| Summary: | The usage of snus has been proven to be a healthier alternative for smoking cigarettes. However, the question posed now is how to design public policy in regards to the taxation of snus; this will be analyzed using a rational addiction model and a hyperbolic discounting model. The rational addiction model is the hypothesis that addictions can be modeled in a future-oriented, rational, and optimal consumption plan. The hyperbolic discount model is a time-inconsistent model of discounting. With the rational addiction model, the user is trying to maximize utility by keeping the future in mind, whereas the user in a hyperbolic discounting model wants to maximize the utility of his or her present state by discounting his or her losses and gains in the future- a reward today is better than a reward tomorrow, but a reward tomorrow and the next day are valued similarly, which holds true for tomorrow as well. There are two views of interest in this paper: an economic approach and a public health approach. Each approach has different points of action; public health favors public policies which tax and ban tobacco products in general, whereas in an economic sense, public policies may not be necessary because an individual is maximizing his or her utility through the usage of these addictive goods. The latter holds true with the exception of negative externalities (i.e. healthcare costs, secondhand-smoke) or if people are irrational like in a hyperbolic discounting model.
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