The Failure of the War on Drugs-BECKER

Every American president since Nixon has engaged in a “war” on illegal drugs: cocaine, heroin, hashish, and the like. And every president without exception has lost this war. The explanation lies not in a lack of effort- indeed, I believe there has been too much effort- but rather in a basic property of the demand for drugs, and the effects of trying to reduce consumption of a good like drugs by punishing persons involved in its trade. The war on drugs is fought by trying to apprehend producers and distributors of drugs, and then to punish them rather severely if convicted. The expected punishment raises the price that suppliers of drugs need to receive in order for them to be willing to take the considerable risks involved in the drug trade. The higher price discourages purchase and consumption of illegal drugs, as with legal goods and services. The harder the war is fought, the greater the expected punishment, the higher is the street price of drugs, and generally the smaller is the consumption of drugs. Those suppliers who are caught and punished do not do very well, which is the typical result for the many small fry involved in distributing drugs. On the other hand, those who manage to avoid punishment- sometimes through bribes and other corrupting behavior-often make large profits because the price is raised so high. This approach can be effective if say every 10% increase in drug prices has a large negative effect on the use of drugs. This is called an elastic demand. However, the evidence from more than a dozen studies strongly indicates that the demand for drugs is generally quite inelastic; that is, a 10% rise in their prices reduces demand only by about 5%, which means an elasticity of about ½. This implies that as drug prices rise, real spending on drugs increases, in this case, by about 5% for every 10% increase in price. So if the war on drugs increased the price of drugs by at least 200%- estimates suggest this increase is about right- spending on drugs would have increased enormously, which it did. This increased spending is related to increased real costs of suppliers in the form of avoidance of detection, bribery payments, murder of competitors and drug agents, primitive and dnagerous production methods, and the like. In addition, the country pays directly in the form of the many police shifted toward fighting drugs, court time and effort spent on drug offenders, and the cost of imprisonment. The US spends about $40,000 per year per prisoner, and in recent years a sizeable fraction of both federal and state prisoners have been convicted on drug-related charges. After totaling all spending, a study by Kevin Murphy, Steve Cicala, and myself estimates that the war on drugs is costing the US one way or another well over $100 billion per year. These estimates do not include important intangible costs, such as the destructive effects on many inner city neighborhoods, the use of the American military to fight drug lords and farmers in Colombia and other nations, or the corrupting influence of drugs on many governments. Assuming an interest in reducing drug consumption- I will pay little attention here to whether that is a good goal- is there a better way to do that than by these unsuccessful wars? Our study suggests that legalization of drugs combined with an excise tax on consumption would be a far cheaper and more effective way to reduce drug use. Instead of a war, one could have, for example, a 200% tax on the legal use of drugs by all adults-consumption by say persons under age 18 would still be illegal. That would reduce consumption in the same way as the present war, and would also increase total spending on drugs, as in the current system. But the similarities end at that point. The tax revenue from drugs would accrue to state and federal authorities, rather than being dissipated into the real cost involving police, imprisonment, dangerous qualities, and the like. Instead of drug cartels, there would be legal companies involved in production and distribution of drugs of reliable quality, as happened after the prohibition of alcohol ended. There would be no destruction of poor neighborhoods- so no material for “the Wire” HBO series, or the movie “Traffic”- no corruption of Afghani or Columbian governments, and no large scale imprisonment of African-American and other drug suppliers. The tax revenue to various governments hopefully would substitute for other taxes, or would be used for educating young people about any dangersous effects of drugs. To be sure, there would be some effort by suppliers of drugs to avoid taxes by going underground with their production and distribution. But since there would then be a option to produce legally-there is no such option now- the movement underground would be much less than under the present system. As a result, the police could concentrate its efforts more effectively on a greatly reduced underground drug sector. We have seen how huge taxes on cigarettes in New York and elsewhere have been implemented without massive movement of production and distribution underground in order to avoid the taxes. So legalization could have a greater effect in reducing drug use than a war on drug without all the large and disturbing system costs. How high the tax rate should be would be determined by social policy. This approach could accommodate a libertarian policy with legalization and low excise taxes, a socially “conservative” position that wants to greatly reduce drug use with very high tax rates, and most positions in between these two extremes. So if drug consumption was not considered so bad once it became legal, perhaps the tax would be small, as with alcoholic beverages in the US. Or perhaps the pressure would be great for very high taxes, as with cigarettes. But whatever the approach, it could be implemented far more successfully by legalizing drugs than by further efforts to heat up the failing war on illegal drugs.

