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A Theory of Natural Addiction

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  • Smith, Trenton G.
  • Tasnadi, Attila

Abstract

Economic theories of rational addiction aim to describe consumer behavior in the presence of habit-forming goods. We provide a biological foundation for this body of work by formally specifying conditions under which it is optimal to form a habit. We demonstrate the empirical validity of our thesis with an in-depth review and synthesis of the biomedical literature concerning the action of opiates in the mammalian brain and their effects on behavior. Our results lend credence to many of the unconventional behavioral assumptions employed by theories of rational addiction, including adjacent complementarity and the importance of cues, attention, and self-control in determining the behavior of addicts. Our approach suggests, however, that addiction is “"harmful"” only when the addict fails to implement the optimal solution. We offer evidence for the special case of the opiates that harmful addiction is the manifestation of a mismatch between behavioral algorithms encoded in the human genome and the expanded menu of choices–generated for example, by advances in drug delivery technology –faced by consumers in the modern world.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2005 Annual meeting, July 24-27, Providence, RI with number 19195.

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Date of creation: 2005
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Handle: RePEc:ags:aaea05:19195

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Keywords: Consumer/Household Economics;

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References

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  1. Larry Samuelson, 2004. "Information-Based Relative Consumption Effects," Econometrica, Econometric Society, vol. 72(1), pages 93-118, 01.
  2. Gary S. Becker & Kevin M. Murphy, 1986. "A Theory of Rational Addiction," University of Chicago - George G. Stigler Center for Study of Economy and State 41, Chicago - Center for Study of Economy and State.
  3. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  4. Orphanides, Athanasios & Zervos, David, 1995. "Rational Addiction with Learning and Regret," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 739-58, August.
  5. B. Douglas Bernheim & Antonio Rangel, 2002. "Addiction and Cue-Conditioned Cognitive Processes," NBER Working Papers 9329, National Bureau of Economic Research, Inc.
  6. Ted O'Donoghue & Matthew Rabin, 2003. "Addiction and Present-Biased Preferences," Game Theory and Information 0303005, EconWPA.
  7. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-81, June.
  8. Becker, Gary S & Grossman, Michael & Murphy, Kevin M, 1994. "An Empirical Analysis of Cigarette Addiction," American Economic Review, American Economic Association, vol. 84(3), pages 396-418, June.
  9. Trenton G. Smith, 2004. "The McDonald’s Equilibrium. Advertising, empty calories, and the endogenous determination of dietary preferences," Social Choice and Welfare, Springer, vol. 23(3), pages 383-413, December.
  10. Theodore C. Bergstrom, . "Economics in a Family Way," ELSE working papers 018, ESRC Centre on Economics Learning and Social Evolution.
  11. Orphanides, Athanasios & Zervos, David, 1998. "Myopia and Addictive Behaviour," Economic Journal, Royal Economic Society, vol. 108(446), pages 75-91, January.
  12. Fehr, Ernst & Zych, Peter K, 1998. " Do Addicts Behave Rationally?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(3), pages 643-62, September.
  13. Hirshleifer, Jack, 1985. "The Expanding Domain of Economics," American Economic Review, American Economic Association, vol. 75(6), pages 53-68, December.
  14. Arthur J. Robson, 2001. "The Biological Basis of Economic Behavior," Journal of Economic Literature, American Economic Association, vol. 39(1), pages 11-33, March.
  15. Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(3), pages 272-292, March.
  16. Hirshleifer, Jack, 1977. "Economics from a Biological Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 20(1), pages 1-52, April.
  17. Jonathan Gruber & Botond Köszegi, 2001. "Is Addiction "Rational"? Theory And Evidence," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1261-1303, November.
  18. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  19. Ainslie, George, 1991. "Derivation of "Rational" Economic Behavior from Hyperbolic Discount Curves," American Economic Review, American Economic Association, vol. 81(2), pages 334-40, May.
  20. Laibson, David I., 2000. "A Cue-Theory of Consumption," Scholarly Articles 4481496, Harvard University Department of Economics.
  21. Jack Hirshleifer, 1977. "Economics from a Biological Viewpoint," UCLA Economics Working Papers 087, UCLA Department of Economics.
  22. Grossman, Michael & Chaloupka, Frank J & Sirtalan, Ismail, 1998. "An Empirical Analysis of Alcohol Addiction: Results from the Monitoring the Future Panels," Economic Inquiry, Western Economic Association International, vol. 36(1), pages 39-48, January.
  23. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
  24. Smith, Trenton G, 2002. "Obesity and Nature's Thumbprint: How Modern Waistlines Can Inform Economic Theory," University of California at Santa Barbara, Economics Working Paper Series qt31g1m028, Department of Economics, UC Santa Barbara.
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Citations

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Cited by:
  1. Rhodes, Charles, 2012. "A Dynamic Model of Failure to Maximize Utility in the Chronic Consumer Choice to Consume Foods High in Added Sugars," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124693, Agricultural and Applied Economics Association.
  2. Trenton Smith, 2009. "Reconciling psychology with economics: Obesity, behavioral biology, and rational overeating," Journal of Bioeconomics, Springer, vol. 11(3), pages 249-282, December.
  3. Perez-Truglia, Ricardo, 2012. "On the causes and consequences of hedonic adaptation," Journal of Economic Psychology, Elsevier, vol. 33(6), pages 1182-1192.
  4. Trenton Smith & Christiana Stoddard & Michael G. Barnes, 2007. "Why the Poor Get Fat: Weight Gain and Economic Insecurity," Working Papers 2007-16, School of Economic Sciences, Washington State University.
  5. Trenton Smith & Hayley Chouinard & Philip Wandschneider, 2009. "Waiting for the Invisible Hand: Market Power and Endogenous Information in the Modern Market for Food," Working Papers 2009-07, School of Economic Sciences, Washington State University.
  6. Just, David R. & Mancino, Lisa & Wansink, Brian, 2007. "Could Behavioral Economics Help Improve Diet Quality for Nutrition Assistance Program Participants?," Economic Research Report 6391, United States Department of Agriculture, Economic Research Service.
  7. Trenton Smith & Hayley Chouinard & Philip Wandschneider, 2009. "Waiting for the Invisible Hand: Novel Products and the Role of Information in the Modern Market for Food," Working Papers 2009-07, School of Economic Sciences, Washington State University.
  8. John A. List & Anya Savikhin Samek, 2014. "The Behavioralist as Nutritionist: Leveraging Behavioral Economics To Improve Child Food Choice and Consumption," NBER Working Papers 20132, National Bureau of Economic Research, Inc.
  9. Perez Truglia, Ricardo Nicolas, 2009. "On the genesis of Hedonic Adaptation," MPRA Paper 19929, University Library of Munich, Germany.
  10. Trenton Smith & Young H. Lee, 2006. "Why are Americans Addicted to Baseball? An Empirical Analysis of Fandom in Korea and the U.S," Working Papers 2006-05, School of Economic Sciences, Washington State University.
  11. Trenton G. Smith & Attila Tasnadi, 2013. "The Economics of Information, Deep Capture, and the Obesity Debate," Working Papers 1315, University of Otago, Department of Economics, revised Nov 2013.
  12. Fabrice Etile, 2013. "L'économie des consommations à risques au miroir des politiques de santé publique," Working Papers 221515, Institut National de la Recherche Agronomique, France.

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