the permanent income hypothesis in his 1957 book A Theory of the Consumption Function. In his book, Friedman posits a theory that explained how and why future expectations change consumption. Friedman's 1957 book created the basis for consumption smoothing. He argued the consumption model, in which outcomes are stochastic, where consumers face risks and uncertainty to their labor incomes, complicates interpretations of indifference curves, and causes consumers to spread out or 'smooth' their spending based on their permanent income, which represents their anticipated income over their lifetimes. Friedman explain in A Theory of the Consumption Function how consumers interact with money based on not just windfall gains, but through their permanent income because consumers will save when they expect their long term income to rise. He writes: Theoretical considerations In his theory, John Maynard Keynes supported economic policy makers by his argument emphasizing their capability of macroeconomic fine tuning. For Keynes, consumption expenditures are linked to disposable income by a parameter called the marginal propensity to consume (the amount per dollar consumers are willing to spend; ). Since the marginal propensity to consume itself is a function of income, it is also true that additional increases in disposable income lead to diminishing increases in consumption expenditures. It must be stressed that the relation characterized by substantial stability links current consumption expenditures to current disposable income—and, on these grounds, a considerable leeway is provided for aggregate demand stimulation, since a change in income immediately results in a multiplied shift in aggregate demand (this is the essence of the Keynesian case of the multiplier effect). The same is true of tax cut policies. According to the basic theory of Keynes, governments are always capable of countercyclical fine tuning of macroeconomic systems through demand management, although Friedman disputes this, arguing in a 1961 journal article that Keynesian macroeconomic fine tuning will succumb to 'long and variable lags.' The permanent income hypothesis questions this ability of governments. However, it is also true that permanent income theory is concentrated mainly on long run dynamics and relations, while Keynes focused primarily on short run considerations. Friedman's argument, which challenged the use of fiscal policy in smoothing out business cycles, was challenged by stressing the relation between consumption and disposable income still follows (more or less) the mechanism supposed by Keynes. Friedman starts elaborating his theory under the assumption of complete certainty. Under such circumstances, for Friedman,