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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.
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"Milton Friedman" is a senior research fellow at the Hoover Institution of Stanford University. Before that, he was Paul Snowden Russell Distinguished Service Professor of Economics at the University of Chicago. He has also taught at Columbia University, the University of Wisconsin, the University of Minnesota, and Cambridge University. Among his many books are "Essays in Positive Economics, A Program for Monetary Stability, Capitalism and Freedom, A Monetary History of the United States", and "The Optimum Quantity of Money".Review:
"Friedman argued that the best way to make sense of saving and spending was not, as Keynes had done, to resort to loose psychological theorizing, but rather to think of individuals as making rational plans about how to spend their wealth over their lifetimes. This wasn't necessarily an anti-Keynesian idea--in fact, the great Keynesian economist Franco Modi-gliani simultaneously and independently made a similar case, with even more care in thinking about rational behavior, in work with Albert Ando. But it did mark a return to classical ways of thinking--and it worked. The details are a bit technical, but Friedman's 'permanent income hypothesis' and the Ando-Modigliani 'life cycle model' resolved several apparent paradoxes about the relationship between income and spending, and remain the foundations of how economists think about spending and saving to this day."--Paul Krugman, New York Times
"Friedman described Keynes's theory of a declining propensity to consume as 'very imaginative and thoughtful.' But in A Theory of the Consumption Function (1957), he demonstrated that while the hypothesis seemed to make psychological sense, it was empirically false. In relating income to propensity to consume, Keynes had erred in not distinguishing between 'transitory' and 'permanent' income. In fact, consumption does not decline as incomes generally rise. Economists across the political spectrum agreed with Friedman's refutation of Keynes."--James A. Nuechterlein, Commentary
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Book Description Princeton University Press, 1957. Condition: Good. First Edition. Former Library book. Shows some signs of wear, and may have some markings on the inside. Seller Inventory # GRP10280066
Book Description Princeton University Press, 1957. Condition: Good. A+ Customer service! Satisfaction Guaranteed! Book is in Used-Good condition. Pages and cover are clean and intact. Used items may not include supplementary materials such as CDs or access codes. May show signs of minor shelf wear and contain limited notes and highlighting. Seller Inventory # 0691041822-2-4
Book Description Princeton University Press, 1957. Hardcover. Condition: Used: Good. Seller Inventory # SONG0691041822
Book Description Princeton University Press 1957-06, 1957. Hardcover. Condition: good. 0691041822. Seller Inventory # 582046
Book Description Princeton University Press, 1957. Hardcover. Condition: Very Good. Great condition with minimal wear, aging, or shelf wear. Seller Inventory # P020691041822
Book Description Princeton University Press, 1957. Hardcover. Condition: Collectible: Very Good. First Edition. First Edition, First Printing in original jacket. (No later printings stated on the copyright page. Jacket's titles all predate publication date, unlike later issue jackets.) In Very Good condition, in original blue cloth binding with gilt stamping to the spine. Clean text. Sound binding. Light cigar smoke odor to pages, may very well dissipate over time. Top of page corners often show a gently bump. Previous owner (Helmar H. Veltzke, a published economist) stamp and signature to front free end paper. The cloth is clean and crisp, with light touches of rubbing. The gilt lettering is legible, but lightly rubbed. The dust jacket price-clipped, shows sunning and light scuffing, as well as a series of indents to the surface of the front panel at about the center. A lovely copy. Seller Inventory # 140906053