Wealth and the Consumption Function

-y_HE purpose of this paper is to present a new theory that explains the I observed relations among consumer expenditure, income, and wealth. The theory, presented in detail below, specifies that savings are the result of a discrepancy between the actual and the desired stock of wealth; when there is no discrepancy, savings equal zero. If income were to remain permanently constant, the desired stock of wealth would ultimately be accumulated and therefore consumption would equal net income. Positive savings will occur only if the secular trend of income is rising.