Originally published in "Social Research", Fall, 2001 by Jeffrey A. Miron (Long)
Quoting from this artices conclusions to summarize what follows in this informative & interesting article...
"This paper does not attempt to make the case for or against prohibition or legalization; likewise, it does not claim to be a complete or systematic evaluation of the evidence. The goal has been to show how the legal status of drugs affects the market for drugs and to demonstrate that many outcomes commonly attributed to drugs are instead due to drug prohibition.
It is worth noting that much of the analysis made no reference to any specific property of drugs, such as addictiveness. The basic analysis applies to any commodity for which there is substantial demand and relatively imperfect substitutes. So the key message is that the legal treatment of drugs plays a huge role in explaining how drug markets operate, not the physical or psychopharmacological properties of drugs."
And Now the :
I. Introduction
AROUND the world, the legal status of commodities such as marijuana, cocaine, and heroin differs dramatically from that of nearly all other goods. Most commodities are subject to substantial regulation and taxation, but the production, distribution, sale, and possession of illegal drugs are prohibited outright. Violation of these prohibitions is punishable by lengthy jail terms, and many governments devote enormous resources to enforcing these prohibition regimes.
The presumed justification for the special legal treatment of drugs is that drug use causes substantial harm both to drug users and to society generally. According to conventional wisdom, drug use diminishes the productivity of the drug user, encourages violent and nonviolent crime, contributes to moral degradation, damages the public purse, harms unborn children, etc. The prohibition of drugs is assumed necessary to reduce the consumption of drugs and thereby reduce the ills caused by drug consumption.
This paper explains that many of the harms typically attributed to drug use are instead due to drug prohibition. This is not to deny that drugs can have powerful effects on the user, nor to deny that drugs differ in some respects from other commodities. But a wide range of outcomes typically thought to result from drug use is far more accurately attributed to the current legal treatment of drugs.
The evidence on whether drug prohibition significantly reduces drug consumption is incomplete. There is no question that many people continue to consume drugs under prohibition, but this fact alone does not determine whether the quantity is different from what it would be under legalization. A substantial social science literature exists that attempts to estimate this effect, in some cases using evidence on prohibitions of other commodities such as alcohol (for example, Dills and Miron, 2001). Overall, this literature suggests that drug prohibition has modest but not dramatic negative effects on consumption (see Miron, 1998).
The first-order effects of prohibition are therefore as follows: prohibition probably raises the costs of supplying drugs, which implies higher prices and lower consumption; and prohibition may reduce the demand for drugs, implying lower prices and reduced consumption. Whether these effects are large or small is not yet resolved.
Prohibitions and Crime
In addition to affecting the supply of and possibly the demand for drugs, prohibition has numerous other effects. Probably the most important of these is increased crime.
Prohibition increases violent crime by preventing drug market participants from resolving their differences through standard nonviolent mechanisms. In all markets, disputes arise between buyer and seller, supplier and purchaser, employer and employee. In a legal market participants use courts and related nonviolent mechanisms to resolve these disputes. In a black market participants do not have this option because they would reveal their identity and illegal activities to the authorities by using the courts, and courts do not enforce contracts involving illegal goods. Suppliers in legal markets can also use advertising to compete with rivals; this is difficult in a black market, where violent turf battles are one possible substitute.
This simple prediction of economic reasoning is consistent with a substantial body of evidence. The use of violence to resolve disputes is common in drug markets and prostitution markets, and it was common in gambling markets before the introduction of state lotteries and expanded legal gambling combined to eliminate the black market. Similarly, the use of violence to resolve commercial disputes in the alcohol trade was widespread during Alcohol Prohibition (1920-1933), but rare both before and after (Friedman, 1991). And the overall incidence of violence has increased and decreased systematically over the past 100 years with enforcement of drug and alcohol prohibition (Miron, 1999).
Prohibitions also encourage crime through several other mechanisms. By raising the price of drugs, prohibition encourages income-generating crime such as theft or prostitution, since users need additional income to purchase drugs. And enforcement of prohibition diverts criminal justice resources from deterrence of all kinds of crime (Benson and Rasmussen, 1991; Benson et al., 1992).
The conclusion that prohibition causes crime contrasts starkly with the usual claim that drug use itself causes crime. There is little evidence, however, that drug use per se promotes violence or other criminal behavior (Duke and Gross, 1993; U.S. Department of Justice, 1992). Considerable evidence that purports to show such an effect merely indicates a correlation between drug use and crime; the same methodology would suggest that wearing blue jeans or eating fast food is criminogenic.
Other Effects of Prohibitions
Product Quality: A different effect of prohibition is decreased product quality. In a legal market, consumers who purchase faulty goods can attempt to punish suppliers with liability claims, by causing bad publicity, by avoiding repeat purchases, or by reporting such events to private or government groups. In a black market, most of these mechanisms are unavailable, and the remaining ones (such as avoiding repeat purchases) are likely to work less effectively. United States experience with alcohol prohibition provides a classic example of this effect; deaths from adulterated alcohol soared (Miron and Zwiebel, 1991; Morgan, 1982). In drug markets, this effect potentially explains many accidental overdoses and poisonings.
Corruption: In legal markets participants have little incentive to bribe the police, and they have legal mechanisms such as lobbying or campaign contributions by which to influence politicians. In black markets participants must either evade law enforcement authorities or pay them to look the other way, so the scope for corruption is substantial. Similarly, standard lobbying techniques are more difficult for a black market supplier, and campaign contributions are automatically illegal bribes. Thus, prohibition increases corruption of law enforcement authorities and politicians.
Redistributions to Criminals: In a legal market the income generated by production and sale of drugs is subject to taxation, and these tax revenues accrue to the government. In a black market, suppliers capture these revenues as profits. Thus prohibition enriches the segment of society willing to evade the law. The revenue involved is substantial; estimates suggest the black market has revenues of tens of billions of dollars, so at standard tax rates the government would collect at least several billion dollars in additional revenues.
Complications of Policymaking in Other Areas: Because drug crimes involve voluntary exchange, enforcement relies on asset seizures, aggressive search tactics, and racial profiling, tactics that strain accepted notions of civil liberty (see, for example, Schlosser, 1994a, 1994b). Because of prohibition, many states prohibit the sale of syringes, which increases sharing of dirty needles and thus promotes the spread of HIV. Because of prohibition, marijuana is even more tightly controlled than morphine or cocaine and cannot be used for medical purposes (Grinspoon and Bakalar, 1993). Because of prohibition, foreign policy decisions and free trade negotiations are intertwined with decisions about drug policy (see, for example, Barro, 1992).
