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De Gustibus Non Est Disputandum
By GEORGE J. STIGLER AND GARY S. BECKER*
economist offers guidance in tackling these where Zi are the commodity objects of choice
problems-and that no other approach of enteringthe utility function, fi is the production
remotely comparable generality and power is function for the ith commodity, Xji is the quan-
available. tity of the jth marketgood or service used in the
To supportour thesis we could offer samples productionof the ith commodity, tji is the jth
of phenomena we believe to be usefully ex- person's own time input, Sj the jth person's
plained on the assumption of stable, well- humancapital, and Yirepresentsall otherinputs.
behavedpreferencefunctions. Ultimately, this is The Zi have no market prices since they are
indeedthe only persuasivemethodof supporting not purchasedor sold, but do have "shadow"
the assumption,and it is legitimateto cite in sup- prices determinedby their costs of production.
port all of the existing corpus of successful Iffi were homogeneous of the firstdegree in the
economic theory. Here we shall undertaketo Xii and tji, marginaland averagecosts would be
give this proof by accomplishmenta special and the same and the shadow price of Zi would be
limited interpretation.We take categories of be-
havior commonly held to demonstratechanges (3) vi - E aji / - ( W S, Yi)Pj
in tastesor to be explicable only in termsof such
changes, and show both that they are recon-
cilable with our assumptionof stablepreferences jE (WI WI
and that the reformulationis illuminating.
where pj is the cost of Xj, wj is the cost of tj,
I. The New Theoryof ConsumerChoice and aji and ,ji are input-outputcoefficients that
The power of stable preferences and utility depend on the (relative) set of p and w, S, and
maximizationin explaining a wide range of be- Yi. The numerous and varied determinantsof
havior has been significantly enhanced by a these shadow prices give concrete expression to
recent reformulationof consumer theory.2This our earlier statementabout the subtle forms that
reformulation transforms the family from a prices take in explaining differences among
passive maximizer of the utility from market men and periods.
purchasesinto an active maximizeralso engaged The real income of a household does not
in extensive productionand investment activi- simply equal its money income deflated by an
ties. In the traditionaltheory, households maxi- index of the prices of marketgoods, but equals
mize a utility functionof the goods and services its full income (which includes the value of
bought in the marketplace,whereas in the refor- "time" to the household)3deflated by an index
mulation they maximize a utility function of of the prices, ;Ti, of the producedcommodities.
objects of choice, called commodities, thatthey Since full income and commodity prices depend
producewith marketgoods, theirown time, their on a varietyof factors, incomes also take subtle
skills, training and other human capital, and forms. Ourtask in this paperis to spell out some
otherinputs. Statedformally, a household seeks of the forms prices and full income take.
to maximize
II. Stability of Tastes and "Addiction"
(I) U = U (Z1,I . Zm)
Tastes are frequentlysaid to change as a result
with of consuming certain "addictive" goods. For
example, smoking of cigarettes, drinking of
(2) Zi =-fi (XIi, Xkii tl 9. tei, SI, alcohol, injection of heroin, or close contact
with some personsover an appreciableperiodof
2An exposition of this reformulation can be found in
Robert Michael and Becker. This exposition emphasizes "Fullincome is the maximummoney income thata house-
the capacityof the reformulationto generate many irnplica- hold could achieve by an appropriateallocation of its time
tions about behavior that are consistent with stable tastes. and other resources.
78 THE AMERICAN ECONOMIC REVIEW MARCH 1977
time, often increases the desire (creates a crav- An increase in this music capital increases the
ing) for these goods or persons, and thereby productivityof time spent listeningto or devoted
cause their consumptionto grow over time. In in other ways to music.
