permanent income hypothesis
E96715
The permanent income hypothesis is an economic theory, associated with Milton Friedman and the Chicago School, which posits that individuals base their consumption decisions on expected long-term average income rather than current income.
All labels observed (1)
| Label | Occurrences |
|---|---|
| permanent income hypothesis canonical | 1 |
How this entity was disambiguated
This entity first appeared as the object of triple T827219 — resolving that mention is where its identity was fixed. The disambiguator weighed these candidate entities and picked the highlighted one (or “None”, minting a new entity). This is how homonymy is resolved: the same surface form can point to different entities.
NED1
Entity disambiguation (via context triple)
gpt-5-mini-2025-08-07
Target entity: permanent income hypothesis Context triple: [Chicago School economics, notableConcept, permanent income hypothesis]
-
A.
Ricardian equivalence
Ricardian equivalence is an economic theory proposing that consumers anticipate future taxes implied by government borrowing and therefore adjust their saving so that deficit-financed tax cuts do not affect overall demand.
-
B.
Inequality Reexamined
Inequality Reexamined is a philosophical and economic work by Amartya Sen that critically analyzes traditional views of inequality and justice through his capabilities approach.
-
C.
Laffer curve
The Laffer curve is an economic theory that illustrates the relationship between tax rates and government revenue, suggesting that beyond a certain point higher tax rates reduce total revenue by discouraging work and investment.
-
D.
Phillips curve framework
The Phillips curve framework is a macroeconomic concept that posits an inverse relationship between inflation and unemployment, shaping policymakers’ understanding of inflation dynamics and trade-offs in the postwar era.
-
E.
The Price of Inequality
The Price of Inequality is a book by economist Joseph Stiglitz that analyzes the causes and consequences of growing economic inequality and argues for policy reforms to create a fairer, more stable society.
- F. None of above. chosen
- G. Unsure - the case is ambiguous/there is not enough information to decide.
NED2
Entity disambiguation (via description)
gpt-5-mini-2025-08-07
Target entity: permanent income hypothesis Target entity description: The permanent income hypothesis is an economic theory, associated with Milton Friedman and the Chicago School, which posits that individuals base their consumption decisions on expected long-term average income rather than current income.
-
A.
Ricardian equivalence
Ricardian equivalence is an economic theory proposing that consumers anticipate future taxes implied by government borrowing and therefore adjust their saving so that deficit-financed tax cuts do not affect overall demand.
-
B.
Inequality Reexamined
Inequality Reexamined is a philosophical and economic work by Amartya Sen that critically analyzes traditional views of inequality and justice through his capabilities approach.
-
C.
Laffer curve
The Laffer curve is an economic theory that illustrates the relationship between tax rates and government revenue, suggesting that beyond a certain point higher tax rates reduce total revenue by discouraging work and investment.
-
D.
Phillips curve framework
The Phillips curve framework is a macroeconomic concept that posits an inverse relationship between inflation and unemployment, shaping policymakers’ understanding of inflation dynamics and trade-offs in the postwar era.
-
E.
The Price of Inequality
The Price of Inequality is a book by economist Joseph Stiglitz that analyzes the causes and consequences of growing economic inequality and argues for policy reforms to create a fairer, more stable society.
- F. None of above. chosen
Statements (49)
| Predicate | Object |
|---|---|
| instanceOf |
consumption theory
ⓘ
economic theory ⓘ macroeconomic concept ⓘ |
| associatedWith |
University of Chicago Department of Economics
ⓘ
surface form:
Chicago School of Economics
|
| assumes |
access to credit or saving instruments
ⓘ
intertemporal optimization of consumption ⓘ rational expectations in some formulations ⓘ |
| contrastsWith | current income hypothesis ⓘ |
| coreIdea |
consumers are forward-looking
ⓘ
consumers form expectations about future income ⓘ consumption depends more on permanent income than on current income ⓘ consumption depends on expected long-term average income ⓘ individuals smooth consumption over time ⓘ permanent income changes have large effects on consumption ⓘ saving is used to smooth consumption over the life cycle ⓘ temporary income changes have small effects on consumption ⓘ |
| criticizedFor |
assuming high degree of consumer rationality
ⓘ
assuming no liquidity constraints ⓘ assuming perfect capital markets ⓘ limited ability to explain excess sensitivity of consumption to income ⓘ limited ability to explain excess smoothness of consumption ⓘ |
| developedIn |
United States of America
ⓘ
surface form:
United States
|
| empiricalTest |
consumption response to lottery winnings
ⓘ
consumption response to social security changes ⓘ consumption response to temporary tax rebates ⓘ |
| field |
consumption economics
ⓘ
macroeconomics ⓘ microeconomics ⓘ |
| implies |
marginal propensity to consume out of permanent income is high
ⓘ
marginal propensity to consume out of transitory income is low ⓘ predictable income changes should not systematically change consumption ⓘ |
| influenced |
New Classical macroeconomics
ⓘ
modern consumption function modeling ⓘ rational expectations permanent income models ⓘ real business cycle theory ⓘ |
| influencedBy | Fisherian intertemporal choice theory ⓘ |
| mathematicalFormulation | consumption equals a constant fraction of permanent income ⓘ |
| proposedBy | Milton Friedman ⓘ |
| publication | A Theory of the Consumption Function ⓘ |
| publicationYear | 1957 ⓘ |
| relatedConcept |
Euler equation for consumption
ⓘ
intertemporal budget constraint ⓘ |
| relatedTo | life-cycle hypothesis ⓘ |
| timePeriod | mid-20th century ⓘ |
| usedIn |
analysis of tax policy effects on consumption
ⓘ
forecasting consumption ⓘ macroeconomic policy analysis ⓘ |
| usesConcept |
permanent income
ⓘ
transitory income ⓘ |
How these facts were elicited
The pipeline generated the facts above by prompting gpt-5.1 with this entity's name + description and the instruction below.
Instruction
You are a knowledge base construction expert. Given a subject entity and a description of it, return factual statements that you know for the subject as a JSON list of dictionaries(triples), where keys must be "subject", "predicate" and "object". The number of facts may be very high, between 25 to 50 or more, for very popular subjects. For less popular subjects, the number of facts can be very low, like 5 or 10. # Requirements - If you don't know the subject at all, return an empty list. - If the subject is not a named entity, return an empty list. - Include at least one triple where predicate is "instanceOf". - Do not get too wordy. - Separate several objects into multiple triples with one object.
Input
Subject: permanent income hypothesis Description of subject: The permanent income hypothesis is an economic theory, associated with Milton Friedman and the Chicago School, which posits that individuals base their consumption decisions on expected long-term average income rather than current income.
Referenced by (1)
Full triples — surface form annotated when it differs from this entity's canonical label.