Respect for the Law: All experience to date indicates that, even with draconian enforcement, prohibitions fail to deter a great many people from supplying and consuming drugs. This fact signals users and nonusers that laws are for suckers; it undermines a spirit of voluntary compliance essential to law enforcement in a free society.
Direct Costs of Enforcement: Expenditure across all levels of government for enforcement of drug prohibition is currently at least $20 billion per year and plausibly in excess of $30 billion (Miron, 2001a). This estimate includes only those expenditures directly attributable to drug policy, not auxiliary expenditures related to prohibition-induced crime.
Summary
Drug prohibition probably reduces drug consumption relative to what would occur under legalization, but existing evidence suggests this reduction is modest. But whether the effect is large or small, prohibition has many other effects compared to legalization.
III. The Normative Analysis of Drug Prohibition
I now present what economists call a normative analysis of drug prohibition, meaning one that asks whether prohibition is preferable to legalization. As a starting point, I note that most effects of prohibition are, in and of themselves, negative (for example, increased crime, redistributions to criminals, greater corruption, diminished civil liberties). The most important exception is prohibition's effect on drug consumption. This effect might not be large, and it might even be perverse (because of the forbidden fruit effect, for example). But there is little dispute that this is the key issue: if prohibition fails to reduce consumption, it is unambiguously inferior to legalization. If prohibition reduces consumption, the bottom line depends on how one views this effect and on the magnitude of prohibition's negative consequences.
In this section I discuss four different perspectives on how public policy might view drug consumption. I emphasize the distinction between two questions: first, whether policy should attempt to reduce such consumption; and second, whether prohibition is the right policy by which to achieve this objective if the objective is sensible in the first place.
Rational Consumption
One view of drug consumption--the one assumed in the standard economic paradigm--is that people consume drugs because they think it makes them better off. According to this view, it does not matter whether people consume drugs because they enjoy the psychopharmacological effects, because they believe drugs have medicinal properties, or because they think drugs are cool; all that matters is that they voluntarily choose to consume drugs. Similarly, under this view, it does not matter whether drugs are addictive or if consumption negatively affects health or productivity; if rational people choose to accept these risks, they must think the benefits are worth the costs.
The rational model of consumption was long believed to be inconsistent with many observed behaviors related to drug consumption, such as addiction, withdrawal, and relapse. Theoretical work by Becker and Murphy (1988) shows that the rational model is potentially consistent with these phenomena, and a growing body of empirical work has had some success in fitting the model to data (see the discussion in Miron, 1998). This empirical work does not prove the rational model is correct with respect to all drug consumption, but it undermines the presumption that all drug use (or other addictive consumption) is necessarily irrational.
If one adopts the rational model, then the normative analysis of drug prohibition is simple: any policy that reduces drug use is a cost, not a benefit. Thus, all of prohibition's effects are negative. If drug consumption is not rational, the conclusion that policy-induced reductions in consumption are a cost does not necessarily hold.
There are numerous reasons why the rational model of drug consumption strikes many as inaccurate. No doubt there are some individuals for whom this description is not even close. But it is hard to deny that at least some drug use fits the rational model. Many people claim to enjoy the high associated with marijuana consumption; others value the pain relief or mental calm produced by opiates; still others appreciate the stimulation of cocaine. An objective evaluation of prohibition, therefore, should include as one cost any reduction in rational drug consumption.
Externalities
A second perspective on drug consumption holds that even if drug consumption is rational and thus a benefit to the person who consumes drugs, such consumption might harm innocent third parties (in the vocabulary of economics, cause externalities) and thus be excessive from society's perspective. Although conventional accounts often exaggerate the magnitude of drug-consumption-induced externalities (see Miron and Zwiebel, 1995; Miron, 1998), it cannot be disputed that these are significant in some cases. For example, drug consumption can impair one's ability to drive or operate machinery safely; it can have negative health effects on the fetus; or it can cause additional use of publicly funded health care.
The mere existence of externalities, however, does not by itself justify policies to reduce drug consumption; one must compare the magnitude of externalities to the costs of the policy, including any unintended consequences. The analysis in section II, for example, shoves that prohibition itself generates externalities, including increased crime and corruption, the spread of HIV, and reduced civil liberties. Even if the externalities from drug consumption are substantial, they might be smaller than the externalities from policy. This is especially true if the policy in question has only modest effects on drug consumption.
In addition, the ability of policy to reduce drug-related externalities is limited by the fact that reduced drug use might translate into increased use of other substances that have similar if not greater externalities. For example, marijuana appears to impair driving ability substantially less than alcohol (U.S. Department of Transportation, 1993; Crancer et al. 1969), and there is evidence of substitution between the two in response to changes in the relative price of the two commodities (DiNardo and Lemieux, 1992; Chaloupka and Laixuthai, 1994).
In addition, the net effect of any particular externality is often difficult to calculate or even perverse. The classic example is the effect of smoking on the use of publicly funded health care (Viscusi, 1994). The standard argument in favor of smoking-reduction policies is that smoking causes decreased health and increased use of Medicaid, Medicare, or other subsidized health care. But any action that tends to shorten life means decreased use of publicly funded Social Security and Medicare, thereby positively affecting the nation's fiscal balance. In some cases calculations of this type suggest that the "positive" effects are similar in magnitude to the negative ones.
Finally, even if drug use does cause externalities, and even if these are sufficiently great to justify a public policy response, there are policies other than prohibition that can reduce drug consumption without the negative effects of prohibition. And the existence of externalities does not imply that the optimum level of consumption is zero, assuming consumers get benefits from drug consumption. Rather, the standard externality argument suggests reducing consumption relative to legalization, but not all the way to zero.
Irrational Consumption
A different perspective on drug use, independent of externalities, is that some consumers are not rational; they harm themselves by using or abusing drugs because they fail to account for the negative consequences. According to this view, policy-induced reductions in drug consumption benefit such people by preventing them from harming themselves. It is undeniable that some people make bad decisions about drugs, although, as with externalities, the harms from drug consumption are often exaggerated (Miron and Zwiebel, 1995; Miron, 1998).
