History
The Pigou effect was first popularised by Arthur Cecil Pigou in 1943, in The Classical Stationary State (an eight page Economic Journal article). He had proposed the link from balances to consumption earlier, and Gottfried Haberler had made a similar objection the year after the General Theory's publication .
Following the tradition of classical economics, Pigou favoured the idea of "natural rates" to which the economy would return, and saw the "Real Balance" effect as a mechanism to fuse Keynesian and classical models. (In most cases - he acknowledged that sticky prices might still prevent reversion to natural output levels after a demand shock.)
Read more about this topic: Pigou Effect
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