The Theory

Abstract

In the early post-war period, there remained little understanding of the personal financial decisions of households. Various researchers had noticed discrepancies in the data that more simplistic models from Irving Fisher and John Maynard Keynes could not explain. The data suggested that consumption remained remarkably stable over time, which implied that savings, as the difference between disposable income and consumption, would be highly volatile as income changed. Savings, too, seemed to follow a steadier path.