Chapter 1: The standard theory of intertemporal choice provides a simple but elegantway to analyze how an individual consumes over time. Addiction, however, is documentedas one of numerous anomalies that the standard theory fails to explain. The modelsof habit-forming and compulsive consumptions have been suggested as the economicways to analyze addiction. The first aim of this paper is to outline the economics ofaddiction as two approaches where each concerns different aspects of stationarity assumedin the standard theory; stationarity in the set of instantaneous preferences and in thesystem of intertemporal preferences. The former highlights the endogenous mechanicsunder which instantaneous preference evolves over time, while the latter emphasizes therelative difference in evaluating the trade-off among intertemporal preferences. While twoapproaches are typically viewed as distinctive, my review suggests otherwise. The secondaim of this paper is to show that two seemingly contrasting approaches have a commoninterest of understanding the manner in which preferences are arranged over time and, inconsequence, leads to addiction. In particular, I show that the model of habit-formationcan be easily modified to describe compulsive consumption predicted by the intertemporalmodel with the hyperbolic discounting. I also suggest that the insights of the economics ofaddiction shed new light to the social welfare analysis with interpersonal inconsistence anddependence and the gateway effect of addiction development.Chapter 2: I consider a seemingly simple extension of the theory of rational addiction.In particular, this paper relaxes a critical assumption in rational addiction that the habit is‘commodity-specific.’ A habit is called commodity-specific when (1) a habit is accumulatedby a specific consumption and (2) the marginal rate of substitution of a consumptionfor a habit depends only on a particular pair of consumption and habit. By allowingthe non-commodity-specificity, I study multiple addictions and find that contemporaneousrelation among consumptions alters their addictiveness. The condition of rational addictionwith the non-commodity-specificity shows that when a rational individual is addicted tomultiple commodities, the concept of adjacent complementarity extends hierarchically towhat I call ‘gross adjacent complementarity.’ I also find that the gateway effect exists whendrugs are substitutes and an increase in the price of a gateway drug has the deterrent andmigrant effects to other drugs, ascribable to the income and substitution effects.Chapter 3: Recent efforts by economists have shown some success in researchingreligion-related behaviors in individual, group, and cultural level. How religion may affectsubstance use is an area where such efforts have been relatively at minimal, while theliterature in sociology, psychology, and medicine has recognized a general stylized fact ofthe negative relationship between religion and substance use. This paper reviews a largeliterature in sociology, psychology, and medicine that notes a clear negative relationshipbetween religion and substance use. To explain the relationship between the two, thispaper relies on the rational addiction explanation on three features of harmful addiction.First, as the consumption capital from substance use is dissipated by religious practice,current substance use is much less enforced from past use. Second, as the satisfaction gapbetween a given level of substance use in past and today becomes narrower, higher level ofpast substance use leads to much less loss in the utility from current substance use. Andthird, the reduction or interruption in current substance use does not result in the reductionin utility. As the increase in religious practice causes three effects, an individual chooses toreduce substance use.
