Behavioral Economics of Addiction
What is the role of behavioral economics in understanding addiction?
Posted September 24, 2014
Behavioral economics provides a framework to understand when and how people make mistakes. The new field of behavioral economics blends insights of psychology and economics, and provides some valuable insights that individuals are not behaving in their own best interests. Behavioral economics emerged against the backdrop of the traditional economic approach known as rational choice model.
The rational person is assumed to correctly weigh costs and benefits and calculate the best choices for himself. The rational person is expected to know his tastes (both present and future), and never flip-flops between two contradictory desires. He has perfect self-control and can restrain impulses that may prevent him from achieving his long-term goals . Traditional economics use these assumptions to predict real human behavior. The standard policy advice that stems from this way of thinking is to give people as many choices as possible, and let them choose the one they like best (with minimum government action).
In contrast, behavioral economics shows that actual human beings do not act that way. People have a great deal of trouble exercising self-control. They are profoundly influenced by context, and often have little idea of what they will like next year or even tomorrow. Behavioral economics attempts to understand these differences and much like a cognitive therapist attempt to guide individuals toward more healthy behaviors by correcting cognitive errors. The focus on errors also suggests ways how policy makers might restructure environments to facilitate (nudge) better choices.
A key concept in behavioral economics is that of how delayed rewards are discounted by individuals. Delay discounting refers to the reduction in the present value of a reward when its delivery is delayed. These decisions have a time dimension, meaning that they involve tradeoffs between costs and benefits occurring at different times. Such choices pervade our lives, from daily decisions to ones that can have life-long consequences, such as saving for retirement , education , and marriage . The concept of choice over time provides a valuable organizing principle to explain the human taste for instant gratification (e.g., addictions, and procrastinations). The main problem with most addictive behaviors is that the costs occur in the future, whereas the pleasures from them occur in the present.
People differ substantially in how they discount the value of future reward. For example, people with chronic deficits in impulse control (e.g., addicts, individuals with ADHD , younger adults) tend to respond impulsively to tempting rewards that are immediately available. The impulsive behavior might facilitate drug use by reducing the weight given to its negative long-term consequences. Evidence shows that relative inconsideration of future consequences is a key aspect of addiction , obesity, and a risk factor for. This inability to appropriately weigh delayed rewards can be quite harmful to an addicted person who may be willing to sacrifice future gains or incur major losses (imprisonment) in exchange for instant gratification.
Behavioral economics views the individual as a divided-self with conflicting preferences. That is, at time 1, the person chooses indulgence; at time 2, this person wishes that he had made a different choice. This pattern of preferences is referred to as “present-biased” preferences. For example, an ice cream may seem like a bad idea when considered a few days before it appears at a birthday party. Yet when the occasion for indulgence comes closer in time, the immediate benefit of indulging in ice cream is more appealing than the long-term potential for negative effects. In this example, the person’s judgment at the time of action diverges from his calm and reflective judgment. His own future self becomes the obstacle to attain his current preference (resolution), resulting in a state of internal conflict between selves over time. Similarly, large proportions of addicts report being motivated to change their behavior and do indeed seek treatment, but later voluntarily drop out of treatment or relapse despite successfully completing treatment.
In the language of public health, a predisposition for shortsighted behavior could be considered as a risk factor. Thus, promoting consideration of the future consequences of behavior may be important policy tool for addiction treatment. To counteract the shortsighted behavior, addiction treatment can use self-control strategies either shift some of the future costs to the present, or that reduce some of the immediate rewards (i.e., changing the values of the choices). For example, some former alcoholics try to stay dry by taking disulfiram (antabuse), a drug that has the effect of making the user violently ill if one takes a drink. Within a few minutes of ingesting alcohol , the user will experience severe nausea and vomiting.
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Shahram Heshmat, Ph.D., is an associate professor emeritus of health economics of addiction at the University of Illinois at Springfield.
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This article is part of the Bringwise Psychology Journal — daily insights on human behavior, mental health, and personal growth.