The Econometric Society An International Society for the Advancement of Economic Theory in its Relation to Statistics and Mathematics
Home Contacts
Econometrica

New Journals

Econometrica
Editorial Board
Journal News

Monograph Series

January 1964 - Volume 32 Issue 1 Page 189 - 197


p.189


Professor Friedman's Consumption Function and the Theory of Choice

W. M. Gorman

Abstract

Turning now to the Friedman theory of consumption, there is a basic assumption which is fundamental to this theory which must be challenged. This is that the utility function can be assumed to be homogeneous in the value of consumption at different dates. For this to be true for all possible sets of prices for the different commodities it would be necessary for the utility function to be completely homogeneous in the quantities of all the goods consumed. And, if this were true, then a change in the level of income would produce proportionate changes in the consumption of all commodities. This is so contrary to common sense and the results of empirical research that the assumption of complete homogeneity must be dismissed. It follows that Friedman's basic assumption of the homogeneity of the utility function considered as a function of the total value of consumption at different periods could only hold true for certain special sets of prices. And it seems a priori rather unlikely that one of these special sets of prices should happen to coincide with the actual and expected market prices.

Full content Login                                    

Note: to view the fulltext of the article, please login first and then click the "full content" button. If you are based at a subscribing Institution or Library or if you have a separate access to JSTOR/Wiley Online Library please click on the "Institutional access" button.
Prev | All Articles | Next
Go to top
Membership



Email me my password
Join/Renew
Change your address
Register for password
Require login:
Amend your profile
E-mail Alerting
The Society
About the Society
Society News
Society Reports
Officers
Fellows
Members
Regions
Meetings
Future Meetings
Past Meetings
Meeting Announcements
Google
web this site
   
Wiley-Blackwell
Site created and maintained by Wiley-Blackwell.
Comments? Contact customsiteshelp@wiley.com
To view our Privacy Policy, please click here.