behavioral economics Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals or institutions, such as how those decisions vary from those implied by classical economic theory. ...

, rational addiction is the

hypothesis A hypothesis (plural hypotheses) is a proposed explanation for a phenomenon. For a hypothesis to be a scientific hypothesis, the scientific method requires that one can test it. Scientists generally base scientific hypotheses on previous obse ...

that

addiction Addiction is a neuropsychological disorder characterized by a persistent and intense urge to engage in certain behaviors, one of which is the usage of a drug, despite substantial harm and other negative consequences. Repetitive drug use o ...

s can be usefully modeled as specific kinds of

rational Rationality is the quality of being guided by or based on reasons. In this regard, a person acts rationally if they have a good reason for what they do or a belief is rational if it is based on strong evidence. This quality can apply to an abili ...

, forward-looking, optimal

consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically * Consumption (ecology), receipt of energy by consuming other organisms * Consumption (economics), the purchasing of newly produced goods for curren ...

plans. The canonical theory comes from work done by

Kevin M. Murphy Kevin Miles Murphy (born 1958) is the George J. Stigler Distinguished Service Professor of Economics at the University of Chicago Booth School of Business and a Senior Fellow at the Hoover Institution. In 1997 Murphy was awarded the prestigi ...

and

Gary Becker Gary Stanley Becker (; December 2, 1930 – May 3, 2014) was an American economist who received the 1992 Nobel Memorial Prize in Economic Sciences. He was a professor of economics and sociology at the University of Chicago, and was a leader of ...

.Becker, Gary S., and Kevin M. Murphy (1988) "A Theory of Rational Addiction." ''Journal of Political Economy'' 96 (4): 675–700. https://doi.org/10.1086/261558.

Economic theory

Though controversial, this theoretical approach has become "one of the standard models in the literature on addictive behavior" in economics,Ferguson, Brian S. (2000) "Interpreting the rational addiction model". ''Health Economics'', Vol. 9: Iss. 7, pp. 587-598 and a variety of extensions and modifications have been developed and published by other authors over the years. A survey of researchers who had authored or co-authored peer-reviewed articles on rational addiction theory indicates that the researchers see the theories as successful in a number of ways: 73 percent of the respondents see them as extending and enriching consumer theory, 56 percent see them as containing relevant insights on the welfare effects of addictive goods and public policies towards these, 44 percent see them as providing useful tools for predicting aggregate consumption behavior, 39 percent see them as providing insights into how addicts choose that are relevant for treatment professionals, and 27 percent see them as providing evidence that addictions are actually a sequence of rational, welfare maximizing choices.

Implementation

The original theory models addictions as the implementation of a forward-looking consumption plan made under full certainty and

perfect information In economics, perfect information (sometimes referred to as "no hidden information") is a feature of perfect competition. With perfect information in a market, all consumers and producers have complete and instantaneous knowledge of all market pr ...

, where the individual is entirely committed toward maximizing utility. ''Addiction'' is defined in a non-physiological sense as a causal effect of past consumption on current consumption, so that addictiveness is specific to individuals. The addict knows exactly how the good will affect him, and the reason he consumes more and more ("gets hooked") is that this is the pattern of consumption that maximizes his

discounted utility In economics, discounted utility is the utility (desirability) of some future event, such as consuming a certain amount of a good, as perceived at the present time as opposed to at the time of its occurrence. It is calculated as the present disco ...

. He knows that consuming the addictive good will change his preferences, altering both his future baseline level of utility and the marginal utility of consuming the addictive good in the future. A sizeable

econometric Econometrics is the application of statistical methods to economic data in order to give empirical content to economic relationships. M. Hashem Pesaran (1987). "Econometrics," '' The New Palgrave: A Dictionary of Economics'', v. 2, p. 8 p. 8 ...

literature has developed on rational addiction, often reporting evidence in favor of rational addiction. For example, Jonathan Gruber and Botond Köszegi (2001) show that the model's prediction that announced future tax increases should decrease current smoking is consistent with the evidence. Christopher Auld and Paul Grootendorst (2004) show, however, that the empirical version of the rational addiction model tends to produce spurious evidence of addictiveness when aggregate data are used.

Criticism

Research attempting to apply the rational addiction model to surveys of drug users have found the model inadequate to explain drug-taking behavior. Criticism of rational addiction theories have emerged along different lines. A prominent critic is the philosopher

Jon Elster Jon Elster (; born 22 February 1940, Oslo) is a Norwegian philosopher and political theorist who holds the Robert K. Merton professorship of Social Science at Columbia University. He received his PhD in social science from the École Normale Supe ...

, who in a series of writings has claimed that theories in Becker's framework are conceptually incoherent in their view of preferences, as well as inconsistent with the ambivalence and desire for increased self-regulation that is empirically displayed by many addicts. The economist Ole Rogeberg has commented that this all "illustrate how absurd choice theories in economics get taken seriously as possibly true explanations and tools for welfare analysis despite being poorly interpreted, empirically unfalsifiable, and based on wildly inaccurate assumptions selectively justified by ''ad hoc'' stories."

References

{{reflist Rational choice theory Addiction