How do the life-cycle and permanent-income theories resolve the seemingly contradictory pieces of evidence regarding consumption behavior?

The life-cycle theory posits that individuals plan their consumption based on their expected lifetime income, smoothing consumption over their lifetime. In contrast, the permanent-income hypothesis suggests that people base their consumption on their long-term income expectations rather than current income fluctuations. Together, these theories reconcile contradictory evidence by explaining that while short-term income changes may affect consumption temporarily, individuals adjust their spending in accordance with their anticipated lifetime resources, leading to more stable consumption patterns over time. This reflects the complex interplay between immediate financial circumstances and broader income expectations in shaping consumer behavior.