Ernst Engel and Engel’s Law

Ernst Engel

Ernst Engel

On March 26, 1821, German statistician Ernst Engel was born. Engel was head of the Prussian Statistical Bureau (1860-82) and is best known for the “Engel curve,” or Engel’s law, which states that the proportion of expenditure on food will fall as income rises, i.e. food is a necessary good.

Ernst Engel studied at the Freiberg University of Mining and Technology, in Saxony, and on completing his curriculum traveled in Germany and France. After the German revolutions of 1848 and 1849, Engel was attached to the royal commission in Saxony appointed to determine the relations between trade and labor.

One year later, Engel was directed by the government to assist in the organization of the German Industrial Exhibition of Leipzig. He earned a good reputation and in 1854, he entered the government service as chief of the newly instituted statistical department. There, Engel earned himself a worldwide reputation and later raised to the rank of ‘Geheimer Regierungsrat’.

Ernst Engel became most famous for Engel’s law. It describes an observation in economics and states that as income rises, the proportion of income spent on food falls, even if the actual expenditure on food rises. This further means that income elasticity of demand of food is between 0 and 1. One application of this statistic is treating it as a reflection of the living standard of a country. As this proportion or ‘Engel coefficient’ increases, the country is by nature poorer, conversely a low Engel coefficient indicates a higher standard of living.

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