utility language, their marginalutility is said to In order to analyze the consequences for its
rise over time because tastes shift in their favor. consumption of "the more good music a man
This argumenthas been clearly statedby Alfred hears," the production and -consumption of
Marshallwhen discussing the taste for "good" music appreciationhas to be dated. The amount
music: of appreciationproducedat any moment j, Mj,
There is however an implicit condition would dependon the time allocatedto music and
in this law [of diminishing marginalutil- the music human capital at j: tmjand Sm . re-
ity] which should be made clear. It is that spectively. The latter in turn is producedpartly
we do not suppose time to be allowed for through "on-the-job" trainingor "learning by
any alterationin the characteror tastes of doing" by accumulating the effects of earlier
the man himself. It is therefore no ex-
ception to the law that the more good music appreciation:
music a manhears, the strongeris his taste (6) Sm7= h(Mj-,, Mi-2...., Ej)
for it likely to become . . . [p. 94]
By definition, the addiction is beneficial if
We believe that the phenomenonMarshallis
trying to explain, namely that exposure to good
mj > 0, all v in (6)
music increasesthe subsequentdemandfor good amj-v
music (for some persons!), can be explained
with some gain in insight by assuming constant The term Ej measures the effect of education
tastes, whereasto assume a change in tastes has and other human capital on music appreciation
been an unilluminating "explanation." The skill, where
essence of our explanation lies in the accumu- (3Sm.
lation of what might be termed "consumption aEj
capital" by the consumer, and we distinguish
"beneficial" addiction like Marshall's good and probably
music from "harmful" addiction like heroin. (32Smj
Considerfirstbeneficial addiction, and an un-
amj_vaEj
changing utility function that depends on two
producedcommodities: We assume for simplicity a utility function
thatis a discountedsum of functionslike the one
(4) U = U(M, Z) in equation(4), where the M and Z commodities
where M measuresthe amountof music "appre- are dated, and the discount rate determinedby
ciation" producedandconsumed, andZ the pro- time preference.4The optimal allocationof con-
ductionand consumptionof other commodities. sumption is determined from the equality be-
Music appreciationis produced by a function tween the ratioof their marginalutilities and the
that depends on the time allocated to music (ti), ratio of their shadow prices:
and the training and other human capital con- MUm._ (aU a U _lTm
ducive to music appreciation(Sm) (other inputs
are ignored): MUzi amj /azj 7rzj
The shadow price equals the marginal cost
(5) M =Mm (tmnSm) of adding a unit of commodity output. The
We assume that marginal cost is complicated for music appre-
ciation M by the positive effect on subsequent
a
>0 >0 music humancapital of the productionof music
atm as' >m
and also that 4A consistent applicationof the assumptionof stable pref-
a2Mm > o erences implies that the discount rate is zero; that is, the
absence of time preference (see the brief discussion in
atmdSm Section VI.)
VOL. 67 NO. 2 STIGLER AND BECKER: DE GUSTIBUS 79
appreciationat any moment j. This effect on value of the saving in futuretime inputsfrom the
subsequentcapital is an investmentreturnfrom effect of the productionof M in j on subsequent
producingappreciationatj that reduces the cost music capital.
of productionatj. It can be shown that the mar- With no addiction, Aj = 0 and equation (8)
ginal cost at j equals5 reduces to the familiar marginal cost formula.
watmj_ jamj+i /amj+i Moreover, Aj is positive as long as music is
(8) Tm. = Wmj W Et 3Mj+i /3Mi+i beneficially addictive, and tends to decline as
j increases, approachingzero as j approaches
dSmj+ 1 n. The term w/MPtm declines with age for a
dMj (i + r)l given time input as long as music capital grows
with age. The term Aj may not change so much
W3tmj W_t
with age at young ages because the percentage
=-M -Ai MP -a
decline in the numberof remainingyears is small
where w is the wage rate(assumedto be the same at these ages. Therefore, irm would tend to de-
at all ages), r the interest rate, n the length of cline with age at young ages because the effect
life, andAj the effect of addiction, measuresthe on the marginalproductof the time inputwould
tend to dominate the effect on A. Although Trm
5The utility function might not always decline at other ages, for the
V
present we assume that Trmdeclines continu-
a U(M;, Zj)
ously with age.
is maximized subject to the constraints If 7T, does not dependon age, the relativeprice
Mj = M(tm7j
I Smj); Zj = Z (xi, tzj)
of music appreciationwould decline with age;
then by equation(7), the relativeconsumptionof
Sm7 = h (Mj- ,, Mi-2, . . , Ej)
music appreciationwould rise with age. On this
px wt, + b3
interpretation, the (relative) consumption of
( + r)j (+ r)j
music appreciationrises with exposure not be-
and t,.tu+ j+
tm j =t, cause tastes shift in favor of music, but because
wheret,.. is hoursworkedin the jth period, and bj is property its shadow price falls as skill and experience in
income in that period. By substitutionone derives the full the appreciation of music are acquired with
wealth constraint:
exposure.
