Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5728
Risky health behaviors such as smoking, drinking alcohol, drug use, unprotected sex, and poor diets and sedentary lifestyles (leading to obesity) are a major source of preventable deaths. This chapter overviews the theoretical frameworks for, and empirical evidence on, the economics of risky health behaviors. It describes traditional economic approaches emphasizing utility maximization that, under certain assumptions, result in Pareto-optimal outcomes and a limited role for policy interventions. It also details nontraditional models (e.g. involving hyperbolic time discounting or bounded rationality) that even without market imperfections can result in suboptimal outcomes for which government intervention has greater potential to increase social welfare. The chapter summarizes the literature on the consequences of risky health behaviors for economic outcomes such as medical care costs, educational attainment, employment, wages, and crime. It also reviews the research on policies and strategies with the potential to modify risky health behaviors, such as taxes or subsidies, cash incentives, restrictions on purchase and use, providing information and restricting advertising. The chapter concludes with suggestions for future research.
health behaviors alcohol tobacco smoking drugs obesity diet food physical activity public health public policy taxation subsidies addiction externalities advertising information behavioral economics neuroeconomics human capital education prices sex income time preference peers bounded rationality medical costs employment wages crime hyperbolic discounting