We use a framework suggested by a model of rational addiction to analyze empirically the demand for cigarettes. The data consist of per capita cigarettes sales (in packs) annually by state for the period 1955 through 1985. The empirical results provide support for the implications of a rational...

We present a model of the creation of social networks, such as political parties, trade unions, religious coalitions, or political action committees, through discussion and mutual persuasion among their members. The key idea is that people are influenced by those inside their network, but not by...

Medical care at the end of life, which is often is estimated to contribute up to a quarter of US health care spending, often encounters skepticism from payers and policy makers who question its high cost and often minimal health benefits. It seems generally agreed upon that medical resources are...

We develop an economic framework for valuing improvements to health and life expectancy, based on individuals' willingness to pay. We then apply the framework to past and prospective reductions in mortality risks, both overall and for specific life-threatening diseases. We calculate (i) the...

A wide range of social indicators turned sharply negative for Blacks in the late 1980s and began to rebound roughly a decade later. We explore whether the rise and fall of crack cocaine can explain these patterns. Absent a direct measure of crack cocaine's prevalence, we construct an index based...

This paper concentrates on both the positive and normative effects of punishments that enforce laws to make production and consumption of particular goods illegal, with illegal drugs as the main example. Optimal public expenditures on apprehension and conviction of illegal suppliers obviously...

We treat rising inequality is an equilibrium outcome in which human capital investment fails to keep pace with rising demand for skills. Investment affects skill supply and prices on three margins: the type of human capital in which to invest; how much to acquire; and the intensity of use. The...

Medical care at the end of life, estimated to contribute up to a quarter of US health care spending, often encounters skepticism from payers and policy makers who question its high cost and often minimal health benefits. However, though many observers have claimed that such spending is often...

According to our analysis, pre-invasion views about the likely course of the Iraq intervention imply present value costs for the United States in the range of $100 to $870 billion. Our estimated present value cost for the containment policy is nearly $300 billion and ranges upward to $700...

We analyze entry, pricing and product design in a model with differentiated products. Under plausible conditions, entry into an initially monopolized market leads to higher prices for some, possibly all, consumers. Entry can induce a misallocation of goods to consumers, segment the market in a...