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A Theory of Natural Addiction

  • Smith, Trenton G.
  • Tasnadi, Attila

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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File URL: http://purl.umn.edu/19195
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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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  13. 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.
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  17. O’Donoghue, Ted & Rabin, Matthew, 2002. "Addiction and Present-Biased Preferences," Department of Economics, Working Paper Series qt3v86x53j, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  18. Smith, Trenton G, 2002. "The McDonald's Equilibrium: Advertising, Empty Calories, and the Endogenous Determination of Dietary Preferences," University of California at Santa Barbara, Economics Working Paper Series qt0hx9x4jr, Department of Economics, UC Santa Barbara.
  19. 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.
  20. Jack Hirshleifer, 1977. "Economics from a Biological Viewpoint," UCLA Economics Working Papers 087, UCLA Department of Economics.
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  24. Arthur J. Robson, 2001. "The Biological Basis of Economic Behavior," Journal of Economic Literature, American Economic Association, vol. 39(1), pages 11-33, March.
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