Comments

[WaitingforGoogle]

"I disagree with Palooka's point that inelasticity MUST deteriorate over time."

Yeah, I think that's right, Martha. We're arguing over whether demand for drugs [necessarily] MUST become more elastic over time. I don't think there is any economic LAW that posits that. I'd like to see the research on it. My initial impression is that it can, and in some circumstances it has, but not that it ALWAYS MUST. I don't think that's an ironclad rule, just an ill-advised presumption. Just my take on it!

[Palooka]

"One of the ways drug dealers create addicts is by offering freebies."

Absolutely, but a rational person would take into account the exoribitant cost they are likely to pay in the future. Now, most drug users aren't completely rational, but it would impact the over all picture (because it would effect a portion of potential drug users).

The important thing to consider is what would happen under a legalized regime with much lower prices, higher quality, no legal risk, lessened social stigma. It is absolutely ridiculous to argue that it would not increase drug use. I think the debate rests in how bad is that increase, and do those increased social and economic costs outweigh any benefits legalization is likely to bring (increased revenue, elimination of perceived injustice, etc). I am absolutely open to reform of many kinds, but Becker's libertarian fantasy is simply absurd.

[Martha Benton]

"It WILL increase drug use and the number of drug users. Is that worth the tax revenue?"

Where is the ***proof*** (or even an econometric argument) for this? Is this NECESSARILY so?

[WaitingforGoogle]

"It is absolutely ridiculous to argue that it would not increase drug use."

That's just begging the question! I think NotAWeedSmokerInReality made a very convincing and rational argument!

[JohnSmith]

"Now, most drug users aren't completely rational,"

Didn't Gary Becker win a Nobel for proving the proposition that contradicts this?

[Palooka]

RWS,

I changed my other mind. If Becker wishes to keep drug prices at current levels, that is very likely to drive a booming black market, negating much of the tax revenue benefit. I do think a tax burdern similar to cigarettes could be maintained, given that experience.

I also do not understand how one could charge the same in a legalized system. Isn't a large cost of the "War on Drugs" the fact that addicts have to engage in criminal behavior to finance their habit? At least now they can sell drugs, in a legalized system they would be only left with theft (often violent). Taxing to achieve comparable price deterence seems to nullify the only redeeming value legalization has (at least to me). You would have addicts mugging and stealing and beating and killing more than ever.

[WaitingforGoogle]

"a rational person would take into account the exoribitant cost they are likely to pay in the future."

No, a rational person would not quote me out of context. And a rational person would recognize that the future costs would be weighed against the steady income flow from buyers with inelastic demand: addicts. That allows drug dealers to exercise monopoly power and price-gouge in the future. Monopoly power into the foreseeable future is not a "cost". It is an gigantic benefit.

What I said was:
"Addicts aren't like consumers who walk into a supermarket. One of the ways drug dealers create addicts is by offering freebies. So price is not an issue for a first time user of an extremely addictive drug like heroin."

Now, do people who take heroin calculate future costs very well? No. But NotAWeedSmokerInReality made a pretty good argument that caclculating future costs inheres in responsible drug use, which is an argument in favor of legalization.

[RWS]

Martha, your question stretches the limits of this debate. Here are a few cites that make the empirical argument that legalization increases drug usage:

57 Vanderbilt L. Rev. 783, n. 433 (citing Stanley Neustadter, Legalization Legislation: Confronting the Details of Policy Choices, in How To Legalize Drugs 388, 393 (Jefferson M. Fish ed., 1998)).