pxj + W(tm. + tz.) wt f bj An alternativeway to state the same analysis
(I + r)P (I + r) j is that the marginal utility of time allocated to
Maximizationof V with respect to Mj and Zj subject to music is increasedby an increase in the stock of
the productionfunctionsand the full wealth constraintgives music capital.6Then the consumptionof music
the first-orderconditions appreciationcould be said to rise with exposure
. aU A tpdxj wdtzX A because the marginalutility of the time spent on
aZ - (1 r)+ dZ+ dZj 2 (I + r)j music rose with exposure, even though tastes
au
dU wdt _i+ were unchanged.
x wat'j
nt
aMj (1 + r)j aMj = dMj ( + r)i, The effect of exposure on the accumulation
of music capital might well depend on the level
A
of education and other human capital, as in-
(1+r)
Since, however, dicatedby equation(6). This would explain why
educatedpersons consume more 'good" music
dS?lj+i aMj+?dtnlj_ti
dMj+j
=0n= dMj+i ? (i.e., music that educated people like!) than
dMj asm dMj dtmj+i dMj
then "The marginal utility of time allocated to music at j in-
cludes the utility from the increase in the future stock of
dSmj+ music capital that results from an increase in the time
dtmm
J l= _ (3Mj+j /3Mj3j
as a _G M allocated at j. An argumentsimilar to the one developed for
dMj ASj+i / tj+i M the price of music appreciation shows that the marginal
By substitution into the definition of ir.,, equation (8) utilityof time would tend to rise with age, at least at younger
follows immediately. ages.
80 THE AMERICAN ECONOMIC REVIEW MARCH 1977
were used even though the subsequentadverse addictive precisely because of the insensitivity
consequences were accurately anticipated, the to price changes.
utilityof the user would be greaterthan it would An exogenous rise in the price of addictive
be if he were prevented from using heroin. Of goods or time, perhapsdue to an excise tax, such
course, his utility would be still greater if as the tax on cigarettesand alcohol, or to restric-
technologies developed (methadone?)to reduce tions on their sale, such as the imprisonnment of
the harmfullyaddictive effects of euphoria.9 dealers in heroin, would have a relatively small
Most interestingly,note thatthe use of heroin effect on their use by addicts if these are harm-
would grow with exposure at the same time that fully addictive goods, and a relatively large
the amountof euphoriafell, if the demandcurve effect if they are beneficially addictive. That is,
for euphoriaandthus for heroinwere sufficiently excise taxes and imprisonmentmainly transfer
inelastic. Thatis, addictionto heroin-a growth resources away from addicts if the goods are
in use with exposure-is the result of an in- harmfullyaddictive, and mainly reducethe con-
elastic demand for heroin, not, as commonly sumptionof addictsif the goods are beneficially
argued,the cause of an inelastic demand. In the addictive.
same way, listening to music or playing tennis The extension of the capitalconcept to invest-
would be addictive if the demand curves for ment in the capacityto consume moreefficiently
music or tennis appreciationwere sufficiently has numerous other potential applications. For
elastic; the addictionagain is the result, not the example, there is a fertile field in consumption
cause, of the particularelasticity. Put differ- capital for the applicationof the theory of divi-
ently, if addiction were surmised (partly be- sion of labor among family members.
cause the input of goods or time rose with age),
but if it were not clear whether the addiction III. Stability of Tastes and Custom and Tradition
were harmful or beneficial, the elasticity of A "Wtraditional" qualificationto the scope of
demand could be used to distinguish between economic theory the alleged powerful hold
is
thenm:a high elasticity suggests beneficial and a over human behavior of custom and tradition.
