Economic modeling of the rational consumption of addictive substances

Substance Use & Misuse
Brian S Ferguson

Abstract

This article gives an overview of the way economists model the decision to consume addictive commodities and reviews some of the relevant literature testing aspects of the model. It aims to answer the question of how it is that economists can speak of the consumption of addictive harmful commodities as a rational decision. Health economics treats the consumption of commodities that have beneficial (or harmful) effects on health, and therefore on utility or well-being, as intertemporal decisions with regard to investment decisions. In investment in health, the payoff to an action comes appreciably later than the action itself. The decision to consume harmful, and even addictive, commodities fits into the investment in health framework, with the benefit comes now, in the form of the pleasure derived from consuming them, and the costs, in terms of damage to the individual's health, comes later. The value that a person places on the future vs. the present is called time preference or subjective rate of time discounting, which represents the weight he places on the future relative to the present when he makes decisions that have future consequences. The more they discount the future, the more myopic they are and the more likely to u...Continue Reading

References

May 1, 1994·Social Science & Medicine·A GlendinningL Hendry
Apr 27, 1994·JAMA : the Journal of the American Medical Association·D E NelsonP D Mowery
Nov 7, 1982·Journal of Health Economics·P Farrell, V R Fuchs
Oct 28, 1999·Journal of Health Economics·A L Bretteville-Jensen
Mar 8, 2000·American Journal of Public Health·M L Ganz
Dec 5, 2000·Health Economics·B S Ferguson
Dec 9, 2003·Proceedings of the National Academy of Sciences of the United States of America·Bryan SchmidtShelagh Ferguson-Miller

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Citations

Feb 9, 2011·Patient Preference and Adherence·Jeanette M Renaud, Michael T Halpern
Jun 23, 2009·International Journal of Environmental Research and Public Health·Monica OrtendahlTuula Wallsten
May 19, 2009·The International Journal on Drug Policy·Cláudia Costa Storti, Paul De Grauwe

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