ABSTRACT
The first two developments to be considered, both of which were initiated in the mid-1960s, arose from a concern that the traditional theory left many aspects of consumers’ choices explicable only in terms of tastes. Whether a good was inferior or not, or whether pairs of goods turned out to be gross complements or gross substitutes, appeared to be little more than an accident of random individual preferences. Moreover, all changes in demand that could not be explained in terms of price or income changes could only be attributed to changes in those preferences. The developments pioneered by Lancaster and Becker, which are discussed respectively in this and the following chapter, are both concerned to investigate whether there are other, more objective, factors that influence choices but that cannot be taken account of within the framework of the traditional theory. Both developments start from a recognition that consumption can be viewed in the same sort of way as production, that is, as a process requiring inputs and yielding an output, but, as we shall see, they do it in rather different ways.
