ABSTRACT
This chapter focuses on conceptual models, empirical explanations, and policy evaluations of consumption of goods that are bad for one’s health. Specifically, the chapter examines the literature around alcohol, tobacco, and opioid consumption. The reader learns about models of addiction which posit the individual as a rational agent with time-inconsistent preferences, as one who excessively discounts the future, and as one who receives increasing utility from consuming addictive goods.
The chapter then discusses the rationale of public intervention and policy in the context of individual decisions to consume bads. Three types of policy interventions are examined: (1) effects of advertising and policy limiting its reach; (2) taxes and their impacts on consumption of alcohol and tobacco; and (3) regulation of production and consumption of alcohol, tobacco, and drugs. The reader learns about the effectiveness of prescription drug monitoring programs in the opioid epidemic in the United States; the role of taxation, advertising and smoking bans in the use of tobacco; and the effects of laws regulating the sale and venue of consumption of alcohol on its impact on fatal vehicle accidents.
