<p>The life-cycle hypothesis as a model doesn't need to explain people's behavior perfectly to be of use in understanding the economy or the decisions that individuals make. Recall the old saying that "<a href="https://en.wikipedia.org/wiki/All_models_are_wrong" rel="nofollow noreferrer">all models are wrong but some are useful</a>." As a quick example, note that many people do in fact borrow when they are young (e.g., for college, save while their income is relatively high (e.g., a lot of people save for retirement), and dissave when they're older---just as would be predicted by this theory.</p>

CC BY-SA 3.0
2018-01-10T00:10:07.757Z
2018-01-11T07:11:42.217Z
2018-01-11T07:11:42.217Z
jmbejara
<p><a href="https://en.wikipedia.org/wiki/Life-cycle_hypothesis?wprov=sfti1" rel="nofollow noreferrer">https://en.wikipedia.org/wiki/Life-cycle_hypothesis?wprov=sfti1</a></p>

<p>It seems self-evident to me that nobody on Earth actually does this. Real people are short-sighted, undisciplined, and lack the computational ability to account for all the variables.</p>

<p>Some may attempt to, but will invariably fail, and most people don’t even try and instead live for the short-term. Richard Thaler covers this in his book “Misbehaving: The Making of Behavioral Economics”. </p>

<p>Has even one instance of LCH behavior ever been documented?</p>

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2018-01-08T12:35:23.930Z
Point taken. I have corrected my question so it doesn’t digress.
Dave
CC BY-SA 3.0
2018-01-10T00:06:44.407Z
It'd probably be better to not abbreviate "life-cycle hypothesis." Also, the fact that it can be attributed some extent to Modigliani seems less important.
jmbejara
<macroeconomics><microeconomics><consumer-theory><behavioral-economics><decision-theory>
Has any person ever actually planned his or her consumption according to Modigliani’s LCH?
Dave
# Has any person ever actually planned his or her consumption according to Modigliani’s LCH?

(Asked by: username_0 on 2018-01-08)

<https://en.wikipedia.org/wiki/Life-cycle_hypothesis?wprov=sfti1>

It seems self-evident to me that nobody on Earth actually does this. Real people are short-sighted, undisciplined, and lack the computational ability to account for all the variables.

Some may attempt to, but will invariably fail, and most people don’t even try and instead live for the short-term. Richard Thaler covers this in his book “Misbehaving: The Making of Behavioral Economics”.

Has even one instance of LCH behavior ever been documented?

**Tags:** macroeconomics, microeconomics, consumer-theory, behavioral-economics, decision-theory
> **Comments:**
> **username_0**: Point taken. I have corrected my question so it doesn’t digress.  
> **username_1**: It'd probably be better to not abbreviate "life-cycle hypothesis." Also, the fact that it can be attributed some extent to Modigliani seems less important.  

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## 1 answers

### Answer by username_1 on 2018-01-10. Score: 2

The life-cycle hypothesis as a model doesn't need to explain people's behavior perfectly to be of use in understanding the economy or the decisions that individuals make. Recall the old saying that "[all models are wrong but some are useful](https://en.wikipedia.org/wiki/All_models_are_wrong)." As a quick example, note that many people do in fact borrow when they are young (e.g., for college, save while their income is relatively high (e.g., a lot of people save for retirement), and dissave when they're older---just as would be predicted by this theory.


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