Consumption and the Consumption Function in the U.S. 1948-1949 Recession
CONSUMPTION has been cast as both villain and hero in the 1948-49 recession in the United States. It has been asserted that a weakening of consumption was important in accounting for the downturn. R. A. Gordon cites the levelling off of consumer demand as one of several factors responsible for the downturn.1 D. Hamberg has suggested an underconsumptionist explanation of the downturn.2 Even C. A. Blyth who set out to prove that the most important cause of the I948-I949 recession was a substantial fall in fixed investment . felt compelled to state in his conclusions, I accept the view that a reduced rate of growth in consumption both domestically and in the export trade in I948 caused unplanned inventory accumulation, which induced a fall in production of certain nondurables and consumer durables.3 Further, it has been argued that it was the strength of consumption which at least in part accounted for the mildness of the I949 recession. R. Fels asserts that an upward shift in the consumption function occurred in I949 which, along with continuing high levels of autonomous investment and government expenditures, accounted for the mildness of the recession.4 R. A. Gordon had adopted a similar view earlier, both with respect to the mitigating effects of the maintenance of a high level of consumption and to the strength of autonomous investment and government expenditures, although he makes no explicit reference to a shift of the consumption function.5 Hamberg points to the secular rise in the consumption function, deferred consumer replacement demand, and high levels of autonomous investment as factors explaining why this recession failed to develop into a major downturn.6 Blyth cites the continued rise in consumption during I949 as one among several factors which modified the recession.7 Since consumption figures largely in explanations of the I948-49 cycle, and in fact appears called upon to play a dual role, it may be useful to direct careful inquiry into determining what influences prompted consumption to behave as it did.
- DOI
- 10.2307/1926046
- Volume
- 39 (3)
- Pages
- 303
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