The mere fact that irrationality exists, however, does not mean attempts to reduce drug consumption are desirable policy; the benefits of reducing irrational consumption must be weighed against the costs of any policy used to achieve that reduction, and they must be balanced against the costs of reducing rational consumption. Further, as with externalities, policy-induced reductions in irrational drug consumption might induce substitution toward goods that have similar or more harmful effects.
Even if attempts to reduce drug consumption are warranted by irrationality, prohibition is not necessarily the right policy, given the negative effects of prohibition. Indeed, prohibition might exacerbate the effects of irrationality to a greater degree than alternative approaches. Prohibition potentially glamorizes drug use in the eyes of those too young, naive, foolish, or myopic to consider the long-term consequences. Also, prohibition alters the reward structure in the illegal drug trade in ways that entice the myopic into that trade. Under prohibition, the monetary rewards for working in the trade are high, but this is merely compensation for the elevated risk of injury, death, and imprisonment. Rational people understand this and work in this trade only if the total compensation equals that available in other sectors. Myopic teenagers, on the other hand, likely focus on the cash and thus expose themselves excessively to substantial risk of death or prison.
Immoral Consumption
A final perspective on drug consumption and public policy is that drug use is evil or immoral, and thus policy should discourage drug use to demonstrate society's disapproval.
Economic analysis does not address the morality argument per se. But unless one puts infinite weight on taking a moral stand against drugs, the benefits of making a moral statement must be weighed against the costs of any policy that makes this statement. Similarly, prohibition is not the only policy that can send a message about society's disapproval of drug consumption, which means that the costs of using prohibition to make a moral statement must be weighed against the costs of using other policies to this end.
The previous analysis also suggests that, from a moral perspective, prohibition has many undesirable effects. Prohibition causes increased violence, some of which affects innocent bystanders caught in drive-by shootings carried out by rival drug gangs or in guerrilla bombings, for example, in Colombia. Prohibition-induced restrictions on clean needles mean that more children are born HIV-infected. Prohibition means that peasants in Latin America, including some who do not grow coca, have their crops destroyed by aerial spraying of pesticides. And prohibition means that criminals get rich at the expense of society generally.
Summary
The normative analysis of drug prohibition suggests three key conclusions. First, virtually all the effects of prohibition are undesirable, with the possible exception of reduced consumption. Second, reduced drug consumption is not necessarily desirable; in particular, any reduction in rational drug consumption is a cost, not a benefit, of policies that reduce drug consumption; the right objective is eliminating externality generating or irrational drug consumption. Third, even if policy should attempt to reduce drug consumption, prohibition is not the only possible approach.
IV. Alternative Policies
The preceding analysis suggests that prohibition has many undesirable consequences relative to prohibition, but it does not by itself imply that legalization is preferable. The choice between these two approaches depends in part on one's moral stance with respect to drug consumption but more importantly on evidence about the degree of rational versus irrational consumption and about the magnitude of various drug-related externalities.
In addition, prohibition and legalization are not the only policies available by which to address the harms of drug use. In this section I discuss other possible drug policies and explain how they compare with prohibition or legalization.
Sin Taxation
A policy that is "between" prohibition and legalization is sin taxation: a tax on drugs in excess of that on other goods. Sin taxes raise drug prices relative to those of other goods, thereby discouraging their consumption. Most economies impose sin taxes on various commodities, including tobacco, alcohol, and gasoline.
The use of sin taxes to discourage drug consumption faces an important constraint: the tax must not be so high that it itself generates a black market because suppliers can profitably evade the tax, even given reasonable enforcement. Existing evidence confirms that tax rates beyond a certain point indeed force markets underground; but existing evidence also indicates that sin taxes can be substantial without so doing. For example, cigarette taxes in some European countries account for 75 to 85 percent of the price.
Assuming sin taxation does not drive the market underground, it will not generate the negative effects of prohibition-induced black markets, and it will decrease consumption of drugs to the extent that demand is responsive to price. Evidence suggests that demand is indeed responsive, contrary to earlier characterization of drug use as being price insensitive because of the addictive properties of some drugs. Whether this responsiveness is large or small is harder to pin down (see Miron, 1998 for a discussion of the evidence). Sin taxation also means that the drug trade occurs "aboveground," so standard policies such as minimum wage laws, environmental laws, and product liability laws can still be enforced. Assuming these policies are beneficial, this represents a plus for sin taxation relative to prohibition.
The standard objection to sin taxation relative to prohibition is the presumption that prohibition can reduce drug use more effectively than can sin taxation. This presumption is not necessarily valid, however. The reason for the presumption is the view that prohibition reduces demand because of respect for the law or because it establishes a social norm that drug use is wrong. This is possible, but prohibition might also glamorize drug use in ways that sin taxation would not, and sin taxation can also send a signal that society disapproves of drug consumption.
Setting aside the possibility that prohibition reduces demand more effectively than sin taxation, there is no guarantee that prohibition reduces consumption more effectively than sin taxation. AS shown explicitly in Miron (2001b), sin taxation can always raise costs and thus price to exactly the same degree as prohibition, holding enforcement constant. And the efficacy of enforcement under sin taxation might exceed that under prohibition.
Whether sin taxation is superior to legalization depends in part on the magnitude of externalities relative to irrational consumption. If drug users impose significant externalities, then sin taxes discourage these externalities and generate revenue that can mitigate the effects. If drug users mainly harm themselves, and if their demands are relatively inelastic, then sin taxes are less appealing since they force drug users to pay higher prices without reducing consumption, leaving users with less income for food, shelter, and clothing, and also possibly encouraging crime. In addition, sin taxation raises political economy issues; political pressures, rather than economics, might determine which commodities are considered sinful. Further, there is a danger under sin taxation that the tax may be raised sufficiently to generate a black market.
Subsidized Treatment
A different policy toward illegal drugs, which can and does coexist with prohibition or legalization, is government-subsidized drug abuse treatment. The desired effect of subsidies is to increase the number of people receiving such treatment, thereby reducing the overall quantity of drug use.
A policy of subsidizing drug treatment raises a number of issues. Although it is easy to advocate such policies out of compassion for drug abusers, the question for society is whether the benefits (such as increased earnings for drug users, lower crime committed by users) exceed the costs. Answering this question is difficult, mainly because assignment to treatment is not random. The available evidence does not make a strong case for subsidized treatment (Apsler and Harding, 1991).
An additional issue is that subsidizing drug treatment, by lowering the price of such treatment to drug users, might encourage drug use. Further, even the perception that this could occur--or a feeling by some that it "rewards" drug use--is a problematic consequence of this policy.
