Accounting for tastes

The answers to these and many other questions about people's consumption patterns, Becker argues, have to do with the way preferences and values are shaped. Although these are central topics of social behavior, they have never been addressed in a systematic and analytical way. Becker applies the tools of modern economic analysis to just this topic, one that economists have traditionally left out of their models for rational choice.

As Becker observes, once people's basic needs for food, shelter, and rest are met, their consumption depends very much on how their tastes are formed - on childhood experiences and on social and cultural influences. For many kinds of behavior, there is a strong positive effect of past behavior on current behavior, and there are strong peer effects. Thus, whether a person currently smokes or uses drugs depends significantly on whether he has smoked or taken drugs in the past. And his choice of music, movies, and books depends to a large extent on what his friends and associates have to say about them.

Becker argues that, for a large class of behavior, decisions on what to consume are not independent of one another but are interdependent. He incorporates past experiences and social influences into preferences or tastes through two basic capital stocks, which he calls personal capital and social capital. At any moment in time, what a person wants depends not only on the menu of goods he can choose from and their prices but also on his current stock of personal and social capital. Behaviors that raise or lower these stocks (trying out the popular new drug, joining on upscale health club) will change his future desires and choices.