The Income Effect Was the Central Problem in the Neoclassical Controversy over the Demand Curve

The income effect was the central problem in what Leland Yeager referred to as the “Methodenstreit over demand curves.” Milton Friedman initiated this controversy in 1949 with his famous article, “The Marshallian Demand Curve,” and the debate was carried on sporadically during the 1950s. Friedman challenged the prevailing Hicksian interpretation of the Marshallian demand curve, arguing that: 1. it misrepresented the ceteris paribus conditions of Marshall’s derivation of the demand curve; and 2. it was less useful for the analysis of practical problems than Marshall’s demand curve, properly understood.

--Joseph T. Salerno, "The 'Income Effect' in Causal-Realist Price Theory," in The Economic Theory of Costs: Foundations and New Directions, ed. Matthew McCaffrey, Routledge Frontiers of Political Economy 236 (London: Routledge, 2018), 28.