None of these caveats is meant to disparage treatment. The point is that subsidizing treatment is a separate question from whether treatment is beneficial, and it is a separate question from whether prohibition is preferable to legalization. Many critics of prohibition take as given that reduced expenditures for prohibition should translate into increased expenditures for subsidized treatment. It might be desirable to legalize drugs and subsidize treatment, but subsidized treatment has its own costs and benefits that require independent analysis.
Medicalization
An alternative to prohibition, which might be termed medicalization, is to put control over drugs in the hands of physicians, with little or no oversight from law enforcement. Under current United States policy, doctors can prescribe cocaine, and most opiates, amphetamines, and depressants under certain conditions. But their ability to prescribe is strictly limited, and drugs such as heroin, marijuana, and LSD cannot legally be prescribed under any circumstance. More broadly, even when doctors can legally prescribe various controlled substances, they avoid doing so because of concern about legal monitoring of their prescription practices. Under a more liberal, medical approach, which exists to some degree in Europe, doctors would face minimal legal restraint on the prescribing of controlled substances. In particular, they might be allowed to "maintain" addicts, meaning the ability to prescribe continued supplies of opiates as the "treatment" for addiction.
The critical effect of such a policy change would be to provide many drug users with a legal source of drugs, thereby reducing the size of the black market relative to prohibition. If the restraints were minimal, some physicians would prescribe freely, potentially reducing the black market to insignificance. Thus, from the perspective of eliminating the negative effects of a prohibition-induced black market, medicalization is certainly beneficial. It is not obvious, however, that this approach is better than simple legalization. Medicalization also implies increased consumption of drugs, so to the extent there are externalities and irrationality related to consumption, this is a negative.
Needle Exchanges
A policy that has received significant attention in recent years is needle exchanges. Under this system, private or government groups provide clean needles to addicts who might otherwise share dirty needles and thereby spread HIV and other diseases. These programs exist in substantial part because of government restrictions on the sale of clean needles, which in turn reflects prohibition. If drugs were legal there would be far fewer restrictions on non-prescription needle sales.
This approach differs from those discussed earlier because the main objective is to reduce the harms of drug use rather than drug use itself, although many needle exchanges do provide counseling and guidance into drug treatment. Under prohibition, needle exchanges are an awkward activity for the government, since this policy appears to accept drug use at the same time that prohibition seeks to punish drug use. Government could reduce the controversy surrounding the issue by repealing the prohibitions on the sale of clean needles; this would allow private groups greater freedom to run needle exchanges. There is some evidence that these programs reduce the sharing of needles and little evidence that they encourage drug use (Gostin, 1991).
Public Education Campaigns
Under legalization or prohibition, public health campaigns that provide information about the consequences of drug use are also an element of drug policy. More information is generally better, and persuading people not to use drugs would circumvent most other issues. But this is probably not the right benchmark for gauging government anti-drug campaigns. In many cases these exaggerate the dangers of drug use to such a degree that the audience ignores the message entirely. And available evidence fails to show that anti-drug campaigns such as DARE significantly reduce drug use (Rosenbaum and Hanson, 1998).
Summary
The main point of this section is not to endorse or criticize the policies discussed earlier; as with the choice between prohibition and legalization, a full evaluation depends partly on personal values and even more on the evidence, which I have not attempted to evaluate systematically here. Instead, the objective has been to clarify the effects of different policies and to show how they relate to prohibition and legalization. The key message is that each of these policies has its own costs and benefits; each requires its own evaluation.
V. Conclusions
This paper does not attempt to make the case for or against prohibition or legalization; likewise, it does not claim to be a complete or systematic evaluation of the evidence. The goal has been to show how the legal status of drugs affects the market for drugs and to demonstrate that many outcomes commonly attributed to drugs are instead due to drug prohibition.
It is worth noting that much of the analysis made no reference to any specific property of drugs, such as addictiveness. The basic analysis applies to any commodity for which there is substantial demand and relatively imperfect substitutes. So the key message is that the legal treatment of drugs plays a huge role in explaining how drug markets operate, not the physical or psychopharmacological properties of drugs.
References
Apsler, Robert, and Wayne M. Harding. "Cost-Effectiveness Analysis of Drug Abuse Treatment: Current Status and Recommendations for Future Research." "Drug Abuse Services Research: Background Papers on Drug Abuse Financing and Services Research." Washington, D.C.: National Institute on Drug Abuse, 1991.
Barro, Robert J. "To Avoid Repeats of Peru, Legalize Drugs." Wall Street Journal 27 April 1992.
Becker, Gary S., and Kevin M. Murphy. "A Theory of Rational Addiction." Journal of Political Economy 96 (1988): 675-700.
Benson, Bruce L., and David W. Rasmussen. "Relationship between Illicit Drug Enforcement Policy and Property Crimes." Contemporary Policy Issues IX (October 1991): 106-115.
Benson, Bruce L., et al. "Is Property Crime Caused by Drug Use or by Drug Enforcement Policy?" Applied Economics 24 (1992): 679-692.
Chaloupka, Frank J., and Adit Laixuthai. "Do Youths Substitute Alcohol and Marijuana? Some Econometric Evidence." National Bureau of Economic Research. Working Paper No. 4662 (1994).
Crancer, Alfred, et al. "Comparison of the Effects of Marihuana and Alcohol on Simulated Driving Performance." Science 164 (1969): 851-854.
Dills, Angela, and Jeffrey A. Miron. "Alcohol Prohibition, Alcohol Consumption, and Cirrhosis." Manuscript. Boston University, 2001.
DiNardo, John, and Thomas Lemieux. "Are Marijuana and Alcohol Substitutes? The Effect of State Drinking Age Laws on the Marijuana Consumption of High School Seniors." National Bureau of Economic Research. Working Paper No. 4212 (1992).
Duke, Steven B., and Albert C. Gross. America's Longest War: Rethinking Our Tragic Crusade against Drugs. New York: Putnam, 1993.
Friedman, Milton. "The War We Are Losing." Searching for Alternatives: Drug-Control Policy in the United States. Eds. Melvyn B. Krauss and Edward P. Lazear. Stanford: Hoover Institution Press, 1991: 53-67.
Gostin, Larry. "The Interconnected Epidemic of Drug Dependency and AIDS." Harvard Civil Rights-Civil Liberties Law Review 26 (1991): 113-184.
