ABSTRACT
It is well known in the history of economics that there are two strands of demand analysis: theoretical and empirical. The theoretical strand refers to the attempts to derive demand curves from utility-maximizing behaviour; the empirical strand emphasizes the statistical analysis of the relationship between prices and quantities. The first contribution to measure demand functions and obtain empirical laws is Ernst Engel’s investigation of the relation between income and consumption expenditure by using data on Belgian families. It is attempted in this chapter to construe Stone’s LES model in terms of the semantic view. Stone’s methodological account of economic measurement was provided in The role of measurement in economics, which was based on his Newmarch Lectures given at University College London in 1949. Stone’s LES model is an example of the kinds of linear consumption functions that were popular devices as ‘a perfectly proper procedure’ in demand analysis in the first half of the last century.