Benjamin & Roger Leroy Miller, Undoing Drugs: Beyond Legalization 186-249 (1991).

For arguments that the US illegalization approach has significantly reduced drug usage...

U.S. Efforts in the International Drug War, in Searching for Alternatives: Drug-Control Policy in the United States 360 (Melvyn B. Krauss & Edward P. Lazear eds., 1991).

James A. Inciardi, Against Legalization of Drugs, in Legalize it? Debating American Drug Policy 141, 161 (Arnold S. Trebach & James A. Inciardi eds., 1993).

----

I am sticking by my argument that the taxation approach to regulation would be costly and impractical, Palooka. The black market for tobacco exists already, for states with higher taxation. If the tax were really high, such that the price deterrent were equal to the high price of narcotics, there would be a whole lot of cheating, much more than now with the comparatively low tax.

I believe that raising the price of drugs is more efficiently done by making possession illegal altogether and choosing the optimal deterrent price increase by the amount of enforcement rather than legalizing it and trying to tax it up to that price. Much harder to do, especially with something as easy to grow as marijuana.

[Martha Bento]

"You would have addicts mugging and stealing and beating and killing more than ever."

Isn't that like saying that sending AIDS drugs to Africa would disincentivize personal saving, so don't do it? Please elaborate.

[Martha Bento]

RWS,

I am sure those studies show how legalization CAN increase drug use. I do not think ANY of them show that legalization DEFINITIVELY AND NECESSARILY MUST increase drug use. That was the point. We shouldn't beg the question. If it may not increase at all, or it might just increase a little, why are we making silly predictions about rampant violence and mob rule?

[Palooka]

Martha,

I really don't know how AIDS got injected into this debate. The comparison doesn't make sense to me.

Becker implied that he would maintain current drug prices via taxation in order to prevent increased drug use. I don't think that's possible for many reasons, already discussed.

BUT if it were, then it would take one of the biggest benefits away from legalization. Many addicts either sell drugs or steal to finance their expensive habits. If the drugs cost the same, then the addict is left with the same cost, but with fewer options. He can no longer sell drugs. He is left with theft, which is often violent, to support his habit. Thus, under legalization, where prices are maintained at very high levels, theft and violent crime is likely to RISE.

[Martha Bento]

AIDS got injected into the debate because it related to another class of inelastic drug users whose social conditions are different and whose social behavior contradicts your argument. You failed to answer my question and gave an irrelevant response.

AIDS sufferers living in failed states whose only incentive to save would be to afford AIDS medication (no consumer goods at market to buy, no consumer culture, no plans of retirement because life expectancy is so low) would no longer have that incentive if the drugs were given to them for free. Their demand for the drugs remains inelastic regardless of the regime (free drugs, or high priced drugs), but their incentive to save drops off in the free drug regime (they go back to living day-to-day). Your argument to me seems no different from saying, "Well, we want Africans to save their wealth, so let's not give them AIDS drugs." It's an argument of the same form, yet clearly immoral in the African AIDS context. Justify your position.

Anyway, your notion of legalization is silly. "If the drugs cost the same, then the addict is left with the same cost, but with fewer options. He can no longer sell drugs." Why would legalization prevent private sales of drugs? Why wouldn't the addict just get a job as a regulated drug-dealer? That's an additional option not previously available. You are assuming that "addicts" are persons prone to steal. My grandfather was an addict, he died at age 103, and he never stole a damn thing.

[Palooka]

Drug addicts don't require drugs to save their lives, that's the difference. I don't think any further explanation is necessary.

Of course not every addict steals or must steal. But are you implying that addicts are as law abiding as non-addicts?

A drug addict in a legalized system MAY choose to engage in the black market, but there will be fewer opportunities, and they will still be breaking the law.

