Rational dependency

The term rational dependence ( engl. Rational addiction ) refers to the hypothesis that addiction and dependence in the economics useful as a specific type of rational consumption can be described decisions. Kevin M. Murphy and Nobel Laureate Gary S. Becker formulated this hypothesis in 1988 as part of their consumption theory.

This theory is the first that:

indicates that unstable stationary states are important for the analysis of dependencies,
expressly derives long and short term functions for addictive goods, and
shows how temporary stressful events can lead to permanent needs.

The theory of rational dependence is viewed as an economic model and as part of behavioral economics . This model can be used to explain the effects that occur on the behavior of individuals in their consumption decisions.

Addictive goods

Economic models of addictive goods (goods addictive) assume that the current consumption dependent on the previous consumption. If the consumer does not perceive how the current consumption of an addictive good affects the amount of future expenditure, there are negative externalities and thus the consumer injures himself. It is therefore recommended that the consumer surplus when consuming such a good is below the demand curve without the existence of the dependency should be appropriate instead of under the curve with its existence. Because more of this good is consumed in addiction, there is a loss of welfare which must be deducted from the rent resulting from the consumption of this good.

Becker and Murphy (1988) model

According to the original theory of "rational dependency", dependency is believed to be an implementation of an advanced consumption decision with complete confidence and complete information, so that the consumer focuses only on maximizing his own welfare. In dependence is a causal effect of a previous consumption on a current and it is absolutely specific focus on the individuals. The consumer takes note of the effects the good has on him. Nonetheless, he continues to consume because his needs are the model of consumption that maximizes his utility function. The dependent goods change the person's preferences, their future level of utility, and their marginal utility of consumption in the future.

Cold Turkey and Binges

This theory implies that strong needs for a dependent good can only be prevented with strict measures .

A rational person can put an end to his need for a good either when events cause demand reductions or when the individual's stock of capital expenditures is reduced.
Consumption changes faster when a change in consumption has a greater impact on future spending than before.
Strongly rational persons end the consumption of dependent goods faster than weakly rational individuals.

With strong complementarity , this creates a utility function that is not concave, so there are large fluctuations in consumption with the smallest stressors in the individual environment.

Short-term loss of benefit is greater for more addicts, but rational individuals are always ready to sacrifice their short-term benefits for their long-term gains. Rational people will try to minimize this short-term loss of utility by stopping the cold turkey .

Becker and Murphy also rate the rationality of Binges well by extending their model for the market price of a need. Binges are generated when the supply of consumer capital is divided into two parts that have different depreciation rates and different degrees of complementarity and substitution.

Findings from psychology

Experimental studies of needs have verified the elements of reinforcement, preserved tolerance and exit:

Reinforcement implies a special response to past consumption; that is, greater past consumption increases the marginal utility of current expenditures
Preserved tolerance: a certain level of current consumption is less than satisfactory if consumption in the previous period was higher.
Leaving: a negative physical reaction and other reductions in satisfaction that count as current expenses have been canceled

Alternative approaches to the economic modeling of the demand for dependent goods

Conventional approach

Standard, restricted, lifelong utility-maximizing framework of the economy:

${\ displaystyle U (t) = f [C (t), X (t)]}$
${\ displaystyle C (t)}$ - Consumption of addictive substances over time ${\ displaystyle t}$
${\ displaystyle X (t)}$ - Consumption of composite good
time ${\ displaystyle t}$

Maximizing the utility function is the main part of the income constraint:

Generates demand function of the type:

${\ displaystyle C (t) = g [P (t), Y (t), Z (t)]}$
${\ displaystyle P (t)}$ - Price of dependent goods
${\ displaystyle Y (t)}$ - Income
${\ displaystyle Z (t)}$ - Vector of variables reflecting preferences

Conventional approach:

Current consumption of dependent drugs depends only on current factors.
Increasing the price will lower consumption (price includes time costs, expected legal costs and expected health consequences)
An increase in the previous price and / or an expected increase in the future price will have no effect on current consumption
The approach does not necessarily reflect the dependence of current consumption on the decisions about behavior in the past that characterize the use of a dependent good.

Rational models based on dependent demand

Standard, restricted, lifelong utility-maximizing framework of the economy: ${\ displaystyle U (t) = f [C (t), C (t-1), X (t)]}$
Lifetime utility function under maximizing reasonable income constraint
Given demand function of the type: - future consumption ${\ displaystyle C (t) = g [P (t), C (t-1), C (t + 1), Y (t), Z (t)] (C (t + 1))}$

Rational approach:

The consumption of funds depends on current, past and future factors
The good is dependent if an increase in the previous consumption increases the current expenditure.
Increasing the current, past or future price will reduce current consumption.
The long-term effect of a permanent price change exceeds the short-term effect
This approach reflects the dependence of current consumption on decisions about past behavior, which describes the use of a good
Implies that the future effects of dependent consumption will be considered when making current consumption decisions.

Price effects

Long-term effects of constant price changes are greater than effects of temporary price changes
The effects of expected price changes are greater than the effects of unexpected price changes
The ratio of long-term to short-term price effects is greater, the greater the degree of dependency.
Long-term price effect is greater, the greater the speed of the rate of time preference for the present.

criticism

Safety and rational behavior do not imply delay or remorse, but it is some consumers who regret such choices. Individuals try to hinder their future behavior. Because of this, it was assumed that this model is inconsistent. Many believe that this consumption involves imperfect rational behavior and is not necessarily appropriate to the economic standard of economic analysis: to a person who wants to quit smoking

"Everyone behaves like two people, one wants clean lungs and long life and the other wants tobacco ... The two are in constant competition for control"

- Thomas Schelling (1978)

Others, however, have argued that economic means could be applied to such behavior:

"It is argued that this traditional approach of economists provides guidance on combating these problems - and that no other approach of comparable generality and performance is available."

- George Stigler and Gary Becker (1977)

Individual evidence

↑ https://www.iei.liu.se/nek/730A17/artiklar/1.283076/Becker-Murphy.pdf .

↑ Archived copy ( memento of the original from June 20, 2015 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. . @1@ 2Template: Webachiv / IABot / www.ief.es

↑ http://www.stat.columbia.edu/~gelman/stuff_for_blog/addiction.pdf .

↑ http://web.uvic.ca/~auld/auld-jh-smoking.pdf .

[1] ttps://www.iei.liu.se/nek/730A17/artiklar/1.283076/Becker-Murphy.pdf .