The History of Attitudes Towards Interdependent Preferences

Abstract

The notion of interdependent preferences has a long history in economic thought. In its general form, it can be found in the works of authors such as Hume, Rae, Genovesi, Smith, Marx, and Mill, among others. In the twentieth century, the idea became more widespread mainly through the works of Veblen and Duesenberry. Recently, an increasing number of theorists are interested in issues such as reference income, relative consumption, and positional goods, which are all based on the concept of interdependent preferences. However, such preferences were never part of the corpus of orthodox theory. For instance, although Pareto and Marshall were aware of their existence, they did not advocate their incorporation into orthodox economic theory. This paper argues that the structure of mainstream economic methodology and the challenging theoretical implications of adopting interdependent preferences were two possible reasons for the mainstream rejection. The discussion includes the more recent orthodox attitudes towards such preferences.

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