9310495 Becker The usual assumption in most discussions over time is that choices today are not directly dependent on choices in the past. The assumption of independence is not "nonsense," for it usefully simplifies many problems that are not crucially affected by dependencies over time. But the assumption has discouraged economists from grappling with other issues of considerable significance -- including addictions, work habits, preference formation, why children support their elderly parents, preference solutions to the problem of future commitments, and the evolution and stability of institutions. This project considers how a person's current preferences depend on past experiences, and on the behavior of others. The influence of the past is illustrated by habitual behavior, defined as behavior that displays a positive relation between the past and current consumptions of a good, such as drugs. The influence of others is illustrated by peer pressure, which may induce a teenager to start smoking. In essence, therefore, the project will consider the rational formation of preferences. The process is "rational" in the sense that a person is assumed to try to anticipate the consequences for his future preferences of what he does now, including groups with which he associates. The assumption of forward-looking and consistent behavior provides rules and implications that determine how preferences evolve over time, and in which groups. This work tries to contribute to our knowledge of these processes. ***