Grinspoon, Lester, and James B. Bakalar. Marihuana: The Forbidden Medicine. New Haven: Yale University Press, 1993.
Miron, Jeffrey A. "Drug Prohibition."' The New Palgrave Dictionary of Economics and the Law. Ed. Peter Newman. London: Macmillan, 1998: 648-652.
--. "Violence and the U.S. Prohibitions of Drugs and Alcohol." American Law and Economics Review 1:1-2 (Fall 1999): 78-114.
--. "Prohibition versus Legalization: An Economic Analysis." Manuscript. Boston University, 2001a.
--. "Prohibitions Raise Prices? Evidence from the Markets for Cocaine and Heroin." Manuscript, 2001b.
Miron, Jeffrey A., and Jeffrey Zwiebel. "Alcohol Consumption During Prohibition." American Economic Review 81 (1991): 242-247.
--. "The Economic Case against Drug Prohibition." Journal of Economic Perspectives 9:4 (Fall 1995): 175-192.
Morgan, John P. "The Jamaica Ginger Paralysis." Journal of the American Medical Association 245:15 (15 October 1982): 1864-1867.
Morgan, John P. "Prohibition Is Perverse Policy: What Was True in 1933 Is True Now." Searching for Alternatives: Drug-Control Policy in the United States. Eds. Melvyn B. Krauss and Edward P. Lazear. Stanford: Hoover Institution Press, 1991: 405-423.
Rosenbaum, Dennis P., and Gordon S. Hanson. "Assessing the Effects of School-Based Drug Education: A Six-Year Multilevel Analysis of Project D.A.R.E." Journal of Research in Crime and Delinquency 35:4 (November 1998): 381-412.
Schlosser, Eric. "Reefer Madness." Atlantic Monthly (August 1994a): 45-63.
--. "Marijuana and the Law." Atlantic Monthly (September 1994b): 84-94.
U.S. Department of Justice. Drugs, Crime and the Justice System: A National Report for the Bureau of Justice Statistics. Washington, D.C., 1992.
U.S. Department of Transportation. Marijuana and Actual Driving Performance. Washington, D.C., 1993.
Viscusi, W. Kip. "Cigarette Taxes and the Social Consequences of Smoking." National Bureau of Economic Research. Working Paper No. 4891 (1994).
Jeffrey A. Miron is Professor of Economics at Boston University and President of Bastiat Institute, Incorporated. He has published more than twenty-five articles in refereed journals and thirty op-eds in the Boston Herald, Boston Business Journal, and Boston Globe. His area of expertise is the economics of libertarianism, with emphasis on the economics of illegal drugs.
http://www.findarticles.com/p/articles/mi_m2267/is_3_68/ai_80310014
Quoting from this artices conclusions to summarize what follows in this informative & interesting article...
"This paper does not attempt to make the case for or against prohibition or legalization; likewise, it does not claim to be a complete or systematic evaluation of the evidence. The goal has been to show how the legal status of drugs affects the market for drugs and to demonstrate that many outcomes commonly attributed to drugs are instead due to drug prohibition.
It is worth noting that much of the analysis made no reference to any specific property of drugs, such as addictiveness. The basic analysis applies to any commodity for which there is substantial demand and relatively imperfect substitutes. So the key message is that the legal treatment of drugs plays a huge role in explaining how drug markets operate, not the physical or psychopharmacological properties of drugs."
And Now the :
I. Introduction
AROUND the world, the legal status of commodities such as marijuana, cocaine, and heroin differs dramatically from that of nearly all other goods. Most commodities are subject to substantial regulation and taxation, but the production, distribution, sale, and possession of illegal drugs are prohibited outright. Violation of these prohibitions is punishable by lengthy jail terms, and many governments devote enormous resources to enforcing these prohibition regimes.
The presumed justification for the special legal treatment of drugs is that drug use causes substantial harm both to drug users and to society generally. According to conventional wisdom, drug use diminishes the productivity of the drug user, encourages violent and nonviolent crime, contributes to moral degradation, damages the public purse, harms unborn children, etc. The prohibition of drugs is assumed necessary to reduce the consumption of drugs and thereby reduce the ills caused by drug consumption.
This paper explains that many of the harms typically attributed to drug use are instead due to drug prohibition. This is not to deny that drugs can have powerful effects on the user, nor to deny that drugs differ in some respects from other commodities. But a wide range of outcomes typically thought to result from drug use is far more accurately attributed to the current legal treatment of drugs.
The evidence on whether drug prohibition significantly reduces drug consumption is incomplete. There is no question that many people continue to consume drugs under prohibition, but this fact alone does not determine whether the quantity is different from what it would be under legalization. A substantial social science literature exists that attempts to estimate this effect, in some cases using evidence on prohibitions of other commodities such as alcohol (for example, Dills and Miron, 2001). Overall, this literature suggests that drug prohibition has modest but not dramatic negative effects on consumption (see Miron, 1998).
The first-order effects of prohibition are therefore as follows: prohibition probably raises the costs of supplying drugs, which implies higher prices and lower consumption; and prohibition may reduce the demand for drugs, implying lower prices and reduced consumption. Whether these effects are large or small is not yet resolved.
Prohibitions and Crime
In addition to affecting the supply of and possibly the demand for drugs, prohibition has numerous other effects. Probably the most important of these is increased crime.
Prohibition increases violent crime by preventing drug market participants from resolving their differences through standard nonviolent mechanisms. In all markets, disputes arise between buyer and seller, supplier and purchaser, employer and employee. In a legal market participants use courts and related nonviolent mechanisms to resolve these disputes. In a black market participants do not have this option because they would reveal their identity and illegal activities to the authorities by using the courts, and courts do not enforce contracts involving illegal goods. Suppliers in legal markets can also use advertising to compete with rivals; this is difficult in a black market, where violent turf battles are one possible substitute.
This simple prediction of economic reasoning is consistent with a substantial body of evidence. The use of violence to resolve disputes is common in drug markets and prostitution markets, and it was common in gambling markets before the introduction of state lotteries and expanded legal gambling combined to eliminate the black market. Similarly, the use of violence to resolve commercial disputes in the alcohol trade was widespread during Alcohol Prohibition (1920-1933), but rare both before and after (Friedman, 1991). And the overall incidence of violence has increased and decreased systematically over the past 100 years with enforcement of drug and alcohol prohibition (Miron, 1999).