low elasticity suggests harmfuladdiction.10 An excellent statementin the context of the be-
We do not have to assume that exposure to havior of rulers is that of John Stuart Mill:
euphoriachanges tastes in order to understand It is niottrue that the actions even of
why the use of heroin grows with exposure, or average rulersare wholly, or anythingap-
why the amountused is insensitive to changes in proachingto wholly, determinedby their
its price. Even with constanttastes, the amount personal interest, or even by their own
used would grow with exposure, and heroin is opinion of their personal interest. . . . I
insist only on what is true of all rulers,
viz., that the characterand course of their
9That is, if new technology reduced and perhaps even actions is largely influenced (independ-
changed the sign of the derivatives in equation (9). We
should state explicitly, to avoid any misunderstanding,that ently of personal calculations) by the
"harmful"means only that the derivatives in (9) are nega- habitualsentimentsand feelings, the gen-
tive, and not that the addiction harms others, nor, as we eral modes of thinking and acting, which
have just indicated, that it is unwise for-addictsto consume prevail throughout the community of
such commodities. which they are members;as well as by the
"'Theelasticity of demand can be estimated from the feelings, habits, and modes of thought
effects of changes in the prices of inputs. For example, if a which characterizethe particularclass in
commodity's production function were homogeneous of that communityto which they themselves
degreeone, and if all its futureas well as presentinputprices . They are also much in-
belong. . .
rose by the same knownpercentage,the elasticity of demand
for the commodity could be estimated from the decline in fluenced by the maxims and traditions
the inputs. Thereforethe distinctionbetween beneficial and which have descended to them from other
harmful addiction is operational:these independentlyesti- rulers, their predecessors;which maxims
mated commodity elasticities could be used, as in the text, and traditionshave been known to retain
to determinewhetheran addictionwas harmfulor beneficial. an ascendancy during long periods, even
82 THE AMERICAN ECONOMIC REVIEW MARCH 1977
in oppositionto the privateinterestsof the chase to obtain the lowest possible priceAtcon-
rulers for the time being. [p. 484] sistent with the cost of search. Then 't is a
function of the amountof search s (assumed to
The specific political behaviorthatcontradicts
be the same at each act of purchase):
"'personalinterest" theories is not clear from
Mill's statement,nor is it muchclearerin similar (10) =t f (s), f' (s) < 0
statementsby others applied to firms or house-
where the total cost of s is C(s).
holds. Obviously, stable behavior by (say)
2. To search less frequently (but usually
householdsfaced with stable prices and incomes
more intensively), relying between searches
-or more generally a stable environment-is
upon the outcome of the previous search in
no contradictionsince stability then is implied
choosing a supplier. Then the price Pt will be
as much by personal interest theories as by
higher(relativeto the averagemarketprice), the
custom and tradition. On the other hand, stable
longer the period since the previous search (at
behavior in the face of changing prices and in-
time to),
comes might contradict the approach taken in
this essay that assumes utility maximizing with Pt = g(t - to), g' > 0
stable tastes.
Ignoring interest, the lattermethod of purchase
Nevertheless, we believe that our approach
will have a total cost over period T determined
betterexplains when behavior is stable than do
by
approachesbased on custom and tradition, and
1) K searches (all of equal intensity) at
can at the same time explain how and when be-
cost K C(s).
havior does change. Mill's "habits and modes
2) Each search lasts for a period T/K,
of thought," or his "maxims and traditions
within which r= T/K purchases are made, at
which have descended," in our analysis result
cost r p, wherep is the average price. Assume
from investmentof time and other resources in
that the results of search "depreciate" (prices
the accumulationof knowledge about the en-
appreciate)at rate6. A consumerminimizes his
vironment, and of skills with which to cope
combinedcost of the commodityandsearchover
with it.
the total time period; the minimizing condition
The making of decisions is costly, and not
isl
simply because it is an activity which some peo-
ple find unpleasant.In orderto make a decision "The price of the ith purchasewithin one of the K search
one requires information, and the information periods ispi= (l + 6)i-1. Hence
must be analyzed. The costs of searching for -I
r
, (1+a)-I
+ a)r1
rationality.
