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

Cheng K. Wu ()
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Cheng K. Wu: Growonders Corp., USA.

Journal of Economics Library, 2017, vol. 4, issue 4, 552-560

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.

Keywords: Keynes; Clower; Keynesian; Disequilibrium; Dual decision hypothesis; Consumption; Martingale. (search for similar items in EconPapers)
JEL-codes: A10 B2 B22 C20 E20 E60 F00 (search for similar items in EconPapers)
Date: 2017
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