Thursday, June 09, 2005

Got Milk Addiction?

University of Calgary's Christopher Auld says you're rational:

A large literature has arisen following Becker and Murphy's (1988) theory of rational addiction. The model has been implemented empirically to study numerous activities, including use of drugs such as tobacco, alcohol, cocaine, opium, and caffeine, and activities such as gambling, cinema, and eating.... Frequently, evidence for rational addiction is found, although the results are often described as less than compelling since unstable demand, implausible discount rates, and low price elasticities are estimated ....we propose an `anti-test' of the empirical rational addiction model: We show that its application to time-series data on consumption of milk, eggs, oranges, apples, and cigarettes yields evidence that milk--by a substantial margin-- is the most rationally addictive of these commodities.

Auld has also updated his 'drink-income puzzle' work to include smoking:

With all else in the system held constant, moderate drinking leads to 10% greater income than drinking abstention, whereas heavy drinking does not cause lower wages than moderate drinking. Smoking is associated with larger effects on income than drinking: Single-equation estimates suggest smokers earn 8% less than non-smokers, and the smoking penalty rises to 24% after correcting for endogeneity.

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