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The Emergence of the Neoclassical Consumption Function

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  • Stavros A. Drakopoulos

    (National and Kapodistrian University, Department of History and Philosophy of Science)

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.

Suggested Citation

  • Stavros A. Drakopoulos, 2026. "The Emergence of the Neoclassical Consumption Function," Springer Books,, Springer.
    • Handle: RePEc:spr:sprchp:978-3-032-15958-8_6
    DOI: 10.1007/978-3-032-15958-8_6
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