Hostname: page-component-cd9895bd7-jkksz Total loading time: 0 Render date: 2024-12-28T08:19:38.191Z Has data issue: false hasContentIssue false
  • English
  • Français

RELATIVE INCOME VS. PERMANENT INCOME: THE CRISIS OF THE THEORY OF THE SOCIAL SIGNIFICANCE OF CONSUMPTION

Published online by Cambridge University Press:  13 August 2012

ATTILIO TREZZINI
Get access Rights & Permissions [Opens in a new window]

Abstract

The investigation of aggregate consumption underwent a radical change in the USA during the 1940s and 1950s. Principles deriving from the American Institutionalist tradition attained their greatest popularity in Duesenberry’s formulation just before they were rapidly abandoned. This paper examines this turning point by comparing Duesenberry’s relative income hypothesis and Friedman’s permanent income hypothesis. This also makes it possible to identify a particular feature of Duesenberry’s analysis—its heterogeneity—which must be taken into consideration by those seeking a return to Institutionalist principles in the analysis of aggregate consumption.

Type
Research Articles
Information
Journal of the History of Economic Thought , Volume 34 , Issue 3 , September 2012 , pp. 355 - 377
Copyright
Copyright © The History of Economics Society 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Arrow, J. K. 1950. “Review of Income, Saving, and the Theory of Consumer Behavior by James Duesenberry.” American Economic Review 40 (5): 906–911.Google Scholar
Asso, P. F., and Fiorito, L.. 2008. “Was Frank Knight an Institutionalist?” Review of Political Economy 20 (1): 59–77.CrossRefGoogle Scholar
Bennion, E. G. 1946. “The Consumption Function: Cyclically Variable?” The Review of Economic Statistics 28: 219–224.CrossRefGoogle Scholar
Brady, D. S., and Friedman, R. D.. 1947. “Savings and Income Distribution.” Studies in Income and Wealth 10: 247–265. New York: NBER,Google Scholar
Clower, R. W. 1951. “Professor Duesenberry and Traditional Theory.” Review of Economic Studies 19: 165–178.CrossRefGoogle Scholar
Cook, S. 2000. “A Neglected Controversy in the Modelling of Consumers’ Expenditure.” Cambridge Journal of Economics 24: 177–191.CrossRefGoogle Scholar
Deaton, A. 1992. Understanding Consumption. Oxford: Oxford University Press.CrossRefGoogle Scholar
Dorfman, J. 1959. The Economic Mind in American Civilization. New York: The Viking Press.Google Scholar
Drakopoulos, S. A. 2010. The History of the Mainstream Rejection of Interdependent Preferences. MPRA Paper 23980. Munich: University Library of Munich.Google Scholar
Duesenberry, J. S. 1948. “Income-consumption Relations and Their Implications” In Metzler, Lloyd A., ed., Income, Employment and Public Policy; Essays in Honor of Alvin H. Hansen. New York: W.W. Norton,.Google Scholar
Duesenberry, J. S. 1949. Income, Saving and the Theory of Consumer Behavior. Cambridge, Mass.: Harvard University Press.Google Scholar
Ezekiel, M. 1942. “Statistical Investigations of Saving, Consumption, and Investment (I) Saving, Consumption and National Income.” American Economic Review 32: 22–49.Google Scholar
Fisher, I. 1907. The Rate of Interest. New York: Macmillan,.Google Scholar
Fisher, I. 1930. The Theory of Interest. New York: Macmillan,.Google Scholar
Friedman, M. 1957. A Theory of the Consumption Function. Princeton: Princeton University Press.CrossRefGoogle Scholar
Friedman, M., and Kuznets, S.. 1945. Incomes from Independent Professional Practice. New York: NBER.Google Scholar
Garegnani, P., and Trezzini, A.. 2010. “Cycles and Growth: A Source of Demand-Driven Endogenous Growth.” Review of Political Economy 22: 1, 119–125.CrossRefGoogle Scholar
Gilboy, E. W. 1932. “Demand as a Factor in the Industrial Revolution.” In Facts and Factors in Economic History. Articles by former Students of Edwin Francis Gay. Cambridge, Mass.: Harvard University Press.Google Scholar
Goldsmith, R. W. 1955. A Study of Saving in the United States. Volume I. Princeton: Princeton University Press.Google Scholar
Hayakawa, H., and Venieris, Y.. 1977. “Consumer Interdependence via Reference Groups.” Journal of Political Economy 85:.599–615.CrossRefGoogle Scholar
Hicks, J. R. 1939. Value and Capital. Oxford: Oxford University Press.Google Scholar
Hodgson, G. M. 2004. The Evolution of Institutional Economics. London: Routledge.CrossRefGoogle Scholar
Hoyt, E. E. 1938. Consumption in Our Society,. New York: McGraw-Hill.Google Scholar
Kaplan, A. D. H. 1938. “Expenditure Patterns of Urban Families.” Journal of the American Statistical Association 33: 81–100.CrossRefGoogle Scholar
Keynes, J. M. [1936] 1973. The General Theory of Employment, Interest and Money. London and Basingstoke: The Macmillan Press Ltd.Google Scholar
Krelle, W. 1972. “Dynamics of the Utility Function.” Zeitschrift fur Nationalekonomie 32: 59–70.CrossRefGoogle Scholar
Kuznets, S. 1942. Uses of National Income in Peace and War. Occasional Paper 6. New York: NBER.Google Scholar
Kuznets, S. 1946. National Product Since 1869. New York: NBER.Google Scholar
