In 1957, the Princeton Press published Milton Friedman’s famous book, A Theory of the Consumption Function.  An interesting assumption underlying the theory is that “the transitory components of consumption and income can be taken to be uncorrelated with the corresponding permanent components and with each, other.” One of the key inferences is that permanent (smoothed) consumption depends on permanent income but not on transitory income.  Sounds a lot like the ideas of persistence, permanent earnings, transitory earnings and smoothing prevalent in the academic accounting literature today.  The entire book is available online at  Maybe we have something to learn from it.