The Economics of Addiction
Is it possible that heroin junkies and crackheads are actually rational?
I feel that it is time to share a secret. When I left on my vacation just over a week ago, I was fighting a battle with a deep-rooted addiction. I feel able to admit this, since over the course of my holiday I was able to go through cold turkey, conquer the addiction, and face the world clean.
It's decaffeinated coffee for me from now on.
Addiction—even to something as benign as filter coffee—is an unlikely topic for an economist to tackle, because most economic theory is predicated on rational behavior, and addiction seems to be quintessentially irrational.
The logical response appeared in 1988. "A Theory of Rational Addiction" was published by Kevin M. Murphy and Nobel laureate Gary Becker, and has defined economists' approaches to addiction ever since. The theory is easy to state: Addicts choose their poison despite knowing that it is habit-forming and dangerous, and they do so because they expect the highs to outweigh the lows.
Even other economists are skeptical. "They don't know what they're talking about," opined Thomas Schelling when I met him shortly after he, too, was awarded the Nobel Memorial Prize in Economic Sciences. Schelling had spent years trying to kick his tobacco addiction.
Yet perhaps the rational addiction approach is not quite as absurd as it seems. Some habits are rational to acquire. Dating my girlfriend was habit-forming enough to ask her to be my wife. So far, I have no regrets.
It seems absurd to compare the decision to drink coffee or start dating with the decision to smoke cigarettes or inject heroin, but if Becker and Murphy are right, the difference is not of kind but of degree.
Rational addicts should behave in certain ways. They should, for instance, respond not just to current price increases but to expected future price hikes. If heroin is likely to get more expensive, rational addicts should consider trying to quit before that happens. Addicts may even be more sensitive to lasting price shifts than nonaddicts. And since addiction is self-reinforcing, when the rational addict wants to quit, cold turkey is the efficient way to do it.
Economists have found some evidence to support these ideas: Pamela Mobilia finds that betting at racetracks falls in anticipation of increases in bookies' takings; Nilss Olekalns and Peter Bardsley find that coffee addicts show similar foresight; Philip Cook and George Tauchen found that when some U.S. counties raised taxes on alcohol, liver cirrhosis fell more sharply than overall consumption, suggesting that it was the alcoholics who cut back most.
My own addiction was perfectly rational: I am working on a new book, and as deadlines loomed, I drank more and more coffee, even though I was becoming dependent on the caffeine. Manuscript submitted, I went cold turkey on holiday, knowing that the headaches and sluggishness of mind would be both less painful and less important while wandering around the Welsh coast.
Tim Harford is a Financial Times columnist. His latest book, The Logic of Life, will be published in paperback on Feb. 10.