Remember I was only arguing that Becker's proposal--charging high taxes to maintain price deterrence--would exacerbate the problem of drug-driven crime (and only if it succeeded in maintaining high prices, which I doubt it can).

[Palooka]

Oh yeah... Regulated drug dealer???? And my conception of legalization is "silly?"

[Martha Bento]

"Drug addicts don't require drugs to save their lives, that's the difference."

AIDS sufferers don't require drugs to save their lives, either, so long as they save enough. That's the point, you moron.

[Anonymous]

"Oh yeah... Regulated drug dealer???? And my conception of legalization is "silly?""

Bars in Amsterdam that sell weed are regulated drug dealers. Prostitutes in the red district are regulated whores. How is that silly? It's really, you dolt.

[WaitingforGoogle]

"are you implying that addicts are as law abiding as non-addicts?"

In a system where drug use is legalized, why not?

[John Smith]

"Remember I was only arguing that Becker's proposal--charging high taxes to maintain price deterrence--would exacerbate the problem of drug-driven crime (and only if it succeeded in maintaining high prices, which I doubt it can)."

You don't seem to have convinced anyone!

[Demonwench007]

The AIDS argument does make some sense, I think. I think Palooka is saying that if we pity Africans then we should send them drugs, but we don't pity drug addicts (who are really thieves, anyhow), so we shouldn't legalize drugs. I don't see the legal or public policy basis for that distinction. We could easily value personal saving in the abstract more than the lives of distant foreigners, and for that reason not send AIDS drugs to Africans; we could value drug use more than private property and tolerate higher levels of stealing by drug addicts in a legalization regime. But there is no legal or public policy basis for these values. It's just, I guess, prejudice. There's no logic to it. I think Martha's point is that Palooka is being illogical and arbitrary.

Palooka, don't be nasty to Martha just because she's a woman. Larry Summers notwithstanding, we're just as intelligent than you are.

[Daniel Chapman]

Here we go again... Could you please give some EVIDENCE that "the drug war" is targeting minorities before randomly race baiting? Yes, we all know that blacks get arrested on drug charges more than whites in proportion to their overall population. Arguendo, I'll even accept that drug useage is proportionally the same among both groups. You still can't logically draw the inference that there is a malicious intent behind those statistics.

As I told you in response to your email, those facts may have more to do with the high percentage of drug arrests that happen in big cities than anything else. Big cities tend to have higher incidences of all crimes, and they also tend to have larger minority populations. You could say that the police are going where the minorities are in order to look for crime, but without additional evidence you could also assume that minorities are simply committing more crimes. Each argument is a fallacy.

[Palooka]

""Oh yeah... Regulated drug dealer???? And my conception of legalization is "silly?""

Bars in Amsterdam that sell weed are regulated drug dealers. Prostitutes in the red district are regulated whores. How is that silly? It's really, you dolt.

====

Yes, and the skills that illicit drug dealers possess don't translate very well to Amsterdam entrepreneurs, do they? That's my point. Somebody who knows how to steal and sell drugs illegally doesn't necessarily have the skills (or the resources) to open up shop. Besides, I don't think the thrust of this discussion is about pot anyhow. Moreover, legalization will remove much of their profit, and they won't be able to make the easy money they can today even if they decided to open up a legit drug operation.

[Palooka]

"But there is no legal or public policy basis for these values. It's just, I guess, prejudice. There's no logic to it. I think Martha's point is that Palooka is being illogical and arbitrary"

There is ABSOLUTELY NOTHING arbitrary about that distinction.

AIDS victims are stricken with an illness which will KILL THEM. The medicine is the CURE or TREATMENT.

Addicts are stricken with an illness (addiction) which may kill them but only if they CONTINUE TO USE THE SOURCE of their sickness--drugs. Drugs are the PROBLEM, not the cure.

Got it: Drugs are good in one case (cure) and bad in another (cause of sickness). I can only think this is pure trolling because it is so apparent.

[edge]

Prawal,

you must not be from one of the Indian states which sell marijuana and opium in government shops then?

