ABSTRACT

In Post Keynesian Economics, theorists have sought an alternative to neoclassical choice theory by turning to Maslow's hierarchy of needs (Pasinetti 1981, Lavoie 1992). Instead of each individual surveying a complete choice set, individuals prioritize (basic) physiological needs, moving with increasing incomes to satisfy safety and social needs, through to the higher needs associated with self-actualization. This framework provides a theoretical foundation for the Engel curve, since as incomes increase consumers become satiated when particular needs are satisfied. As an alternative to the neoclassical preoccupation with prices and substitution, a Post Keynesian theory of consumption has been formulated with income effects as the cornerstone.