A simple example of economizing on infor- TC = T{p 1+ (r2 ) rJ
are:
or
1. To search at the time of an act of pur-
VOL. 67 NO. 2 STIGLER AND BECKER: DE GUSTIBUS 83
We shall argue, in directoppositionto this view, were independentof its behavior, the shadow
that it is neithernecessary nor useful to attribute price of Z, the marginalcost of x, would simply
to advertising the function of changing tastes. be the expenditureon x requiredto change Z by
A consumer may indirectly receive utility one unit. From equation (13), that equals
from a marketgood, yet the utility depends not
only on the quantity of the good but also the (14) 7zP = x
consumerIs knowledge of its true or alleged
properties. If he does not know whether the where px is the price of x.
berries are poisonous, they are not food; if he An increase in advertising may lower the
does not know that they contain vitaminC, they commoditypriceto the household(by raisingg),
are not consumed to prevent scurvy. The and thereby increase its demand for the com-
quantityof informationis a complex notion: its modity and change its demandfor the firm'sout-
degree of accuracy, its multidimensionalprop- put, because the household is made to believe-
erties, its variable obsolescence with time are correctly or incorrectly-that it gets a greater
all qualities that make direct measurementof output of the commodity from a given input of
informationextremely difficult. the advertisedproduct. Consequently, advertis-
How can this elusive variablebe incorporated ing affects consumption in this formulationnot
into the theory of demand while preservingthe by changingtastes, but by changingprices. That
stabilityof tastes?Ourapproachis to continueto is, a movement along a stable demandcurve for
assume, as in the previous sections, that the commoditiesis seen as generatingthe apparently
ultimateobjects of choice are commodities pro- unstable demand curves of market goods and
duced by each household with market goods, other inputs.
own time, knowledge, andperhapsother inputs. More than a simple change in language is
We now assume, in addition, that the knowl- involved: our formulation has quite different
edge, whether real or fancied, is produced by implications from the conventional ones. To
the advertisingof producersandperhapsalso the develop these implications, consider a firm that
own search of households. is determiningits optimaladvertisingalong with
Our approachcan be presentedthrougha de- its optimal output. We assume initially that the
tailed analysis of the simple case where the out- commodity indirectly produced by this firm
putx of a particularfirmand its advertisingA are (equation (12)) is a perfect substitute to con-
the inputs into a commodity producedand con- sumers for commodities indirectlyproducedby
sumed by households; for a given household: many other firms. Therefore, the firm is per-
fectly competitive in the commoditymarket,and
(12) Z =f(x,A,E,y)
could (indirectly) sell an unlimited amount of
where AZ/ax > 0, AZ/8A > 0, E is the human this commodity at a fixed commodity price. Ob-
capital of the houshold that affects these mar- serve that a firm can have many perfect sub-
ginal products, and y are other variables, pos- stitutes in the commodity market even though
sibly including advertising by other firms. few other firms produce the same physical
Still more simply, product. For example, a firm may be the sole
designerof jewelry that contributesto the social
(13) Z-g(A,E,y)x
prestige of consumers, and yet compete fully
where agg/A = g' > 0 and a2g/aA2 <0. with many other productsthat also contributeto
With A, E, and y held constant, the amountof prestige: large automobiles, expensive furs,
the commodity producedand consumed by any fashionable clothing, elaborate parties, a re-
household is assumed to be proportionalto the spected occupation, etc.
amountof the firm's outputused by that house- If the level of advertising were fixed, there
hold. 13If the advertisingreachingany household would be a one-to-one correspondencebetween
13Stateddifferentiy, Z is homogeneous of the firstdegree the price of the commodity and the price of the
in x alone. firm's output (see equation (14)). If mz were
VOL. 67 NO. 2 STIGLER AND BECKER: DE GUSTIBUS 85
= MC(X) D
(19) dA = X~ Pa-e
Z
FIGURE 1
ZA aZ AZ
or output and price are ZO and -iT-, respectively.
