Keynes-Clower-Wu's Income Growth Theory provides a new consumption theory, combining theory and empirical evidence. In contrast, neoclassical economists have failed to provide a scientific theory on short and long term consumption behavior, including overconsumption and dissaving. And, it fails to explain why households in a higher saving country can suddenly start saving less, creating a yo-yo effect, and vice versa. This inability to explain personal saving in data reflects the need for a better consumption theory. With the analysis of factors affecting employment and labor income growth, it is possible to show that changes in savings are the direct consequence of forecasting error of future income and the resulting "optimal" consumption. Finally, based on Income Growth Theory, we can offer an explanation about the effects of trade on saving, and, from 1960 to 2024, the outcome of the U.S. presidential elections where a single variable has predicted correctly 14 out of 16 (87.5%) times.

The following chart will show some of the issues we will discuss: