Research Paper No. 673

ON THE HISTORY OF HABIT FORMATION IN CONSUMPTION

by

George Messinis

January 1999

Department of Economics. University of Melbourne. Parkville Victoria 3052 Australia

ABSTRACT

A century ago, Veblen (1898, 1899)paid considerable attention tot eh Aristotelian idea that habit formation is an essential feature of human behaviour and struggled to convince economists of this view. In the 1990s, the habit persistence hypothesis has increasingly been seen as an important extension ot the utility theory of consumption. This paper traces the evolution of the habit formation literature in economics. Its long history displays two main features: (i) the literature has grown immensely during the 20th century, and (ii) its growth has not been smooth. The paper argues that factors such as methodology, theoretical innovations, data availability and historical events have all played a role in the formation of these patterns. Finally, the paper points to new challenges ahead.
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