I'm guessing you are from Andra Pradesh? There is still a religious right for sadhus to use marijuana throughout India no? and India would probably loosen restrictions on opium and marijuana if the U.S. released pressure.

Alcohol is certainly a problem in India, as is tobacco.

Public policy should address these questions rationally, but will it?

Good luck, Mr. Becker. We got close in '87 to a libertarian inspired decriminalization of mj in the U.S. congress. close. the tide is headed the other way right now.

The biggest issue is not the individual drug user or even those near and dear to the self-destructive but the erosion of civil society and the destabilization of nation states, and the drug war seems to be exacerbating those macro phenomena.

[TheWinfieldEffect]

"Yes, and the skills that illicit drug dealers possess don't translate very well to Amsterdam entrepreneurs, do they?"

Actually, that isn't true. Latin American countries that have more experience with drug cartels have found that they act in a corporatist manner, which is why asset forfeiture laws work so effectively on them. I don't have the cites, but I will look for them and provide them later. It is true that skills necessary to run organized crime are the same as those to run legitimate business organizations. In fact, transborder/transnational criminal organizations have been found to organize themselves much like multinationals, and they avoid laws designed to interdict their smuggling routes much like multinationals seek to evade taxation. Some of the asset forfeiture provisions contained in the Patriot Act are premised on that assumption, actually, that organized crime (including terrorist cells) operate rationally much as coprorations do.

[TheWinfieldEffect]

Palooka wrote: "There is ABSOLUTELY NOTHING arbitrary about that distinction. AIDS victims are stricken with an illness which will KILL THEM. The medicine is the CURE or TREATMENT. Addicts are stricken with an illness (addiction) which may kill them but only if they CONTINUE TO USE THE SOURCE of their sickness--drugs. Drugs are the PROBLEM, not the cure."

Okay. Not to step into this obviously contentious and quite personal spat, but although I don't like the Africans with AIDS analogy, I don't think Palooka adequately defends his position.

As far as it has been articulated, Africans could save their earnings and refrain from unprotected sex at a present cost to themselves. The benefit to them is future compound interest and reduced risk of AIDS infection. So, as Martha put it, we could refuse to send them drugs to encourage them to internalize the risk of bad sexual behavior and future medical health care. It sounds rather like a combination of Bush's health savings accounts (which presumably reduce moral hazard) and his African foreign aid package, which, controversially, I might add, promotes abstinence instead of sending over contraceptive devices.

In other words, on this theory the Africans are suffering from AIDS because of their "bad" behavior: not saving and sinful sex. If we want to reduce that bad behavior, we should not send them AIDS drugs.

That does sound (somewhat) similar to the argument Palooka is making: Drug addicts will engage in stealing and violence to get their drugs and feed their habit. The stealing and violence will increase if drugs are legalized. To reduce the "bad" behavior (the stealing and violence), we should not legalize drugs. In that way the arguments *are* analagous in the relevant way, which leads to the question: if reducing "bad" behavior is the only principle that guides us, then what is so wrong with depriving Africans of AIDS medication if it reduces "bad" behavior?

Indeed, as I stated above, this is an implicit assumption of President Bush's policies. So I am troubled by the fact that the analogy was made in the first place, but I am disappointed that Palooka had not really answered its, well, profundity. I don't think that was on purpose.

I think the reason for the disconnect between the two is that Martha (who has repeatedly stated that her grandfather, who may or may not have died at age 103, if she is telling the truth, was a drug addict) does not believe that using drugs per se is bad behavior, whereas Palooka does. Palooka appears to think that drug addicts are inherently "bad" people who deserve punishment (so it seems). Yet a background assumption of Becker's post, and the Pot Proponents (sorry, just amusing myself here) is that drug addicts are rational, social, normal individuals who just happen to enjoy using drugs more than other potential consumers. It seems like a disagreement about morals. To me, anyway. I'm not sure that economic theory can bridge that divide.