Tuesday, April 8, 2014


"Addiction" is one of those expansive words that mean different things to different disciplines. Here's how Psychology Today defines it:
Addiction is a condition that results when a person ingests a substance (alcohol, cocaine, nicotine) or engages in an activity (gambling) that can be pleasurable but the continued use of which becomes compulsive and interferes with ordinary life responsibilities, such as work or relationships, or health. Users may not be aware that their behavior is out of control and causing problems for themselves and others.
Economists tremble at the lack of relative prices in this description and would insist on a mismatch of utility and cost in downstream consumption events (Becker and Murphy wrote the flagship paper on the topic). We here at EE are awfully fond of the no ex post regret condition to purposely eliminate exchange in addictive substances as candidates for euvoluntary exchange.

But could there be too much tooth in that bite? Is it possible for someone to rationally (and I mean "rationally" in the colloquial sense, not merely in the strict economists' use of the word) choose to take the first step down the road to addiction? In other words, contrast ex ante regret expectations with ex post regret expression. In 21st century America, you'd have to have been raised in the middle of a swamp by manatees to not know that smoking cigarettes is addictive, and not particularly good for your health to boot. Yet, people still routinely pick up the habit, de novo, against all available public medical advice and common sense.

Nor is it the case that heroin's well-deserved reputation for shortening one's expected lifespan is a great secret kept well-hidden from the scrying eyes of would-be junkies. Yet, surprisingly, people still shoot up from time to time. It seems as if that, even with all available rational-mind information (Kahneman's rider, rather than the elephant), people still still choose the coffin nail, or the spike, or the bottle, or the pill.

So perhaps the important question is not "is addiction euvoluntary," but rather, "what institutions might make addictive behaviors more euvoluntary?" In the black markets that arise to feed addictions, merchants may not necessarily have good incentives to monitor the quality of their wares (there are exceptions to this rule, as Andrea noted in her podcast appearance). Under prohibition, the severity and frequency of ex post regret should be expected to increase. The salient question for euvoluntary exchangeurs is whether or not there is any change to the ex ante regret calculus under legalization, and whether or not the associated tradeoff is worth it.

Note here that the empirical literature helps only so far. The tradeoff question is ultimately a value judgement. And justice is a tricky virtue, even under the most favorable circumstances.

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Do you have suggestions on where we could find more examples of this phenomenon?