Theory of the Consumption Function: 63 (National Bureau of Economic Research) - Softcover

Friedman, Milton

Softcover

ISBN 10: 0691138869 ISBN 13: 9780691138862

Publisher: Princeton University Press, 2008

Synopsis

What is the exact nature of the consumption function? Can this term be defined so that it will be consistent with empirical evidence and a valid instrument in the hands of future economic researchers and policy makers? In this volume a distinguished American economist presents a new theory of the consumption function, tests it against extensive statistical J material and suggests some of its significant implications.


Central to the new theory is its sharp distinction between two concepts of income, measured income, or that which is recorded for a particular period, and permanent income, a longer-period concept in terms of which consumers decide how much to spend and how much to save. Milton Friedman suggests that the total amount spent on consumption is on the average the same fraction of permanent income, regardless of the size of permanent income. The magnitude of the fraction depends on variables such as interest rate, degree of uncertainty relating to occupation, ratio of wealth to income, family size, and so on.


The hypothesis is shown to be consistent with budget studies and time series data, and some of its far-reaching implications are explored in the final chapter.

About this title

About the Author

Milton Friedman (1912-2006) was awarded the Nobel Prize in Economics in 1976. He was a Senior Research Fellow at the Hoover Institution and had previously taught at the University of Chicago from 1946 to 1976. He was also a member of the research staff of the National Bureau of Economic Research from 1937 to 1981.

Edition details

• Publisher: Princeton University Press
• Publication date: 2008
• Language: English
• ISBN 10: 0691138869
• ISBN 13: 9780691138862
• Binding: Paperback
• Number of pages: 260