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relies on well-known and consistent preferences defined at a
given level of per-capita income. Such a theory is indeed useful
in showing the consequences of price changes, at a given level
of income, but has nothing to offer us to explain changes fol-
lowing each successive increment of income.
The regrettable consequence has been, that when economists
— by introducing technical progress in their models — have
been compelled to make definite hypotheses about the expan-
sion of demand, in the absence of any guiding principle,
have made those assumptions that best suited the mathematical
properties of their models. As we have seen, they have inva-
riably postulated, either explicitly or implicitly, a uniform and
proportional expansion of per-capita demand (7).
Now, if there is something that we do positively know about
expansion of per-capita demand when income increases, it is
that per-capita demand for each commodity does not expand
proportionally. All the empirical investigators who, in the last
hundred years, have looked into this matter have invariably
and without exception confirmed this tendency.
As is well known, the first empirical generalizations on the
evolving pattern of demand, in response to increases in income,
come from an old discovery in economics which goes back to
ERNST ENGEL (*) in the 1850’s. ENGEL, after studying the
conditions of consumption of workers in the kingdom of
Saxony, stated what has since become known as Engel’s law.
The law says that the proportion of income spent on food dec-
lines as income increases. A more general formulation of this
() The effect of this is that all models of economic growth now-a-days
share a defect which was characteristic of Classical analysis. They have
concentrated their emphasis exclusively on the production side of the’ eco-
aomic process and have entirely forgotten the other half of economic reality,
related to demand.
(®) Ernst ENGEL, Die Productions- und Consumptionsverhiltnisse des
Känigreichs Sachsen, in « Zeitschrift der Statistischen Bureaux des Kôniglich
Sächsischen Ministerium des Inneren », Nos. 8 and go, Nov. 22, 1857; repub-
lished in « Bulletin de l’Institut International de Statistique ». IX (1805).
Io] Pasinetti - pag. 60
