A Theoretical and Methodoloical Critique of the Principle of Relative Constancy

Abstract

This article revisits the theoretical assumptions of the principle of relative constancy (PRC). This principle, or hypothesis, holds that consumers spend a constant fraction of their income on mass media over time (constancy assumption), although they are expected to alter their spending patterns within mass media categories in response to the introduction of new mass media products or services (functional equivalence assumption). But application of demand theory to the PRC reveals that whereas the functional equivalence assumption can be phrased in economic terms, there is no such validation for the constancy assumption. That assumption was found to be inconsistent with the Engel law/curve in that this traditional microeconomic model of consumer choice does not posit, as does the PRC, a proportional relationship between expenditures on mass media and income. Furthermore, the empirical literature reviewed here suggests mixed support for the PRC, casting more doubts on the validity of the PRC as a theoretically grounded, empirically determined hypothesis. The article identifies and discusses five methodological factors that may explain why PRC studies offer conflicting evidence. Finally, it proposes a series of theoretical and methodological recommendations for conducting future research on consumer mass media expenditures.