Prohibitions also encourage crime through several other mechanisms. By raising the price of drugs, prohibition encourages income-generating crime such as theft or prostitution, since users need additional income to purchase drugs. And enforcement of prohibition diverts criminal justice resources from deterrence of all kinds of crime (Benson and Rasmussen, 1991; Benson et al., 1992).
The conclusion that prohibition causes crime contrasts starkly with the usual claim that drug use itself causes crime. There is little evidence, however, that drug use per se promotes violence or other criminal behavior (Duke and Gross, 1993; U.S. Department of Justice, 1992). Considerable evidence that purports to show such an effect merely indicates a correlation between drug use and crime; the same methodology would suggest that wearing blue jeans or eating fast food is criminogenic.
Other Effects of Prohibitions
Product Quality: A different effect of prohibition is decreased product quality. In a legal market, consumers who purchase faulty goods can attempt to punish suppliers with liability claims, by causing bad publicity, by avoiding repeat purchases, or by reporting such events to private or government groups. In a black market, most of these mechanisms are unavailable, and the remaining ones (such as avoiding repeat purchases) are likely to work less effectively. United States experience with alcohol prohibition provides a classic example of this effect; deaths from adulterated alcohol soared (Miron and Zwiebel, 1991; Morgan, 1982). In drug markets, this effect potentially explains many accidental overdoses and poisonings.
Corruption: In legal markets participants have little incentive to bribe the police, and they have legal mechanisms such as lobbying or campaign contributions by which to influence politicians. In black markets participants must either evade law enforcement authorities or pay them to look the other way, so the scope for corruption is substantial. Similarly, standard lobbying techniques are more difficult for a black market supplier, and campaign contributions are automatically illegal bribes. Thus, prohibition increases corruption of law enforcement authorities and politicians.
Redistributions to Criminals: In a legal market the income generated by production and sale of drugs is subject to taxation, and these tax revenues accrue to the government. In a black market, suppliers capture these revenues as profits. Thus prohibition enriches the segment of society willing to evade the law. The revenue involved is substantial; estimates suggest the black market has revenues of tens of billions of dollars, so at standard tax rates the government would collect at least several billion dollars in additional revenues.
Complications of Policymaking in Other Areas: Because drug crimes involve voluntary exchange, enforcement relies on asset seizures, aggressive search tactics, and racial profiling, tactics that strain accepted notions of civil liberty (see, for example, Schlosser, 1994a, 1994b). Because of prohibition, many states prohibit the sale of syringes, which increases sharing of dirty needles and thus promotes the spread of HIV. Because of prohibition, marijuana is even more tightly controlled than morphine or cocaine and cannot be used for medical purposes (Grinspoon and Bakalar, 1993). Because of prohibition, foreign policy decisions and free trade negotiations are intertwined with decisions about drug policy (see, for example, Barro, 1992).
Respect for the Law: All experience to date indicates that, even with draconian enforcement, prohibitions fail to deter a great many people from supplying and consuming drugs. This fact signals users and nonusers that laws are for suckers; it undermines a spirit of voluntary compliance essential to law enforcement in a free society.
Direct Costs of Enforcement: Expenditure across all levels of government for enforcement of drug prohibition is currently at least $20 billion per year and plausibly in excess of $30 billion (Miron, 2001a). This estimate includes only those expenditures directly attributable to drug policy, not auxiliary expenditures related to prohibition-induced crime.
Summary
Drug prohibition probably reduces drug consumption relative to what would occur under legalization, but existing evidence suggests this reduction is modest. But whether the effect is large or small, prohibition has many other effects compared to legalization.
III. The Normative Analysis of Drug Prohibition
I now present what economists call a normative analysis of drug prohibition, meaning one that asks whether prohibition is preferable to legalization. As a starting point, I note that most effects of prohibition are, in and of themselves, negative (for example, increased crime, redistributions to criminals, greater corruption, diminished civil liberties). The most important exception is prohibition's effect on drug consumption. This effect might not be large, and it might even be perverse (because of the forbidden fruit effect, for example). But there is little dispute that this is the key issue: if prohibition fails to reduce consumption, it is unambiguously inferior to legalization. If prohibition reduces consumption, the bottom line depends on how one views this effect and on the magnitude of prohibition's negative consequences.
In this section I discuss four different perspectives on how public policy might view drug consumption. I emphasize the distinction between two questions: first, whether policy should attempt to reduce such consumption; and second, whether prohibition is the right policy by which to achieve this objective if the objective is sensible in the first place.
Rational Consumption
One view of drug consumption--the one assumed in the standard economic paradigm--is that people consume drugs because they think it makes them better off. According to this view, it does not matter whether people consume drugs because they enjoy the psychopharmacological effects, because they believe drugs have medicinal properties, or because they think drugs are cool; all that matters is that they voluntarily choose to consume drugs. Similarly, under this view, it does not matter whether drugs are addictive or if consumption negatively affects health or productivity; if rational people choose to accept these risks, they must think the benefits are worth the costs.
The rational model of consumption was long believed to be inconsistent with many observed behaviors related to drug consumption, such as addiction, withdrawal, and relapse. Theoretical work by Becker and Murphy (1988) shows that the rational model is potentially consistent with these phenomena, and a growing body of empirical work has had some success in fitting the model to data (see the discussion in Miron, 1998). This empirical work does not prove the rational model is correct with respect to all drug consumption, but it undermines the presumption that all drug use (or other addictive consumption) is necessarily irrational.
If one adopts the rational model, then the normative analysis of drug prohibition is simple: any policy that reduces drug use is a cost, not a benefit. Thus, all of prohibition's effects are negative. If drug consumption is not rational, the conclusion that policy-induced reductions in consumption are a cost does not necessarily hold.
There are numerous reasons why the rational model of drug consumption strikes many as inaccurate. No doubt there are some individuals for whom this description is not even close. But it is hard to deny that at least some drug use fits the rational model. Many people claim to enjoy the high associated with marijuana consumption; others value the pain relief or mental calm produced by opiates; still others appreciate the stimulation of cocaine. An objective evaluation of prohibition, therefore, should include as one cost any reduction in rational drug consumption.
Externalities
A second perspective on drug consumption holds that even if drug consumption is rational and thus a benefit to the person who consumes drugs, such consumption might harm innocent third parties (in the vocabulary of economics, cause externalities) and thus be excessive from society's perspective. Although conventional accounts often exaggerate the magnitude of drug-consumption-induced externalities (see Miron and Zwiebel, 1995; Miron, 1998), it cannot be disputed that these are significant in some cases. For example, drug consumption can impair one's ability to drive or operate machinery safely; it can have negative health effects on the fetus; or it can cause additional use of publicly funded health care.
