Wednesday, 16 June 2010

How to fight the war on drugs

I have just come across a 2004 NBER working paper on "The Economic Theory of Illegal Goods: the Case of Drugs" by Gary S. Becker, Kevin M. Murphy, and Michael Grossman. The abstract reads:
This paper concentrates on both the positive and normative effects of punishments that enforce laws to make production and consumption of particular goods illegal, with illegal drugs as the main example. Optimal public expenditures on apprehension and conviction of illegal suppliers obviously depend on the extent of the difference between the social and private value of consumption of illegal goods, but they also depend crucially on the elasticity of demand for these goods. In particular, when demand is inelastic, it does not pay to enforce any prohibition unless the social value is negative and not merely less than the private value. We also compare outputs and prices when a good is legal and taxed with outputs and prices when the good is illegal. We show that a monetary tax on a legal good could cause a greater reduction in output and increase in price than would optimal enforcement, even recognizing that producers may want to go underground to try to avoid a monetary tax. This means that fighting a war on drugs by legalizing drug use and taxing consumption may be more effective than continuing to prohibit the legal use of drugs. (emphasis added)
What this means is that legalisation of drugs is the best anti-drugs policy.

Ed Glaeser has this to say on the Libertarian view of the drug war in his review of Jeff Miron's book "Libertarianism, from A to Z",
In some cases, like drug legalization, his views are clever if not nuanced -– “the right policy toward drugs is legalization.” Professor Miron’s writing on drugs is interesting not because his overall view is a surprise, but because he has spent decades marshaling arguments and facts in favor of drug legalization. Drug prohibition, he asserts, “harms the public purse,” because of both the cost of enforcement and the lost tax revenues; breeds “disrespect for the law”; “enriches drug traffickers”; leads drug dealers to resort to violence and causes some “thrift-minder users” to use more dangerous drugs that have “the biggest bang-for-the-buck.” He also asserts that some people would benefit by using drugs and that the risk of imprisonment and higher prices that drug laws bring do excessive damage to drug users. Professor Miron’s warning that drug prohibition erodes civil liberties concerns anyone who worries about the millions of Americans who have become part of the prison system because of our drug laws.
In other words the war on drugs comes with seriously big costs.

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