March 26, 2005
The War on Drugs--Posner's Response to Comments
The fact that the price of illegal drugs is not only low but falling, and indeed has fallen to quite low levels, is often treated as compelling evidence that the war on drugs has failed. That is true if the war metaphor is taken literally. But if the “war” is redescribed realistically as a campaign to reduce the consumption of illegal drugs, it could be thought at least a partial success even if the price of illegal drugs is extremely low. The reason lies in the distinction that economists draw between the full price of a good and its nominal price. The nominal price is the dollar amount charged by the seller; the full price includes any additional costs borne by the buyer, such as search costs (the costs involved in finding and negotiating with the seller—in other words, shopping costs) and any health risks associated with the consumption of the good. The war on drugs has had a significant effect on these additional costs. As a result of the drugs’ illegality, it takes some effort to find a seller, there is a risk of arrest and prosecution, and there is a risk of an accidental overdose resulting from lack of quality control in the manufacture of the product. (There is also a stigma to using illegal drugs, but this might remain if the drugs were legalized; heavy drinking, though legal, is stigmatized.) These costs would be eliminated if drugs were legal. It might seem that with the drugs worth more to consumers, price would rise, but this is unlikely; price would be constrained to cost by competition, and the additional benefits of the drugs—that is, the benefits generated by removing the costs resulting from criminalization—would be realized by consumers as consumer surplus (the difference between what a consumer would pay for a good and the price of the good). With the good more valuable to consumers but the nominal price no higher, consumption would increase.
This point is potentially very important empirically, because the effect of criminalizing drugs on the full price of the drugs may be much greater than the effect on the nominal price. Suppose criminalization raises the nominal price of a dose of cocaine from $1 to $1.l0, a 10 percent increase; then using Becker’s elasticity estimate, legalizing cocaine would result in a 5 percent increase in demand. But now suppose that the war on drugs has increased the full price of cocaine from $1 a dose to $2.10 a dose (the 10¢ increase in nominal price plus a $1 increase in other costs of consumption); then legalizing cocaine could be expected to have a much more dramatic effect on consumption. However, as Becker points out, this effect could be offset by a tax (in the example, a $1.10 tax), though some incentive to smuggling would be created by so stiff a tax, as in the case of cigarettes. The important thing is that because of the difference between full and nominal price, the tax might have to be very stiff.
Regarding performance-enhancing drugs, such as steroids, one comment points out that sports fans appreciate better performance, and notes that professional football is more popular than college football (alumni loyalties to one side). But there is a difference between skill and strength; if the principal effect of steroids is to increase strength rather than skill, it is not clear that entertainment value is enhanced. But suppose it is. Then what must be considered is the tradeoff between the increased income that steroid-consuming athletes can expect to obtain and the risks to their health. The tradeoff is complicated because some athletes will prefer the higher income and others will prefer to have better health and, being thus at a competitive disadvantage, will drop out of the sport. It is unclear whether there will be a net increase in performance, since some killed athletes will be lost to the sport, though those that remain will be better performers.
Let me make clear that I have no ethical objection to performance-enhancing drugs. Suppose there’s a drug that adds 10 IQ points to everyone who takes it, and it has no adverse health consequences. Once some people start taking the drug, this will put pressure on others to follow suit. But I don’t see any difference between this effect and that resulting from an effort by a young business person to gain a competitive edge by getting an MBA, which will place pressure on his competitors to do likewise. That kind of competition improves economic welfare.
Posted by posner at 02:55 PM | Comments (5) | TrackBack (3)
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Comments
Excellent post. You've articulated what I was trying to accomplish in Becker's thread, though I was often distracted with many side issues.
I don't see why it's necessary for those advocating legalization to entertain the fiction that drug use would not increase. Posner does not think this is necessary to justify his opposition to the status quo. And I am fairly certain, if pushed, Becker doesn't either. There are just too many reductions in cost (both nominal and "full"). Lower nominal price, reduced social stigma, ease of aquisition, lack of legal punishment, increased quality, a much decreased risk of receiving dangerous or toxic product, and the elimination of fear of violence. The list goes on and on, and it all points to one result--increase in drug use.
The war on drugs may have "failed" because it produced greater costs than it did benefits (though this is a very difficult thing to measure), but it has not failed to reduce drug use.
