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By Staff Reporters
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Angus Deaton’s 1980s studies, including one called “Why is consumption so smooth?” gave birth to a concept called the Deaton Paradox — in short, sharp shocks to income didn’t seem to cause similarly large shocks to consumption.
IOW: Consumption varies surprisingly smoothly despite sharp variations in income.
CITE: https://www.r2library.com/Resource/Title/0826102549
According to David Henderson, this was an important development in understanding the actions of consumers, causing economists to rethink the “permanent income hypothesis” developed by Milton Friedman, which suggested that people spend based on their lifetime income.
And, Mike Bird wrote a good article on Deaton the highlighted the Nobel Prize in Economics Committee.
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Filed under: "Ask-an-Advisor", Financial Planning, Funding Basics, Glossary Terms, Health Economics, iMBA, iMBA, Inc., Investing, Jokes and Puns | Tagged: Angus Deaton, david henderson, deaton paradox, deaton's paradox, iMBA, mike bird, Milton Friedman |
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