not deliver a consistent theory of deflation with protracted depression. This is basically because destabilizing market forces cannot dominate in that conceptual framework. By contrast, owing to the way competitive forces operate under fundamental uncertainty, Keynes’s General Theory escapes the contradiction. 

JEL Classification: B26; E3; E4.

Keywords: Debt-deflation depression instability uncertainty