Jump to ContentJump to Main Navigation
Separability and AggregationThe Collected Works of W. M. Gorman, Volume I$
Users without a subscription are not able to see the full content.

W. M. Gorman, C. Blackorby, and A. F. Shorrocks

Print publication date: 1996

Print ISBN-13: 9780198285212

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198285213.001.0001

Show Summary Details
Page of

PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 01 April 2020

Professor Friedman's Consumption Function and the Theory of Choice

Professor Friedman's Consumption Function and the Theory of Choice

Chapter:
(p.89) 6 Professor Friedman's Consumption Function and the Theory of Choice
Source:
Separability and Aggregation
Author(s):

W. M. Gorman (Contributor Webpage)

, C. Blackorby, A. F. Shorrocks
Publisher:
Oxford University Press
DOI:10.1093/0198285213.003.0006

Although this paper, which was published in Econometrica 32 (1964) can be read as a straightforward budgeting argument, it was inspired by a claim of Sargan's about the necessary and sufficient conditions for Friedman's permanent income hypothesis to be valid. A version of this hypothesis shows that a 10% increase in permanent income leads to a 10% increase in expenditure in every period. Sargan (1957) claimed that this would lead to a 10% increase in expenditure on every commodity. Section 2 of the paper disposes of the Sargan claim by means of a counter‐example, and Sect. 3 presents the restrictions on the cost function that are both necessary and sufficient for Friedman's permanent income hypothesis to hold. The remaining sections apply the solution derived and its special cases to problems of decentralized decision‐making suggested by Strotz and Samuelson, and to a problem discussed by Drèze.

Keywords:   budgeting, choice, cost functions, decision‐making, expenditure, Friedman's consumption function, Friedman's permanent income hypothesis, permanent income

Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs , and if you can't find the answer there, please contact us .