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A Theory of Natural Addiction

Author

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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 choicesgenerated for example, by advances in drug delivery technology faced by consumers in the modern world.

Suggested Citation

  • Smith, Trenton G. & Tasnadi, Attila, 2005. "A Theory of Natural Addiction," 2005 Annual meeting, July 24-27, Providence, RI 19195, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea05:19195
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    File URL: http://ageconsearch.umn.edu/record/19195/files/sp05sm01.pdf
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    References listed on IDEAS

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    1. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-481, June.
    2. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
    3. Larry Samuelson, 2004. "Information-Based Relative Consumption Effects," Econometrica, Econometric Society, vol. 72(1), pages 93-118, January.
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    5. Trenton G. Smith, 2004. "The McDonald’s Equilibrium. Advertising, empty calories, and the endogenous determination of dietary preferences," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 23(3), pages 383-413, December.
    6. Orphanides, Athanasios & Zervos, David, 1995. "Rational Addiction with Learning and Regret," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 739-758, August.
    7. Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(3), pages 272-292, March.
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    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 643-662, September.
    13. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August.
    14. Hirshleifer, Jack, 1977. "Economics from a Biological Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 20(1), pages 1-52, April.
    15. David Laibson, 2001. "A Cue-Theory of Consumption," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 81-119.
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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. 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.
    19. Ainslie, George, 1991. "Derivation of "Rational" Economic Behavior from Hyperbolic Discount Curves," American Economic Review, American Economic Association, vol. 81(2), pages 334-340, May.
    20. 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.
    21. B. Douglas Bernheim & Antonio Rangel, 2002. "Addiction and Cue-Conditioned Cognitive Processes," NBER Working Papers 9329, National Bureau of Economic Research, Inc.
    22. 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. Young H. Lee & Trenton G. Smith, 2008. "Why Are Americans Addicted To Baseball? An Empirical Analysis Of Fandom In Korea And The United States," Contemporary Economic Policy, Western Economic Association International, vol. 26(1), pages 32-48, January.
    2. Réquillart, Vincent & Soler, Louis-Georges & Zang, Yu, 2016. "Quality standards versus nutritional taxes: Health and welfare impacts with strategic firms," Journal of Health Economics, Elsevier, vol. 50(C), pages 268-285.
    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 & 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.
    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. 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.
    8. Trenton Smith, 2009. "Reconciling psychology with economics: Obesity, behavioral biology, and rational overeating," Journal of Bioeconomics, Springer, vol. 11(3), pages 249-282, December.
    9. Smith Trenton G. & Stoddard Christiana & Barnes Michael G, 2009. "Why the Poor Get Fat: Weight Gain and Economic Insecurity," Forum for Health Economics & Policy, De Gruyter, vol. 12(2), pages 1-31, June.
    10. Trenton G. Smith & Attila Tasnádi, 2014. "The Economics of Information, Deep Capture, and the Obesity Debate," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(2), pages 533-541.
    11. List, John A. & Samek, Anya Savikhin, 2015. "The behavioralist as nutritionist: Leveraging behavioral economics to improve child food choice and consumption," Journal of Health Economics, Elsevier, vol. 39(C), pages 135-146.
    12. Smith, Trenton G. & Chouinard, Hayley H. & Wandschneider, Philip R., 2011. "Waiting for the invisible hand: Novel products and the role of information in the modern market for food," Food Policy, Elsevier, vol. 36(2), pages 239-249, April.
    13. Perez Truglia, Ricardo Nicolas, 2009. "On the genesis of Hedonic Adaptation," MPRA Paper 19929, University Library of Munich, Germany.
    14. Graham, Hope E. & Vestal, Mallory K. & Guerrero, Bridget L., 2015. ""Go-Slow-Whoa!": Will Nutritional Information Influence Adolescent Food Choices and Lead to a Healthier Generation?," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 206007, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Consumer/Household Economics;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D2 - Microeconomics - - Production and Organizations
    • D3 - Microeconomics - - Distribution
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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