Kyrk, H. 1923. A Theory of Consumption. New York and Boston: Houghton Miffin.Google Scholar
Leibenstein, H. 1950. “Bandwagon, Snob, and Veblen Effects in the Theory of Consumers’ Demand.” Quarterly Journal of Economics 64 (2): 183–207.CrossRefGoogle Scholar
MackRuth, P. Ruth, P. 1948. “The Direction of Change in Income and the Consumption Function.” Review of Economics and Statistics XXX: 256.Google Scholar
Mason, R. 2000. “The Social Significance of Consumption: James Duesenberry’s Contribution to Consumer Theory.” Journal of Economic Issues 34 (3): 553–572.CrossRefGoogle Scholar
McCormick, K. 1983. “Duesenberry and Veblen: The Demonstration Effect Revisited.” Journal of Economic Issues 17 (4): 1125–1129.CrossRefGoogle Scholar
McMahon, T. 1925. Social and Economic Standards of Living. Boston, New York: D.C. Heat.Google Scholar
Meghir, C. 2004. “A Retrospective on Friedman’s Theory of Permanent Income.” The Economic Journal 114, 496 (Features, June): F239–F306. Blackwell Publishing for The Royal Economic Society.CrossRefGoogle Scholar
Mitchell, W. C. 1912. “The Backward Art of Spending Money.” The American Economic Review 2: 269–281.Google Scholar
Modigliani, F. 1949. “Fluctuations in the Saving-Income Ratio: A Problem in Economic Forecasting.” Studies in Income and Wealth 11: 371–441. New York: NBER.Google Scholar
Modigliani, F., and Brumberg, R., R, . 1954. “Utility Analysis and the Consumption Function: An Interpretation of Cross-Section Data”. In Kurihara, K. K., ed., Post-Keynesian Economics. London: Allen & Unwin.Google Scholar
Morgan, M., and Rutherford, M., eds. 1998., From Interwar Pluralism to Postwar Neoclassicism. Durham: Duke University Press.Google Scholar
Mosak, M. S. 1945. “Forecasting Postwar Demand: III.” Econometrica 13: 25–53.CrossRefGoogle Scholar
Ogburn, W. F. 1919. “Analysis of the Standard of Living in the District of Columbia in 1916.” Journal of the American Statistical Association 16: 374–394.Google Scholar
Palley, Thomas I. 2010. “The Relative Permanent Income Theory of Consumption: A Synthetic Keynes-Duesenberry-Friedman Model.” Review of Political Economy 22: 1, 41–56.CrossRefGoogle Scholar
Peixotto, J. B. 1927. Getting and Spending at the Professional Standard of Living: A Study of the Costs of an Academic Life. New York: Macmillan.Google Scholar
Peixotto, J. B. 1929. How Workers Spend a Living Wage: A Study of the Incomes and Expenditures of Eighty-Two Typographers’ Families in San Francisco. Berkeley: University of California Publications in Economics, n°5.Google Scholar
Pigou, A. C. 1951. “Professor Duesenberry on Income and Savings.” Economic Journal 61: 883–885.CrossRefGoogle Scholar
Polak, J. J. 1939. “Fluctuations in United States Consumption, 1919–32.” Review of Economic Statistics 21: 1–12.CrossRefGoogle Scholar
Pollak, R. A. 1976. “Interdependent Preferences.” The American Economic Review 66, 3 (June): 309–320.Google Scholar
Prais, S. J., and Houthaker, H. S.. 1955. The Analysis of Family Budgets. New York: Cambridge University Press.Google Scholar
Rutherford, M.., ed. 1998. The Economic Mind in America: Essays in the History of American Economics. London and New York: Routledge.CrossRefGoogle Scholar
Samuelson, P. A. (1943) “Full Employment After the War”. In Harris, S. E., ed., Postwar Economic Problems. McGraw Hill, New York, pp. 27–53.Google Scholar
Smithies, A. 1945. “Forecasting Postwar Demand: I.” Econometrica 13: 1–14.CrossRefGoogle Scholar
Stigler, G. J. 1954. “The Early History of Empirical Studies of Consumer Behaviour.” Journal of Political Economy 42: 95–113.CrossRefGoogle Scholar
Stone, J. R. N. 1942. “National Income in the United Kingdom and the United States of America.” Review of Economic Studies 10: 1–27.CrossRefGoogle Scholar
Thomas, J. J. 1989. “The Early Econometric History of the Consumption Function.” Oxford Economic Papers 41: 131–149.CrossRefGoogle Scholar
Trezzini, A. 2005a. “The Economics of Consumption as a Social Phenomenon: A Neglected Approach to the Analysis of Consumption.” Quaderno di ricerca n. 2, DIeS Dipartimento Innovazione e Società Roma.Google Scholar
Trezzini, A. 2005b. “The Irreversibility of Consumption and Economic Growth.” Quaderno di Ricerca del Centro Studi e Documentazione “Piero Sraffa” n. 6.Google Scholar
Veblen, T. B. [1899] 1965. The Theory of the Leisure Class. Reprints of Economic Classics. New York: Augustus M. Kelley Bookseller.Google Scholar
Veblen, T. B. 1909a. “The Limitations of Marginal Utility.” Journal of Political Economy 17: 620–636.CrossRefGoogle Scholar
Veblen, T. B. 1909b. “Fisher’s Rate of Interest.” Political Science Quarterly 24: 296–303.CrossRefGoogle Scholar
Williams, Faith M., and Zimmerman, C. C.. 1935. Studies of Families Living in the United States and Other Countries. U.S. Department of Agriculture, Publication 223.Google Scholar
Woytinsky, W. S. 1946. “Relationship Between Consumers’ Expenditures, Savings, and Disposable Income.” Review of Economic Statistics 28: 1–12.CrossRefGoogle Scholar