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A Theory of Natural Addiction

  • Trenton G. Smith

    (Washington State University)

  • Attila Tasnádi

    (Corvinus University of Budapest)

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 e ects 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://econwpa.repec.org/eps/mic/papers/0503/0503006.pdf
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Paper provided by EconWPA in its series Microeconomics with number 0503006.

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Length: 41 pages
Date of creation: 10 Mar 2005
Date of revision:
Handle: RePEc:wpa:wuwpmi:0503006
Note: Type of Document - pdf; pages: 41. UCLA International Institute Global Fellows Working Paper Series; December 18, 2003
Contact details of provider: Web page: http://econwpa.repec.org

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  2. B. Douglas Bernheim & Antonio Rangel, 2003. "Addiction and Cue-Conditioned Cognitive Processes," NajEcon Working Paper Reviews 666156000000000052, www.najecon.org.
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  4. 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.
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  9. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  10. 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.
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  13. 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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  18. Daniel Kahneman & Peter P. Wakker & Rakesh Sarin, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 375-406.
  19. Hirshleifer, Jack, 1985. "The Expanding Domain of Economics," American Economic Review, American Economic Association, vol. 75(6), pages 53-68, December.
  20. 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.
  21. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-81, June.
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  23. 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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