An increase in advertisingto A1 would increase
(19') x -=rzg'X ( + =pa Z to Z1 (the increase in Z is determinedby the
XaA ETrzg given g' function). The decline in -rz inducedby
Equation(1 8') is simply the usual maximizing the increase in Z would be negatively relatedto
conditionfor a monopolistthatcontinuesto hold the elasticity of the commodity demandcurve: it
when there is advertising.'5 Equation (19') would be less, for example, if the demandcurve
clearly shows that, given 7-rzg'X,the marginal were D 'D' ratherthan DD. Since the increase
revenue from additional advertising is greater, in Pr is negatively relatedto the decline in rz16
the greater is the elasticity of the commodity the increase in Px, and thus the marginal
demand curve; therefore, the optimal level of revenue from the increase in A, is directly re-
advertising would be positively related to the lated to the elasticity of the commodity demand
commodity elasticity. curve.17
This importantresultcan be made intuitiveby The same result is illustratedwith a more con-
considering Figure 1. The curve DD gives the
firm's commodity demand curve, where 7Tz is 16Since zrZg= Px,
measuredalong the verticaland commodityout-
aPx = 7T g O
put Z along the horizontal axis. The firm's + ga7Tz,
cussion; we have some tentative comments in approved charities, choose prestigious occupa-
this direction. tions, and do other things that affect his dis-
The commodity apparentlyproducedby fash- tinctioni. Following recent work on social
ion goods is social distinction:the demonstration interactions,we can write the social distinction
of alert leadership, or at least not lethargy, in of the ith person as
recognizing and adoptingthat which will in due
(20) Ri = Di + hi
time be widely approved. This commodity-it
might be termed stvle-sounds somewhat cir- where Di is the contributionto his distinctionof
cular, because new things appearto be chosen his social environment, and hi is his own con-
simply because they are new. Such circularity tribution.Each person maximizes a utility func-
is no more peculiar than that which is literally tion of R and other commodities subject to a
displayed in a race-the runnersobviously do budget constraintthat depends on his own in-
not run arounda track in order to reach a new come andthe exogenously given social environ-
destination. Moreover, it is a coimmendationi of ment.19A numberof general results have been
a style good thatit be superiorto previousgoods, developed with this approach(see Becker), and
andstyle will not be sought intentionallythrough a few are mentioned here to indicate that the
less functionalgoods. Indeed, if the stylish soon demand for fashion (and other determinantsof
becomes inferiorto the unstylish, it would lose social distinction) can be systematically
its attractiveness. analyzed without assuming that tastes shift.
Style, moreover, is not achieved simply by An increase in i's own income, prices held
change: the newness must be of a special sort constant, would increase his demand for social
that requiresa subtle predictionof what will be distinction and other commodities. If his social
approvednovelty, anda trainedpersoncan make environment were unchanged, the whole in-
better predictions than an untrained person. crease in his distinction would be producedby
Style is social rivalry, and it is, like all rivalry, an increase in his own contributionsto fashion
both an incentive to individualityand a source and other distinction-producinggoods. There-
of conformity. fore, even an average income elasticity of de-
The areas in which the rivalry of fashion mandfor distinctionwould imply a high income
takes place are characterizedby public exposure elasticity of demandfor fashion (and these other
and reasonably short life. An unexposed good distinction-producing)goods, which is consist-
(automobile pistons) cannot be judged as to its ent with the common judgement that fashion
fashionableness, and fashions in a good whose is a luxury good.20
efficient life is long would be expensive. Hence If otherpersons increasetheircontributionsto
fashion generally concentrates on the cheaper theirown distinction, this may lower i's distinc-
classes of garments and reading matter, and tion by reducing his social environment. For
thereis morefashion in furniturethanin housing. distinction is scarce and is to a large extent
Fashioncan be pursuedwith the purseor with simply redistributedamong persons:an increase
the expenditureof time. A person may be well- in one person's distinction generally requiresa
read (i.e., have read the rec'entbooks generally reduction in that of other persons. This is why
believed to be important),but if his time is valu- people are often "forced" to conform to new
able in the marketplace, it is much more likely fashions. When some gain distinctionby paying
that his spouse will be the well-read memberof
the family. (So the ratioof the literacyof wife to l9The budget constraintfor i can be written as
that of husbandis positively relatedto the hus-
band's earning power, and inversely related to HIR R + IIHZ = Ii + IIRiDi = Si
her earning power.) where Z are other commodities, fi,. is his marginalcost of
The demandfor fashion can be formalizedby changing R, /i is his own full income, and Si is his "social
assuimingthat the distinction available to any income.
20Marshallbelieved that the desire for distinctionwas the
person depends on his social environment, and most powerfulof passions and a majorsource of the demand
his own efforts: he cani be fashionable, give to for luxury expenditures(see pp. 87-88, 106).
