The Italian Debate on the Aggregate Consumption Function: The Life Cycle Hypothesis versus Kaldorrs Theory (1960s-1970s)

Abstract

This paper discusses the difficult acceptance of Modigliani’s LCH in Italy over the 60s and 70s and explains it by the economic and intellectual context. In particular, the paper examines connections between the LCH model and the Kaldorian consumption functions, its main competing theory in the explanation of economic growth, and the indirect involvement of Modigliani’s saving theory in the larger dispute on the capital theory. The strong influence that the Anglo-Italian school of thought exercised in the Italian theoretical and political debate in the 1960s and early 70s certainly contributed to prevent the acceptance of Modigliani’s LCH.