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03/27/2005

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Zathras

Everything we know about consumer markets for commodities suggests that under drug legalization most producers -- the vast majority of them, in fact -- would be driven out of business by market forces as effectively as they could be now by law enforcement.

Production of marijuana, for example, is now dispersed among a large number of relatively small producers, the better to evade laws against its production. If it were legal, production could be consolidated, and a much smaller number of producers could grow a much larger quantity of the drug. Among the many questions this raises is how former producers of marijuana would react. They could, I suppose, leap at the chance for secure, stable employment with DopeCo. They could give up growing marijuana and the income its sale now provides, or grow just enough for their own use. Or they could switch from producing marijuana to producing some other drug offering a comparable rate of return.

If every conceivable drug now illegal were decriminalized and made commercially available this could not happen, but I don't think even Becker is proposing this.

Bob

I'm surprised there were no comments on the fact that the government has proven itself woefully inept at regulating drugs. As anyone who still remembers high school will tell you, alcohol and tobacco are a huge part of the social life of teenagers in this country, despite the fact that they're illegal. The same goes for college. Even at the tech school I went to, which was recently rate one of the worst party schools in the country, a very large percent of the students drank a lot and often. Legalizing more drugs might seem like a good idea if you assume the government can keep young people from consuming, but this is a risky assumption to make. Does anyone have confidence in the government keeping newly legalized drugs out of the hands of high school and college students?

RWS

Exactly, Bob, and I would add to it that legalizing possession greatly complicates enforcement of a taxation regime, as I stated in my prior comments. The mere fact that some possession (through purchasing at an approved retailer that pays the tax) is legal whereas midnight harvesting or the farmer selling a little on the side is not would doom any attempt at legalizing and highly regulating. Cheating this regulatory scheme is wayyy too easy, as the failure of the authorities to control teenage alcohol and tobacco use shows.

It's the same principle as how the government regulates monopolies in different ways (antitrust laws, government ownership, rate regulation) depending on the specific industry. Costs of practical, effective enforcement are key to the regulation choice.

RWS

fling, one of the key reasons why illegal drugs have an active black market like you said is because they are so costly, which means that the dealer can make a very good profit. If the drugs were legalized but taxed at a rate that would make them cost just as much, there would be even more of a black market from dealers wanting to make a buck from capturing windfall profits. Cigarettes and alcohol have pretty low taxes by comparison, and so there is not an organized black market to capture that profit. The only way to eliminate the black market is to legalize it and have taxes so low that one won't develop.

Also, we see a lot more kids lighting up cigarettes in the high school parking lot than marijuana, for whatever that is worth empirically.

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