The persistence of consumption habits

Lorenz Kueng, Evgeny Yakovlev 10 September 2014

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Understanding consumption behaviour of individuals and households is crucial for many economic questions, particularly for those with policy implications. For instance, given that consumption is the largest component of aggregate demand in most economies, it is important for policymakers to understand how consumers respond to changes in their economic environment – so called ‘shocks’ –  including those caused by new policies.

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Topics:  Health economics Microeconomic regulation

Tags:  consumption habits, Alcohol consumption, substitution, Russia

Minimum prices for alcohol should work

Joan Costa-i-Font 30 June 2014

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Policymaking on addictive substances is a tricky business, since the choices of addicts should not be expected to follow the neoclassical view of consumer choice. The additional problems are many:

  • People have limited will power,
  • Time preferences tend to excessively favour the short run, and
  • Certain social norms can create an unhealthy social environment (e.g., “drinking is cool”, “alcohol is the fast way to relax”).

Under these circumstances, traditional incentives might not work the way we think.

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Topics:  Health economics

Tags:  Alcohol consumption, minimum price, public health, consumption externalities

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