Friedman’s book on the “Consumption Function” is one of the great works of Economics
demonstrating how the interplay between theoretical ideas and data analysis could lead to
major policy implications. We present a short review of Friedman’s Permanent Income
Hypothesis, the origins of the idea and its theoretical foundations. We give a brief
overview of its influence in modern economics and discuss some relevant empirical
results and the way they relate to the original approach taken by Friedman