Posted by Palooka at March 26, 2005 04:32 PM | direct link
The war on drugs may have "failed" because it produced greater costs than it did benefits (though this is a very difficult thing to measure), but it has not failed to reduce drug use.Oh, really?
In fact, drug use hasn't really changed that much over the past few decades, and the drug war has had a minimal effect on it, if much at all. The more likely explanations for rising and falling drug use are social trends unrelated to the war on drugs.
Consider the Office of National Drug Control Policy's own data (which technically comes from the flawed but still useful National Household Survey on Drug Abuse), which states the following data for people using "any illicit drug" ever in their lifetime:
1A. Age: 12–17, Year: 1985 - 27.4%
1B. Age: 12–17, Year: 1999 - 27.6%
1C. Age: 12–17, Year: 2001 - 28.4%
2A. Age: 18–25, Year: 1985 - 62.9%
2B. Age: 18–25, Year: 1999 - 52.6%
2C. Age: 18–25, Year: 2001 - 55.6%
3A. Age: 26–34, Year: 1985 - 59.5%
3B. Age: 26–34, Year: 1999 - 53.2%
3C. Age: 26–34, Year: 2001 - 53.3%
4A. Age: 12 and older, Year: 1985 - 34.4%
4B. Age: 12 and older, Year: 1999 - 39.7%
4C. Age: 12 and older, Year: 2001 - 41.7%
As you can see by the last statistic, overall drug use has steadily increased rather than diminished.
Posted by John H. at March 26, 2005 08:01 PM | direct link
There are many reasons to have ethical objections to performance enhancing drugs, especially at this point in time. Comparing an MBA which is a performance enhancing aid of a particular kind - no doubt - to performance enhancing drugs is quite problematic.
Without going into a host of details, my main concern stems from how far performance enhancing drugs and/or analogous biochemical/bio-engineering modifications can change human potential.
There is an enormous grey area involved in 'improving' the human being through technology.
I suggest a reading of Aldous Huxley's 'Brave New World', or Margaret Atwoods 'Oryx and Crake' for fictional accounts of how technological improvement for its own sake can lead to ethically disastrous ends. The film 'Gattaca' presents similar issues.
Actually, its preposterous to suggest that we need fiction to provide these ethical conundrums. A similar lesson was impressed on the scientists of the Manhattan project as many of them contemplated how the seemingly noble quest for knowledge, had led inexorably from Einstein's 1905 theory of relativity formula to a technological doomsday device which ushered in the prospect of self-annihilation.
Similarly, geneticist Bill McKibben and many others pose whether there is an 'enough' line, beyond which we should not exercise our technological powers to alter human material.
Another difference between an MBA and a performance enhancing drug arises from a philosophical preference for 'hard work and applied intelligence' over the effort required to pop a few pills. Clearly, we value individuals capable of sustained mental/physical effort and concentration over those who prefer to take shortcuts.
All this said, I think your overall argument about the merits of legalization is quite sound.
Posted by Peter Konefal at March 27, 2005 01:41 PM | direct link
Wow - I like this blog. I'll come back and link.
About the difference between skill and strength - I think you might to some extent be making an artificial distinction. Often they are different - sometimes they are the same.
Take swinging a baseball bat. The ability to hit a pitch accurately (as opposed to hard) would I assume be considered skill, but that is heavily dependent on the time it takes a batter to react, which is dependent on bat speed. Bat speed and strength are of course linked as well. Now you could isolate strength from the whole mess by saying that everything but bat speed is the skill component of hitting a baseball pitch, but that seems to be a rather arbitrary distinction.
Posted by elliot at April 3, 2005 10:34 AM | direct link
Wow - I like this blog. I'll come back and link.
About the difference between skill and strength - I think you might to some extent be making an artificial distinction. Often they are different - sometimes they are the same.
Take swinging a baseball bat. The ability to hit a pitch accurately (as opposed to hard) would I assume be considered skill, but that is heavily dependent on the time it takes a batter to react, which is dependent on bat speed. Bat speed and strength are of course linked as well. Now you could isolate strength from the whole mess by saying that everything but bat speed is the skill component of hitting a baseball pitch, but that seems to be a rather arbitrary distinction.
Posted by elliot at April 3, 2005 10:34 AM | direct link