VOL. 67 NO. 2 STIGLER AND BECKER: DE GUSTIBUS 89
attentionto (say) new fashions, they lower the The taste for consumptionin say 1984 is alleged
social environmentof others. The latter are in- to continueto shift upwardas 1984 gets closer to
duced to increase their own efforts to achieve the present.In spite of the importancefrequently
distinction, including a demand for these new attachedto time preference, we do not know of
fashions, because an exogenous decline in their any significant behavior that has been illumi-
social environment induces them to increase nated by this assumption. Indeed, given addi-
their own contributionsto their distinction. tional space, we would arguethatthe assumption
Therefore, an increase in all incomes induces of time preference impedes the explanation of
an even greaterincreasein i's contributionto his life cycle variations in the allocation of re-
distinction than does an increase in his own sources, the seculargrowth in real incomes, and
income alone. For an increase in the income of other phenomena.
others lowers i's social environment because Moreover, we have not consideredsystematic
they spend more on their own distinction; the differences in tastes by wealth or other classi-
reduction in his environment induces a further fications. We also claim, however, that no
increase in i's contributionto his distinction. significant behavior has been illuminated by
Consequently,we expect wealthy countrieslike assumptions of differences in tastes. Instead,
the UnitedStatesto pay moreattentionto fashion they, along with assumptionsof unstabletastes,
thanpoorcountrieslike India,even if tastes were have been a convenient crutchto lean on when
the same in wealthy and poor countries. the analysis has bogged down. They give the ap-
pearance of considered judgement, yet really
VI. Conclusion have only been ad hoc arguments that dis-
We have surveyedfour classes of phenomena guise analytical failures.
widely believed to be inconsistent with the We have partly translated "'unstabletastes'
stability of tastes: addiction, habitualbehavior, into variablesin the household productionfunc-
advertising, and fashions, and in each case of- tions for commodities. The great advantage,
feredan alternativeexplanation.Thatalternative however, of relying only onichanges in the argu-
explanation did not simply reconcile the phe- ments entering household productionfunctions
nomena in question with the stability of tastes, is that all changes in behavior are explained by
but also sought to show that the hypothesis of changes in prices and incomes, precisely the
stable tastes yielded more useful predictions variables that organize and give power to
about observable behavior. economic analysis. Addiction, advertising,etc.
Of course, this short list of categories is far affect not tastes with the endless degrees of free-
from comprehensive:for example, we have not dom they provide, but prices and incomes, and
entered into the literatureof risk aversion and are subject thereforeto the constraintsimposed
risk preference, one of the richest sources of by the theorem on negatively inclined demand
ad hoc assumptionsconcerningtastes. Nor have curves, and other results. Needless to say, we
we considered the extensive literatureon time would welcome explanationsof why some peo-
preference, which often alleges that people ple become addicted to alcohol and others to
"systematicallyundervalue'.. . futurewants". Mozart, whetherthe explanationwas a develop-
ment of our approach or a contribution from
2'This quote is taken from the following longer passage some other behavioral discipline.
in B6hm-Bawerk: As we remarkedat the outset, no conceivable
We must now consider a second phenomenon of
humanexperience-one that is heavilv fraughtwith expenditureof effort on our partcould begin to
consequence. That is the fact that we feel less con- exhaust the possible tests of the hypothesis of
cerned about future sensations of joy and sorrow
simply because they do lie in the future, and the stable and uniform preferences. Our task has
lessening of our concern is in proportion to the been oddly two-sided. Our hypothesis is trivial,
remoteness of that future. Consequently we accord
to goods which are intended to serve future ends a for it merely asser-tsthat we should apply stan-
value which falls short of the true intensity of their dardeconomic looic as extensively as possible.
futuremarginalutility. We.systematiccallv unidervalue
our future wants and also the means which serve to But the self-same hypothesisis also a demanding
satisfy them. [p. 268] challenge, for it urges us not to abandonopaque
90 THE AMERICAN ECONOMIC REVIEW MARCH 1977
and complicated problems with the easy sug- John K. Galbraith, The Affluent Society, Boston
gestion that the furtherexplanationwill perhaps 1958.
someday be produced by one of our sister be- M. Grossman, "The Economics of Joint Pro-
havioral sciences. ductionin the Household," rep. 7145, Center
Math. Stud. Bus. Econ., Univ. Chicago 1971.
Alfred Marshall, Principles of Economics, 8th
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