The Rational Consumer
Since the late 1960s, Robert Hall's research has had a significant impact on the macroeconomic study of consumer behavior. The Rational Consumer brings together eight articles that represent key points in the development of Hall's ideas on consumption over the past two decades. In his introduction, Hall puts this work into perspective, tying together his ideas and pointing to how consumer behavior should work in the future given what he has discovered.
Working within the standard intertemporal models of consumption—the overlapping generations model and the infinite lifetime model—Hall's contributions to methodology have been especially important. Particularly noteworthy was his challenge to the prevalent model in which current consumption was seen as deriving from expected future income. Hall argued that consumption was, instead, based upon the actual present discounted value of future income.
Contents: Introduction. The Allocation of Wealth among the Generations of a Family that Lasts Forever—A Theory of Inheritance. The Dynamic Effects of Fiscal Policy in an Economy with Foresight. Consumption Taxes versus Income Taxes: Implications for Economic Growth. Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence. The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households (with Frederic S. Mishkin). Intertemporal Substitution in Consumption. Survey of Research on the Random Walk of Consumption. The Role of Consumption in Economic Fluctuations.