tag:blogger.com,1999:blog-2830084253401570472.post7030461696014819742..comments2024-03-28T09:22:36.967+13:00Comments on Offsetting Behaviour: The addictive choiceEric Cramptonhttp://www.blogger.com/profile/15831696523324469713noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2830084253401570472.post-31447169247233502772013-10-04T08:58:19.134+13:002013-10-04T08:58:19.134+13:00Yup. I spend a week on the Becker-Murphy model and...Yup. I spend a week on the Becker-Murphy model and draw out the graph in my 200-level class. Main point is that evidence of addiction isn't necessarily evidence of irrationality, not that all addicts are necessarily behaving that way.Eric Cramptonhttp://offsettingbehaviour.blogspot.com/noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-89756163906515727422013-10-03T20:48:54.280+13:002013-10-03T20:48:54.280+13:00Addicts respond to incentives and make choices, bu...Addicts respond to incentives and make choices, but that has (or should have been) known for a long time. My impression is that economists back before Becker thought of addiction as a "change in preferences." That makes it hard to compare welfare, since you have to decide whether to use the non-addicted or addicted set of preferences and so on. Even if you rationally took the risk of addiction into account, though, you wouldn't be a Beckerian rational addict:<br /><br />The new thing in rational addiction theory was that Becker and Murphy derived unstable consumption from stable preferences under full information (later work by others introduced uncertainty), which they did by introducing an "addictive stock" that summarizes past consumption history and which the addict manages rationally. Their (to my mind not very credible) claim is that addicts show increasing consumption as their addiction takes hold because they are implementing a forward-looking (not necessarily conscious) investment plan that takes the stock dynamics into account. The point is that this optimal plan is all the addiction is. <br /><br />So: people taking risk of addiction into account seems reasonable, addicts still able to respond to incentives and still attempting to make the best of their situation seems reasonable. Smokers and heroin junkies displaying unstable consumption (of the kind we call addictions) because they have solved and are implementing an optimal forward looking consumption-and-investment plan - not so much...olejrnoreply@blogger.com