Consumption and Saving Behavior Course

Lesson 1 • The Household Budget Constraint

Explains how income limits consumption and saving choices simultaneously. Connects budget arithmetic to real household decision-making.

Lesson 2 • Motivations for Saving

Surveys the primary reasons households save, from precaution to retirement. Builds intuition for behavioral drivers explored in later chapters.

Lesson 3 • Measuring Saving Rates

Covers national accounts and household survey methods for quantifying saving. Prepares students to interpret empirical data in subsequent chapters.

Lesson 1 • Keynesian Consumption Function

Presents the absolute income hypothesis and marginal propensity to consume. Establishes the baseline model against which later theories are compared.

Lesson 2 • Permanent Income Hypothesis

Develops Friedman's distinction between permanent and transitory income. Shows how forward-looking expectations smooth consumption over time.

Lesson 3 • Relative Income Hypothesis

Introduces Duesenberry's argument that consumption depends on relative standing. Explains the ratchet effect and its implications for aggregate saving.

Lesson 4 • Comparing Classical Models

Synthesizes the four classical theories through empirical evidence and predictive accuracy. Prepares students to identify which model fits a given context.

Lesson 1 • Two-Period Consumption Model

Builds the canonical two-period budget constraint and indifference curve framework. Provides the mathematical foundation for all intertemporal analysis.

Lesson 2 • Uncertainty and Precautionary Saving

Extends the optimization model to include income uncertainty and prudence. Derives the precautionary saving motive from first principles.

Lesson 3 • Multi-Period and Infinite Horizon Models

Generalizes the two-period model to dynamic settings with recursive utility. Introduces Euler equation conditions used in empirical consumption research.

Lesson 4 • Interest Rate Effects on Saving

Decomposes the income and substitution effects of interest rate changes on saving. Resolves the ambiguity in the direction of saving responses.

Lesson 1 • Mental Accounting and Framing

Covers Thaler's mental accounting theory and how framing alters spending decisions. Explains why fungibility of money often fails in practice.

Lesson 2 • Social Influence on Spending

Analyzes peer effects, social norms, and status consumption on household budgets. Connects social comparison to aggregate consumption patterns.

Lesson 3 • Present Bias and Hyperbolic Discounting

Introduces time-inconsistent preferences and their consequences for under-saving. Contrasts hyperbolic with exponential discounting in practical settings.

Lesson 4 • Loss Aversion and Reference Points

Applies prospect theory to consumption and saving choices around reference points. Shows how loss aversion distorts responses to income shocks.

Lesson 1 • Income Volatility and Consumption Risk

Examines how transitory and persistent income shocks pass through to consumption. Establishes the empirical relationship between income risk and saving rates.

Lesson 2 • Wealth Effects on Consumption

Quantifies how changes in housing and financial wealth affect household spending. Distinguishes housing wealth effects from financial asset wealth effects.

Lesson 3 • Debt Accumulation and Deleveraging

Traces the dynamics of household debt buildup and its eventual drag on consumption. Links deleveraging cycles to aggregate demand contractions.

Lesson 4 • Credit Constraints and Liquidity

Explores how borrowing limits prevent consumption smoothing for constrained households. Identifies the role of liquidity in amplifying income shocks.

Lesson 1 • Household Portfolio Rebalancing

Explains when and how households should rebalance portfolios to maintain target allocations. Addresses transaction costs and behavioral inertia in rebalancing decisions.

Lesson 2 • Retirement Saving Strategies

Covers contribution rates, asset allocation glide paths, and decumulation planning. Integrates life-cycle theory with practical retirement saving design.

Lesson 3 • Risk-Return Trade-offs in Saving

Applies mean-variance principles to household portfolio decisions. Connects theoretical risk-return frontiers to practical saving choices.

Lesson 4 • Taxonomy of Household Saving Instruments

Classifies saving vehicles by liquidity, risk, and tax treatment. Provides a structured map of options households face when allocating savings.

Lesson 1 • Cultural and Institutional Saving Norms

Explores cross-national variation in saving rates driven by culture and institutions. Distinguishes cultural from structural explanations for saving differences.

Lesson 2 • Household Structure and Consumption

Examines how family size, marital status, and dependency ratios affect spending and saving. Applies equivalence scales to compare welfare across household types.

Lesson 3 • Age and Life-Stage Consumption Profiles

Documents empirical consumption and saving patterns across the life course. Connects observed profiles to life-cycle and behavioral theory predictions.

Lesson 4 • Education, Financial Literacy, and Saving

Quantifies the relationship between financial knowledge and saving adequacy. Identifies literacy gaps that interventions should target.

Lesson 1 • Evaluating Interventions with Data

Applies quasi-experimental and experimental methods to measure causal effects on saving. Equips students to critically assess evidence quality in policy evaluations.

Lesson 2 • Tax Policy and Saving Incentives

Evaluates how tax-advantaged saving schemes affect household saving rates and composition. Distinguishes new saving from reshuffled existing assets.

Lesson 3 • Consumption Smoothing Policy Tools

Examines unemployment insurance, social insurance, and credit programs as consumption stabilizers. Evaluates design features that maximize smoothing without distorting saving.

Lesson 4 • Behavioral Interventions at Scale

Reviews large-scale nudge programs and their measured impact on saving outcomes. Assesses cost-effectiveness relative to traditional financial incentives.