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2016 | OriginalPaper | Chapter

5. Overborrowing, Overeating, and Addictive Behavior

Author : Shinsuke Ikeda

Published in: The Economics of Self-Destructive Choices

Publisher: Springer Japan

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Abstract

I would like to think about self-destructive choices from the perspective of discounting—hyperbolic discounting in particular—which governs intertemporal choices. Specifically, I will take up behavioral problems regarding (1) economic decision-making that involves undersaving and overborrowing, (2) health-related decision-making that involves overeating and obesity, and (3) decisions that relate to addictive consumption, such as smoking, drinking, and gambling. I shall examine them one by one.

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previous chapter Self-Control Problems of the Dual Self

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However, we would need to control the effect of the discount rate in order to draw such a conclusion because, as we discussed previously (and as will be shown later), the amount of assets held depends on not only hyperbolic discounting but also the level of the discount rate itself. We cannot rule out the possibility that the nonsavers in Mastrobuoni and Weinberg (2009) were nonsavers who showed a consumption pattern that featured a downward slope, because their discount rate was high.

However, in the case of loan sharks in Japan, one could borrow JPY 30,000 and repay JPY 50,000 10 days later or borrow JPY 70,000 and repay JPY 100,000 10 days later, for example (Ide 2007). The effective annual interest rate is about 125,160,000 % for the former and exceeds 450,000 %, even for the latter; therefore, payday loans are not that exorbitant.

It was Komlos et al. (2004) who first used a macro international comparison and showed that a lower savings rate corresponds with a higher obesity rate in this manner.

Except where permitted by law, such as the Horse Racing Act, gambling is prohibited by the penal code. Pachinko parlors avoid being subject to the penal code by operating in the so-called three-store style in which a pachinko parlor, thrift shop (gift exchange office), and gift wholesaler coordinate with each other. As a practical matter, however, virtually no one considers pachinko a mere game, rather than gambling. Here, I, too, take the position of viewing pachinko as gambling.

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Title: Overborrowing, Overeating, and Addictive Behavior
Author: Shinsuke Ikeda
Publisher: Springer Japan
Book: The Economics of Self-Destructive Choices
Print ISBN: 978-4-431-55792-0

Electronic ISBN: 978-4-431-55793-7

Copyright Year: 2016
DOI: https://doi.org/10.1007/978-4-431-55793-7_5