The mere existence of externalities, however, does not by itself justify policies to reduce drug consumption; one must compare the magnitude of externalities to the costs of the policy, including any unintended consequences. The analysis in section II, for example, shoves that prohibition itself generates externalities, including increased crime and corruption, the spread of HIV, and reduced civil liberties. Even if the externalities from drug consumption are substantial, they might be smaller than the externalities from policy. This is especially true if the policy in question has only modest effects on drug consumption.
In addition, the ability of policy to reduce drug-related externalities is limited by the fact that reduced drug use might translate into increased use of other substances that have similar if not greater externalities. For example, marijuana appears to impair driving ability substantially less than alcohol (U.S. Department of Transportation, 1993; Crancer et al. 1969), and there is evidence of substitution between the two in response to changes in the relative price of the two commodities (DiNardo and Lemieux, 1992; Chaloupka and Laixuthai, 1994).
In addition, the net effect of any particular externality is often difficult to calculate or even perverse. The classic example is the effect of smoking on the use of publicly funded health care (Viscusi, 1994). The standard argument in favor of smoking-reduction policies is that smoking causes decreased health and increased use of Medicaid, Medicare, or other subsidized health care. But any action that tends to shorten life means decreased use of publicly funded Social Security and Medicare, thereby positively affecting the nation's fiscal balance. In some cases calculations of this type suggest that the "positive" effects are similar in magnitude to the negative ones.
Finally, even if drug use does cause externalities, and even if these are sufficiently great to justify a public policy response, there are policies other than prohibition that can reduce drug consumption without the negative effects of prohibition. And the existence of externalities does not imply that the optimum level of consumption is zero, assuming consumers get benefits from drug consumption. Rather, the standard externality argument suggests reducing consumption relative to legalization, but not all the way to zero.
Irrational Consumption
A different perspective on drug use, independent of externalities, is that some consumers are not rational; they harm themselves by using or abusing drugs because they fail to account for the negative consequences. According to this view, policy-induced reductions in drug consumption benefit such people by preventing them from harming themselves. It is undeniable that some people make bad decisions about drugs, although, as with externalities, the harms from drug consumption are often exaggerated (Miron and Zwiebel, 1995; Miron, 1998).
The mere fact that irrationality exists, however, does not mean attempts to reduce drug consumption are desirable policy; the benefits of reducing irrational consumption must be weighed against the costs of any policy used to achieve that reduction, and they must be balanced against the costs of reducing rational consumption. Further, as with externalities, policy-induced reductions in irrational drug consumption might induce substitution toward goods that have similar or more harmful effects.
Even if attempts to reduce drug consumption are warranted by irrationality, prohibition is not necessarily the right policy, given the negative effects of prohibition. Indeed, prohibition might exacerbate the effects of irrationality to a greater degree than alternative approaches. Prohibition potentially glamorizes drug use in the eyes of those too young, naive, foolish, or myopic to consider the long-term consequences. Also, prohibition alters the reward structure in the illegal drug trade in ways that entice the myopic into that trade. Under prohibition, the monetary rewards for working in the trade are high, but this is merely compensation for the elevated risk of injury, death, and imprisonment. Rational people understand this and work in this trade only if the total compensation equals that available in other sectors. Myopic teenagers, on the other hand, likely focus on the cash and thus expose themselves excessively to substantial risk of death or prison.
Immoral Consumption
A final perspective on drug consumption and public policy is that drug use is evil or immoral, and thus policy should discourage drug use to demonstrate society's disapproval.
Economic analysis does not address the morality argument per se. But unless one puts infinite weight on taking a moral stand against drugs, the benefits of making a moral statement must be weighed against the costs of any policy that makes this statement. Similarly, prohibition is not the only policy that can send a message about society's disapproval of drug consumption, which means that the costs of using prohibition to make a moral statement must be weighed against the costs of using other policies to this end.
The previous analysis also suggests that, from a moral perspective, prohibition has many undesirable effects. Prohibition causes increased violence, some of which affects innocent bystanders caught in drive-by shootings carried out by rival drug gangs or in guerrilla bombings, for example, in Colombia. Prohibition-induced restrictions on clean needles mean that more children are born HIV-infected. Prohibition means that peasants in Latin America, including some who do not grow coca, have their crops destroyed by aerial spraying of pesticides. And prohibition means that criminals get rich at the expense of society generally.
Summary
The normative analysis of drug prohibition suggests three key conclusions. First, virtually all the effects of prohibition are undesirable, with the possible exception of reduced consumption. Second, reduced drug consumption is not necessarily desirable; in particular, any reduction in rational drug consumption is a cost, not a benefit, of policies that reduce drug consumption; the right objective is eliminating externality generating or irrational drug consumption. Third, even if policy should attempt to reduce drug consumption, prohibition is not the only possible approach.
IV. Alternative Policies
The preceding analysis suggests that prohibition has many undesirable consequences relative to prohibition, but it does not by itself imply that legalization is preferable. The choice between these two approaches depends in part on one's moral stance with respect to drug consumption but more importantly on evidence about the degree of rational versus irrational consumption and about the magnitude of various drug-related externalities.
In addition, prohibition and legalization are not the only policies available by which to address the harms of drug use. In this section I discuss other possible drug policies and explain how they compare with prohibition or legalization.
Sin Taxation
A policy that is "between" prohibition and legalization is sin taxation: a tax on drugs in excess of that on other goods. Sin taxes raise drug prices relative to those of other goods, thereby discouraging their consumption. Most economies impose sin taxes on various commodities, including tobacco, alcohol, and gasoline.
The use of sin taxes to discourage drug consumption faces an important constraint: the tax must not be so high that it itself generates a black market because suppliers can profitably evade the tax, even given reasonable enforcement. Existing evidence confirms that tax rates beyond a certain point indeed force markets underground; but existing evidence also indicates that sin taxes can be substantial without so doing. For example, cigarette taxes in some European countries account for 75 to 85 percent of the price.
