Gibson's paradox

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Gibson's Paradox was the observation that, during the gold standard era, the rate of interest and the general level of prices were observed to be correlated.

The term was first used by John Maynard Keynes, in his 1930 work, A Treatise on Money. It was believed to be a paradox because the economic theory of the time predicted that the rate of interest would be instead correlated with the rate of change in the general level of prices. Keynes commented that the observed correlation was, "one of the most completely established empirical facts in the whole field of quantitative economics."

[edit] References

• Keynes, John Maynard (1930). A Treatise on Money. Macmillan. ISBN 0-404-15000-4. 
• Robert B Barsky, Lawrence H Summers (1988). "Gibson's Paradox and the Gold Standard". The Journal of Political Economy 96: 528–550.