Addiction and Health

Summary

Economists approach addiction from a behavioral point of view and with a focus on assessing and measuring the effects of policy interventions, such as taxation and prohibitions. The canonical model, Becker and Murphy’s (1988) rational addiction model, considers a world in which people are aware that their consumption of addictive goods today will affect their behavior in the future and make choices accordingly. This model provides a framework to analyze addictive behaviors and has led to a large and detailed body of empirical evidence. The model has also been extended in many ways to incorporate more realistic psychological, physiological, and social aspects.

The standard model makes several predictions that are falsified, notably including the prediction that addicts do not regret their past decisions. A number of theoretical investigations relax or otherwise modify the assumptions of the standard model to address this failing. In these models, people may not know themselves well enough to predict whether they will find some good or activity addictive, or they may have self-control problems that prevent them from quitting a harmful addiction even though they realize that addiction is harmful. Policy implications vary across theoretical models as the assumptions driving the model vary, so the theoretical literature has not come to a consensus on optimal policy toward addictive goods. Current research continues to incorporate results from other disciplines, such as neuroscience, into economic models.

Economists have also produced a large body of statistical evidence detailing what kind of people consume various addictive goods, the extent to which people respond to changes in the price of addictive goods, and how consumption varies with prices, income, and other incentives over short and long time periods. This literature shows that addicts do respond to prices and other incentives, that past consumption of addictive goods causes current consumption of addictive goods, and that consumption of a given addictive good is best understood as a part of a profile of consumption of various addictive goods rather than in isolation, for example, policy makers should consider the effects of a change in heroin policy on alcohol consumption in addition to heroin consumption.

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