The Emergence of the Neoclassical Consumption Function

Stavros A. Drakopoulos ()
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Stavros A. Drakopoulos: National and Kapodistrian University, Department of History and Philosophy of Science

Chapter Chapter 6 in The Consumption Function in Economics, 2026, pp 69-87 from Springer

Abstract: Abstract This chapter will start with the mainstream attitudes towards Keynes’ absolute income hypothesis and Duesenberry’s relative income hypothesis. After criticising Keynes’ and Duesenberry’s theories, the life-cycle and permanent-income hypotheses of consumption were suggested by mainstream economics as ‘sounder’ approaches. Both of these theories were based on Irving Fisher’s theory of intertemporal choice with utility maximising and forward-looking agents, thus eliminating any sociological or psychological influences on consumption decisions. The chapter will then focus on the life-cycle and permanent-income hypotheses of consumption. It will also examine their main differences in terms of theory and policy implications.

Keywords: The life-cycle consumption hypothesis; The permanent-income hypothesis of consumption; Theory of intertemporal choice; Policy implications of consumption theories (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-032-15958-8_6

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DOI: 10.1007/978-3-032-15958-8_6

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