Painkilling drugs produce a good called relief which reduces the fixed level of bad (pain) the individual is endowed with. These drugs have the side-effect of reducing the utility the individual gets from consuming goods. This means that the shadow price of relief counts not only the cost of drugs and their ability to reduce pain, but also the undesired reduction in pleasure from consuming goods. The tradeoff between goods and relief is non-linear and convex even for painkilling drugs that have a linear effect on pain. Small increases in pain may push the individual to a corner where painkilling drugs dominate his life. This seeming dependence on the drug has nothing to do with addiction or habit formation, but is a consequence of how consumption of these drugs changes the shadow prices of goods and relief.
|Date of creation:||14 Nov 2001|
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