Why do some people who experiment with drugs become addicted, while others do not? The answer to this question is quite complicated. The ways in which a particular drug activates, reinforces, and desensitizes pleasure can vary with dose, frequency, and chronicity of use; drugs also vary in their effects across individuals and environments. Medical researchers often view the contraction of a disease as an interaction of an agent, a host, and the environment. Applying this framework to drug use, the agent is the drug taken. As described above, drugs differ in effect. The host refers to the characteristics of the individual drug user, including genetic makeup, family history, traits of temperament or personality (e.g., openness to experience, or to risk-taking behavior), affiliation with drug-using peers who provide models for drug-taking behavior, and expectations about the drug effects. Individuals respond to the same drug in the same dose in different ways. The last piece of this disease contraction sequence, the environment, refers to availability of the drug and the sociocultural context surrounding its use. Experience and social context exert powerful effects on the brain and thus on behavior. Environmental cues also alter the effects of use. Thus the addiction process involves multiple simultaneous factors that vary across drugs, individuals, and environments (O’Brien, 1995).

Economic Research on Price Sensitivity

Economic research on the determinants of drug use focuses on the relationship between quantity consumed and price. In particular, a demand function relates consumption of a commodity to its price. The price elasticity of demand is the percentage change in consumption that is caused by a 1 percent change in the price. For example, if a 1 percent increase in the price causes a 0.5 percent decrease in consumption, then the price elasticity of demand is –0.5. It may seem that demand for an addictive substance is likely to be insensitive to price, so that the price elasticity of demand is close to zero, but this is not necessarily the case. The demand for cigarettes provides an illustration. The many studies of the price elasticity of demand for cigarettes have found that the long-run price elasticity of demand is in the range –0.27 to –0.79 for the population as a whole and –0.9 to –1.3 for college students (Chaloupka, 1991; Becker et al., 1994; Chaloupka and Wechsler, 1997).

Demand functions and price elasticities must be understood to formulate effective drug policies. In particular, many antidrug policies are aimed at increasing the price that consumers must pay for a drug. If demand does not change when the price increases, then such policies will have little effect on consumption but will increase drug sellers’ earnings. These policies may also increase property crimes by consumers who need

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