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Four Laws of Consumption

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  • Kenneth W. Clements

Abstract

Scientific knowledge can be distilled into a set of laws that are sufficiently general and robust to be useful in describing and predicting behaviour – the behaviour of physical objects (the orbits of the planets, for example), invisible forces (electricity), economies (why some prosper and others languish) and people (education as deliberate investment in human capital). This paper identifies four empirical regularities in consumption behaviour that are sufficiently general and pervasive to qualify as ‘laws’: Engel’s law; the law of demand (the downward‐sloping demand curve); quantities more dispersed than prices; and the ‘law’ of -12 for price elasticities. In each case, I survey previous research, use international evidence to illustrate the workings of the laws and demonstrate their practical use.

Suggested Citation

  • Kenneth W. Clements, 2019. "Four Laws of Consumption," The Economic Record, The Economic Society of Australia, vol. 95(310), pages 358-385, September.
    • Handle: RePEc:bla:ecorec:v:95:y:2019:i:310:p:358-385
    DOI: 10.1111/1475-4932.12491
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    Cited by:

    1. Kenneth W Clements, 2023. "Tastes," Economics Discussion / Working Papers 23-01, The University of Western Australia, Department of Economics.
    2. Herwig Immervoll & Cathal O’Donoghue & Jules Linden & Denisa Sologon, 2023. "Who pays for higher carbon prices?: Illustration for Lithuania and a research agenda," OECD Social, Employment and Migration Working Papers 283, OECD Publishing.
    3. Eliyathamby A Selvanathan & Kenneth W Clements & Saroja Selvanathan, 2021. "CES, DIVISIA and 400+ SIGMAS," Economics Discussion / Working Papers 21-16, The University of Western Australia, Department of Economics.
    4. Chai, Andreas & Stepanova, Elena & Moneta, Alessio, 2023. "Quantifying expenditure hierarchies and the expansion of global consumption diversity," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 860-886.
    5. Clements, Kenneth W. & Mariano, Marc Jim M. & Verikios, George & Wong, Berwyn, 2022. "How elastic is alcohol consumption?," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 568-581.
    6. Cathal ODonoghue & Beenish Amjad & Jules Linden & Nora Lustig & Denisa Sologon & Yang Wang, 2023. "The Distributional Impact of Inflation in Pakistan: A Case Study of a New Price Focused Microsimulation Framework, PRICES," Papers 2310.00231, arXiv.org, revised Mar 2024.
    7. Fukase, Emiko & Martin, Will, 2020. "Economic growth, convergence, and world food demand and supply," World Development, Elsevier, vol. 132(C).
    8. Kenneth W Clements & Yihui Lan & Haiyan Liu & Long Vo, 2022. "The Icp, Ppp And Household Expenditure Patterns," Economics Discussion / Working Papers 22-18, The University of Western Australia, Department of Economics.
    9. Kenneth W. Clements & Long Vo & Marc Jim Mariano, 2020. "Import Penetration And Consumption Of Domestic And Foreign Varieties," Economics Discussion / Working Papers 20-20, The University of Western Australia, Department of Economics.
    10. Eliyathamby A. Selvanathan & Saroja Selvanathan & Lucille Wong & Maneka Savithri Jayasinghe, 2021. "Modelling Regional Consumption Patterns in Australia," The Economic Record, The Economic Society of Australia, vol. 97(317), pages 141-156, June.
    11. Rathnayaka, Shashika D. & Selvanathan, Eliyathamby A. & Selvanathan, Saroja, 2022. "Modelling the consumption patterns in the Asian countries," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 277-296.
    12. Clements, Kenneth W. & Vo, Long Hai & Mariano, Marc Jim, 2021. "Modelling import penetration," Economic Modelling, Elsevier, vol. 102(C).
    13. Long Hai Vo & Thai‐Ha Le, 2022. "COVID‐19 test‐kit trade and trade policy: Implications for developing countries," The World Economy, Wiley Blackwell, vol. 45(10), pages 3246-3268, October.

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