Rational Addiction Model Essay

951 Words2 Pages

Case Study
In the economic study of crime, economists not only develop theoretical frameworks, but also empirically test the predictions. The model of Rational Addiction has been implemented in many different conditions, such as alcohol consumption, illicit drug use and so on. Most of these studies provide evidence to verify the hypothesis that there exists significant positive reinforcement effects and negative price effects. The Grossman and Chaloupka’s (1998) study is one of these studies that aim to analyze the price elasticity of demand for cocaine. This study broadly support the rational addiction model. They indicated that no matter how the model is specified, the estimated coefficient on future consumption is always significant and …show more content…

Some critics argued that it is unreasonable to predict that a rational individual will choose to risk addiction under the knowledge of its potential harmful outcome. They claim that addicts will regret about their choice. Whereas, economists’ argued that addicts is possible to regret when they do not know their addictive tendencies until they have actually experimented. Otherwise, things they do are what they expect to regret. This criticism also modified and extended the rational addiction model that helps to explain the misconceptions of some “completely irrational” behavior (Orphanides & Zervos, …show more content…

Since addicts are rational, their decision of consumption should follow the rule that benefits exceed cost. It has already been discussed that the internal cost of drug use is long-term health problem and the benefit is individual’s immediate gratification. Addicts rationally decided to consume drug, while they ignore the concern of external cost. Economists propose the welfare economics framework as a tool for identifying the social costs of illicit drug use, which provides a rationale for enforcement intervention. The framework put forward two main external costs, health care costs and crime costs, which might be ignored to take into account when people are making decision of consuming

Open Document