Rational Habit Formation: Experimental Evidence from Handwashing in India

We test the predictions of the rational addiction model, reconceptualized as rational habit formation, in the context of handwashing in rural India. To track handwashing, we design soap dispensers with timed sensors. We test for rational habit formation by informing some households about a future change in the returns to daily handwashing. Monitoring and incentives raise handwashing contemporaneously, and effects persist well after they end. In addition, people are rational about this habit formation: when they anticipate future monitoring, they increase their current handwashing. Average child weight and height increase for all study arms given soap dispensers. (JEL D12, D83, D91, I12, I18, J13, O12)

Thick Concepts in Economics: The Case of Becker and Murphy’s Theory of Rational Addiction

In this paper, we examine the viability of avoiding value judgments encoded in thick concepts when these concepts are used in economic theories. We focus on what implications the use of such thick concepts might have for the tenability of the fact/value dichotomy in economics. Thick concepts have an evaluative and a descriptive component. Our suggestion is that despite attempts to rid thick concepts of their evaluative component, economists are often not successful. We focus on the strategy of explication to remove the evaluative component of thick concepts and argue that often economists either have to make value judgments or are unable to individuate out the phenomenon under analysis. We support our claim with a case study, namely the concept of addiction in Gary Becker and Kevin Murphy’s Theory of Rational Addiction (1988). One consequence of our analysis is that theories containing thick concepts could commit economists to making value judgments and as such undermine the fact/value dichotomy.

Looking at the taxation effect on cross-state smuggling using rational addiction models

Purpose The purpose of this paper is to show how the taxation effect on cross-state smuggling can be a valid instrumental variable for lagged and future consumption together with the local price series. Design/methodology/approach On the same grounds, the authors raise the question using the rational-addiction model by noticing that the neighboring price differentials really capture the possible smuggling or bootlegging effects. Findings Moreover, the authors look into the extended model to test the key condition that the expected future financial consequences will affect the current consumptions. Originality/value This supports the rational-addiction model, which can be used to plan the taxation for the forward-looking consumptions.