liquidity constraints. Carroll (1997) and Carroll (2001) dispute this, and adjust the model for limits on borrowing. A comprehensive analysis of 3000 tests of the hypothesis provides another explanation. It argues that rejections of the hypothesis are based on publication bias and that after correction, it is consistent with data. Policy implications According to Costas Meghir, unresolved inconsistencies explain the failure of transitory Keynesian demand management techniques to achieve its policy targets. In a simple Keynesian framework the marginal propensity to consume (MPC) is assumed constant, and so temporary tax cuts can have a large stimulating effect on demand. Shapiro & Slemrod (2003) find that consumers spread tax rebates over their temporal horizon. Reception Criticism Some critics of the permanent income hypothesis, such as Frank Stafford, have criticized the permanent income hypothesis for its lack of liquidity constraints. However, some studies have adapted the hypothesis for certain circumstances and found that the permanent income hypothesis is compatible with liquidity constraints and other market failures unaccounted for in the original hypothesis. Alvarez-Cuadrado & Van Long (2011) argue that more affluent consumers save more of their permanent incomes, against what would be expected given the permanent income hypothesis. Praise Friedman received the 1976 Sveriges Riksbank prize in Economic Sciences in Memory of Alfred Nobel 'For his achievements in the field of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy.' The 'consumption analysis' has been interpreted by Worek (2010) as representing Friedman's contributions in the form of the permanent income hypothesis, while the monetary history and stabilization section has been interpreted to refer to his work on monetary policy and history, and monetarism, which seeks to stabilize a currency, preventing erratic swings, respectively. The Permanent Income Hypothesis has been met with praise from Austrian economists, such as Robert Mulligan. See also Consumption smoothing Income#Economic definitions Milton Friedman Ricardian equivalence Risk compensation Milton Friedman bibliography Notes References Milton Friedman Consumer theory Household income