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Does Clower’s Dual-Decision Hypothesis lead to the change in saving conclusion in Keynes’s General Theory?

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  • Wu, Cheng

Abstract

Keynes’ General Theory (1936) is probably the most challenging economics book ever written, with an abundance of hypotheses, concepts and theories. Twenty five years after its publication, Clower proposed an insightful explanation on Keynes, the Dual-Decision Hypothesis (DDH). Hall (1978) and Flavin (1981) seemingly reached the conclusion that, under certain conditions, consumption was independent of income. In contrast, Wu (2016) has shown that, change in saving has to be a function of income growth. In fact, applying Wu’s corrected consumption for period t+1, it is possible to show DDH equations leading to Keynes’ change in saving (and disequilibrium) conclusion.

Suggested Citation

  • Wu, Cheng, 2017. "Does Clower’s Dual-Decision Hypothesis lead to the change in saving conclusion in Keynes’s General Theory?," MPRA Paper 82120, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:82120
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    References listed on IDEAS

    as
    1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    2. Wu, Cheng, 2016. "New Result in Consumption Theory: Change in Savings and Income Growth – Nineteen Years Later," MPRA Paper 69582, University Library of Munich, Germany.
    3. Cheng K. WU, 2017. "Economics and how Obama could have lost the 2016 election too," Journal of Social and Administrative Sciences, KSP Journals, vol. 4(3), pages 283-288, September.
    4. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    5. Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October.
    6. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Wu, Cheng, 2018. "Clower’s Dual-Decision Hypothesis is economics," MPRA Paper 84013, University Library of Munich, Germany.
    2. Cheng K. WU, 2018. "Clower’s Dual-Decision Hypothesis is economics," Turkish Economic Review, KSP Journals, vol. 5(1), pages 83-88, March.

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    More about this item

    Keywords

    consumption; martingale; savings; growth; income; trade; Clower; dual decision hypothesis; keynes;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F0 - International Economics - - General
    • J0 - Labor and Demographic Economics - - General
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations

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