Every now and again someone will ask what I’m working on. Occasionally, these people actually seem to be genuinely interested (rather than just being polite!). This post is for those people. Ryan Oprea and I have recently submitted our joint paper to a journal, which means that it is now available on the web and ready for public consumption.
Sir Richard Blundell, a very well renowned British economist (as you might guess from the Sir in front of his name), is visiting UBC this week. During his time here is giving a series of advanced lectures; today’s lecture was on the theory and applications of revealed preference theory. Here I am going to give an outline of one piece of his work that he discussed: a paper that looks at the changes in demand for cigarettes in Britain during the 1980s and 1990s. This paper is particularly important because it simultaneously advances economic theory and contributes to a very important policy debate. The paper in question is (somewhat blandly) called Prices versus Preference: Taste Change and Revealed Preferences, and is co-authored with Abi Adams, Martin Browning and Ian Crawford.
This post is reasonably technical, but should (I hope) be readable for most. If you manage to stick through the economics at the beginning then you will see some remarkable insights at the end regarding the effects of taxes and health information on the behaviour of smokers. To summarize, health information has very little effects on lower educated, heavy smokers but a much greater effect on higher educated, lighter smokers. However, increases in cigarette taxes do have an effect on lower educated, heavy smokers. [Aside: what do you think the welfare implications of these results are?]