ECONOMIC ANALYSIS OF SMOKING AS A NEGATIVE INVESTMENT IN HEALTH CAPITAL

The paper examines the concept of health capital alongside the phenomenon of positive and negative investments in it. Neoclassical economic theory implies individuals always act rationally, making their choice solely for reasons of prudence and considering the consequences of their actions. Since health capital is treated as a standalone type of capital, a rational individual would invest in health benefits and refuse to invest in benefits destructively affecting him or her in order to maximize the number of days during which he or she would be able to use human capital and receive financial income accordingly. Nonetheless, according to the observations, individuals tend to act differently. The goal of the study is to identify how both animal spirits and investor myopia affect the fact that individuals are investing negatively in their own health capital. The paper relies on surveys of HSE students in St. Petersburg, Russia. By using the econometric analysis of smoking as an example of negative investment in health capital, the study states how to find an explanation for one of the mysteries of social life in post-Soviet countries: the average life expectancy of Russians, extremely low (especially regarding men), even by the standards of underdeveloped countries. The main result is that the propensity to smoke is affected by animal spirits, but not by investor myopia.