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  2. Permanent income hypothesis - Wikipedia

    en.wikipedia.org/wiki/Permanent_income_hypothesis

    The American economist Milton Friedman developed the permanent income hypothesis in his 1957 book A Theory of the Consumption Function. [7] In his book, Friedman posits a theory that explained how and why future expectations change consumption. [8] Friedman's 1957 book A Theory of the Consumption Function created the basis for consumption ...

  3. Milton Friedman - Wikipedia

    en.wikipedia.org/wiki/Milton_Friedman

    Milton Friedman (/ ˈ f r iː d m ən / ⓘ; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the complexity of stabilization policy. [4]

  4. Random walk model of consumption - Wikipedia

    en.wikipedia.org/wiki/Random_walk_model_of...

    Robert Hall was the first to derive the effects of rational expectations for consumption. His theory states that if Milton Friedman’s permanent income hypothesis is correct, which in short says current income should be viewed as the sum of permanent income and transitory income and that consumption depends primarily on permanent income, and if consumers have rational expectations, then any ...

  5. Consumption function - Wikipedia

    en.wikipedia.org/wiki/Consumption_function

    If this assumption is to be used, it would result in a nonlinear consumption function with a diminishing slope. Further theories on the shape of the consumption function include James Duesenberry 's (1949) relative consumption expenditure, [ 9 ] Franco Modigliani and Richard Brumberg's (1954) life-cycle hypothesis , and Milton Friedman 's (1957 ...

  6. Consumption smoothing - Wikipedia

    en.wikipedia.org/wiki/Consumption_smoothing

    Since Friedman's 1956 permanent income theory and Modigliani and Brumberg's 1954 life-cycle model, the idea that agents prefer a stable path of consumption has been widely accepted. [ 9 ] [ 10 ] This idea came to replace the perception that people had a marginal propensity to consume and therefore current consumption was tied to current income.

  7. Consumption (economics) - Wikipedia

    en.wikipedia.org/wiki/Consumption_(economics)

    The permanent income hypothesis was developed by Milton Friedman in the 1950s in his book A theory of the Consumption Function. This theory divides income into two components: is transitory income and is permanent income, such that = +.

  8. Consumer economy - Wikipedia

    en.wikipedia.org/wiki/Consumer_economy

    The absolute income hypothesis argues that income and demand generate consumption, and that the rise in GDP gives life to a rise in consumption. It was popularized by Keynes. Milton Friedman argues for a permanent income hypothesis, that consumption spending is a function of how rich you are. [6]

  9. Essays in Positive Economics - Wikipedia

    en.wikipedia.org/wiki/Essays_in_Positive_Economics

    Its critics however, had by then long pointed out the flaw in Friedman's reasoning: by shielding assumptions from the requirement of realism, Friedman admits falsehoods as part of his theory. He defends against this by requiring only certain phenomena of interest to be explained, but as Samuelson pointed out, this can lead to unscientific ...