Fifteen years after the Global Financial Crisis: Recessions and Business Cycles in the History of Economic Thought

The economics of consumption as a social phenomenon and the debate on the aggregate consumption function

Trezzini Attilio, Università Roma Tre Department of Economics

The idea that the choices of individuals are affected by social elements such as considerations of status is present in the economic theory since the very origins of the discipline itself. At the beginning of the 20th century, some American institutionalist (women) economists – H. Kyrk, T. McMahon, J Peixotto and E. Gilboy - developed theoretical, empirical and historical contributions that constituted a theory of consumption. As originally argued by Veblen, consuming certain goods makes it possible to identify with specific social groups and this idea is assumed as the basis of a complete theory of consumption that, in the original formulations, was independent of - and even in opposition to - the principles of marginalist analyses. The origins, the early phases and the transformations of these theories have been recently analysed. The present paper tries to argue that this approach was quite popular at least till the 50ies, being a reference point for the economists who first tried to study aggregate consumption function both from theoretical and empirical points of view. An echo of this approach - probably due to a direct knowledge of the theoretical and empirical contributions of the American women economists - can in fact be found in the General Theory. In empirical econometric works of the 1940ties, some American economists used assumptions based on this approach as the most natural choice for their econometric analyses of aggregate consumption aiming to solve an empirical puzzle. Some of these authors - F. Modigliani and P. Samuelson – were destined to become very famous mainstream economists. At that stage, however, as the institutionalists of the first phase of the approach, they made no reference to marginalist principles.

Area: Eshet Conference

Keywords: Social relevance of consumption, Consumption theories, American institutionalists

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