This chapter will start with the mainstream attitudes towards Keynes’ absolute income hypothesis and Duesenberry’s relative income hypothesis. After criticising Keynes’ and Duesenberry’s theories, the life-cycle and permanent-income hypotheses of consumption were suggested by mainstream economics as ‘sounder’ approaches. Both of these theories were based on Irving Fisher’s theory of intertemporal choice with utility maximising and forward-looking agents, thus eliminating any sociological or psychological influences on consumption decisions. The chapter will then focus on the life-cycle and permanent-income hypotheses of consumption. It will also examine their main differences in terms of theory and policy implications.