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It was a strike against the edifice of policy and politics coming to rest upon Keynesian concepts of savings and consumption. Years later, Friedman spelled out the ultimate implications. Dorothy and Rose’s paper fed into a much larger body of research, the permanent income hypothesis, that “removes completely one of the pillars of the ‘secular stagnation’ thesis.” It also had implications for the Keynesian proposition that there was “no automatic force in a monetary economy to assure the existence of a full-employment equilibrium.”9 On the surface, Dorothy and Rose had published a basic research report. Considered in the bigger picture, their conclusions spoke to the politically charged question of consumption. Was the paper deliberately framed as an attack upon Keynes?10 Both women were dedicated empiricists, and the problem in the data was compelling. At the same time, the solution they came up with dovetailed nicely with each woman’s intellectual inclinations. The paper’s emphasis on relative income reflected the traditional approach of consumption research that Dorothy knew well. Dorothy’s long tenure in reformist D.C. agencies suggests that like most consumption economists, she was probably sympathetic to New Deal social spending. By contrast, although Rose has left little trace of her thinking in this period, she was among the most loyal of Frank Knight’s students. His teachings would have primed her to be skeptical of both the New Deal and the Keynesian concepts that were newly popular among economists.
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