We present a theory of rational behavior in which individuals maximize a set of stable preferences over goods with unknown addictive power. The theory is based on three fundamental postulates: that consumption of the addictive good is not equally harmful to all, that individuals possess subjective beliefs concerning this harm, and that beliefs are optimally undated with information gained through consumption. Although individual actions are optimal and dynamically consistent, addicts regret their past consumption decisions and regret their initial assessment of the potential harm of the good. Addict-prone individuals who believe "it could not happen to them" are most likely to be drawn into a harmful addiction.

We present a theory of rational behavior in which individuals maximize a set of stable preferences over goods with unknown addictive power. The theory is based on three fundamental postulates: that consumption of the addictive good is not equally harmful to all, that individuals possess subjective beliefs concerning this harm, and that beliefs are optimally undated with information gained through consumption. Although individual actions are optimal and dynamically consistent, addicts regret their past consumption decisions and regret their initial assessment of the potential harm of the good. Addict-prone individuals who believe "it could not happen to them" are most likely to be drawn into a harmful addiction.

The frequency of foreign conflict initiations in the United States is found to be significantly greater following the onset of recessions during a president's first term than in other periods. We develop an economic theory of the political use of wars which links the election cycle, war decisions, and economic performance consistent with the observed relationships among these events. An incumbent leader with an unfavorable economic performance record may initiate a war to force the learning of his war leadership abilities and thus salvage, with some probability, his reelection. This obtains despite voter rationality and informational symmetry.

The frequency of foreign conflict initiations in the United States is found to be significantly greater following the onset of recessions during a president's first term than in other periods. The authors develop an economic theory of the political use of wars which links the election cycle, war decisions, and economic performance consistent with the observed relationships among these events. An incumbent leader with an unfavorable economic performance record may initiate a war to force the learning of his war leadership abilities and thus salvage, with some probability, his reelection. This obtains despite voter rationality and informational symmetry. Copyright 1995 by American Economic Association.