The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Relative Income Hypothesis

  • Richard F. Kosobud
Reference work entry


The relative income hypothesis as expressed by its foremost exponent was an effort to reconcile conflicting evidence revealed by consumption functions fitted to long and short-period time series, and budget data; to bring social psychology into consumer theory; and to restore virtue to the act of saving (Duesenberry 1962). While proposed as a critique of the Keynesian consumption function, neither its formulation nor implications weakened the concept of deficient aggregate demand nor the grounds for stabilization policy. It was consequently well within the framework of the vast research programme stimulated by the General Theory.

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Richard F. Kosobud
    • 1
  1. 1.