Living Reference Work Entry

The New Palgrave Dictionary of Economics

pp 1-5

Date: Latest Version

Addiction

  • George LoewensteinAffiliated with
  • , Scott RickAffiliated with

Abstract

Research on addiction had already yielded a wide range of interesting and important findings when economists first arrived on the scene. The economic study of addiction was initiated by a seminal paper by Becker and Murphy (1988) which challenged the prevailing view of addiction as self-destructive, proposing instead a ‘rational account of addiction’. Although some empirical research has confirmed the model’s critical prediction that anticipated increases in future prices will decrease current demand for a drug, more recent research by economists, stimulated by the prior work from other disciplines, has challenged some of the rational account’s assumption and predictions.

Keywords

Addiction, rational account of Becker, G. Drugs Excise tax Forward price elasticity Rational behaviour Sin taxes Time consistency

JEL Classifications

D1