ABSTRACT
This chapter examines the economic nature of health bads, and it studies the potential of curbs on advertising and increased excise taxes to reduce the consumption of bads. Economic reasoning is helpful for any approach to the analysis of bads, such as cigarette smoking and excessive alcohol consumption. Most smokers will remember how bad the first cigarette tasted, but similarly smoking or drinking at age 21 may increase enjoyment of smoking or drinking in subsequent years. The rationally addicted smoker weighs the present pleasure against both the future health consequences and the beneficial impact of current consumption on future consumption enjoyment. Models of addiction come out of both psychology/medicine and economics. The rational addiction theorists have drawn several further implications from their analyses. Addiction is more likely for people who discount the future heavily, because they pay less attention to the potential adverse consequences.
