Addiction and discounting

Abstract

In 1988, Becker and Murphy [Becker, G.S., Murphy, K.M., 1988. A theory of rational addiction. Journal of Political Economy, 96, 675-700.] launched a theory in which they proposed that the perspective of rational decision-making could be applied also to cases of addictive behaviour. This paper discusses the theory's assumptions of interpersonal variation and stability in time preferences on the basis of estimates derived from three groups of people with different consumption levels of illegal intoxicants. We find that active injectors of heroin and amphetamine have a higher discount rate than a group reporting that they have never used the substances. Of greater interest, though not in accordance with Becker and Murphy's assumption of stability, we also find that the discount rate among active and former users differs significantly. These findings raise the question of whether a high time-preference rate leads to addiction or whether the onset of an addiction itself alters people's inter-temporal equilibrium.