Deaton Paradox

economics

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July 21, 2026

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The Deaton Paradox, identified by economist Angus Deaton, highlights a puzzling observation in consumer behavior. It notes that consumption doesn't fluctuate significantly when individuals experience income shocks. This contradicts traditional economic models, such as the life-cycle theory and the permanent income hypothesis, which predict more substantial changes in spending based on expected future income and wealth.12

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Angus Deaton
…came to be called the Deaton Paradox, and it was instrumental in spurring a rapid expansion of research into the careful study of consumer behaviour in economics, both theoretically and empirically.
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…came to be called the Deaton Paradox, and it was instrumental in spurring a rapid expansion of research into the careful study of consumer behaviour in economics, both theoretically and empirically.
Read More