James Duesenberry’s classic work on consumption proposes a model of consumer choice based on social interdependence and habit formation, tests the model against the available macroeconomic evidence, and speculates about the implications of the model for other areas of economics. This is a summary of the third chapter of the book, in which Duesenberry formulates his model of consumer choice. Portions of the chapter dealing with macroeconomic analysis of savings have been omitted.
