When you’re wrong, you’re wrong, no matter how famous and respected you might be as a scientist. Albert Einstein was wrong about quantum mechanics. Linus Pauling was wrong about the structure of DNA. And Milton Friedman was wrong about the permanent income hypothesis. But unlike with the first two examples, where scientists quickly realized the mistake, economists haven’t yet come to grips with the reality.
Friedman’s theory says that people’s consumption isn’t affected by how much they ...
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2017