Assuming sin taxation does not drive the market underground, it will not generate the negative effects of prohibition-induced black markets, and it will decrease consumption of drugs to the extent that demand is responsive to price. Evidence suggests that demand is indeed responsive, contrary to earlier characterization of drug use as being price insensitive because of the addictive properties of some drugs. Whether this responsiveness is large or small is harder to pin down (see Miron, 1998 for a discussion of the evidence). Sin taxation also means that the drug trade occurs "aboveground," so standard policies such as minimum wage laws, environmental laws, and product liability laws can still be enforced. Assuming these policies are beneficial, this represents a plus for sin taxation relative to prohibition.
The standard objection to sin taxation relative to prohibition is the presumption that prohibition can reduce drug use more effectively than can sin taxation. This presumption is not necessarily valid, however. The reason for the presumption is the view that prohibition reduces demand because of respect for the law or because it establishes a social norm that drug use is wrong. This is possible, but prohibition might also glamorize drug use in ways that sin taxation would not, and sin taxation can also send a signal that society disapproves of drug consumption.
Setting aside the possibility that prohibition reduces demand more effectively than sin taxation, there is no guarantee that prohibition reduces consumption more effectively than sin taxation. AS shown explicitly in Miron (2001b), sin taxation can always raise costs and thus price to exactly the same degree as prohibition, holding enforcement constant. And the efficacy of enforcement under sin taxation might exceed that under prohibition.
Whether sin taxation is superior to legalization depends in part on the magnitude of externalities relative to irrational consumption. If drug users impose significant externalities, then sin taxes discourage these externalities and generate revenue that can mitigate the effects. If drug users mainly harm themselves, and if their demands are relatively inelastic, then sin taxes are less appealing since they force drug users to pay higher prices without reducing consumption, leaving users with less income for food, shelter, and clothing, and also possibly encouraging crime. In addition, sin taxation raises political economy issues; political pressures, rather than economics, might determine which commodities are considered sinful. Further, there is a danger under sin taxation that the tax may be raised sufficiently to generate a black market.
Subsidized Treatment
A different policy toward illegal drugs, which can and does coexist with prohibition or legalization, is government-subsidized drug abuse treatment. The desired effect of subsidies is to increase the number of people receiving such treatment, thereby reducing the overall quantity of drug use.
A policy of subsidizing drug treatment raises a number of issues. Although it is easy to advocate such policies out of compassion for drug abusers, the question for society is whether the benefits (such as increased earnings for drug users, lower crime committed by users) exceed the costs. Answering this question is difficult, mainly because assignment to treatment is not random. The available evidence does not make a strong case for subsidized treatment (Apsler and Harding, 1991).
An additional issue is that subsidizing drug treatment, by lowering the price of such treatment to drug users, might encourage drug use. Further, even the perception that this could occur--or a feeling by some that it "rewards" drug use--is a problematic consequence of this policy.
None of these caveats is meant to disparage treatment. The point is that subsidizing treatment is a separate question from whether treatment is beneficial, and it is a separate question from whether prohibition is preferable to legalization. Many critics of prohibition take as given that reduced expenditures for prohibition should translate into increased expenditures for subsidized treatment. It might be desirable to legalize drugs and subsidize treatment, but subsidized treatment has its own costs and benefits that require independent analysis.
Medicalization
An alternative to prohibition, which might be termed medicalization, is to put control over drugs in the hands of physicians, with little or no oversight from law enforcement. Under current United States policy, doctors can prescribe cocaine, and most opiates, amphetamines, and depressants under certain conditions. But their ability to prescribe is strictly limited, and drugs such as heroin, marijuana, and LSD cannot legally be prescribed under any circumstance. More broadly, even when doctors can legally prescribe various controlled substances, they avoid doing so because of concern about legal monitoring of their prescription practices. Under a more liberal, medical approach, which exists to some degree in Europe, doctors would face minimal legal restraint on the prescribing of controlled substances. In particular, they might be allowed to "maintain" addicts, meaning the ability to prescribe continued supplies of opiates as the "treatment" for addiction.
The critical effect of such a policy change would be to provide many drug users with a legal source of drugs, thereby reducing the size of the black market relative to prohibition. If the restraints were minimal, some physicians would prescribe freely, potentially reducing the black market to insignificance. Thus, from the perspective of eliminating the negative effects of a prohibition-induced black market, medicalization is certainly beneficial. It is not obvious, however, that this approach is better than simple legalization. Medicalization also implies increased consumption of drugs, so to the extent there are externalities and irrationality related to consumption, this is a negative.
Needle Exchanges
A policy that has received significant attention in recent years is needle exchanges. Under this system, private or government groups provide clean needles to addicts who might otherwise share dirty needles and thereby spread HIV and other diseases. These programs exist in substantial part because of government restrictions on the sale of clean needles, which in turn reflects prohibition. If drugs were legal there would be far fewer restrictions on non-prescription needle sales.
This approach differs from those discussed earlier because the main objective is to reduce the harms of drug use rather than drug use itself, although many needle exchanges do provide counseling and guidance into drug treatment. Under prohibition, needle exchanges are an awkward activity for the government, since this policy appears to accept drug use at the same time that prohibition seeks to punish drug use. Government could reduce the controversy surrounding the issue by repealing the prohibitions on the sale of clean needles; this would allow private groups greater freedom to run needle exchanges. There is some evidence that these programs reduce the sharing of needles and little evidence that they encourage drug use (Gostin, 1991).
Public Education Campaigns
Under legalization or prohibition, public health campaigns that provide information about the consequences of drug use are also an element of drug policy. More information is generally better, and persuading people not to use drugs would circumvent most other issues. But this is probably not the right benchmark for gauging government anti-drug campaigns. In many cases these exaggerate the dangers of drug use to such a degree that the audience ignores the message entirely. And available evidence fails to show that anti-drug campaigns such as DARE significantly reduce drug use (Rosenbaum and Hanson, 1998).
Summary
The main point of this section is not to endorse or criticize the policies discussed earlier; as with the choice between prohibition and legalization, a full evaluation depends partly on personal values and even more on the evidence, which I have not attempted to evaluate systematically here. Instead, the objective has been to clarify the effects of different policies and to show how they relate to prohibition and legalization. The key message is that each of these policies has its own costs and benefits; each requires its own evaluation.
V. Conclusions
This paper does not attempt to make the case for or against prohibition or legalization; likewise, it does not claim to be a complete or systematic evaluation of the evidence. The goal has been to show how the legal status of drugs affects the market for drugs and to demonstrate that many outcomes commonly attributed to drugs are instead due to drug prohibition.
It is worth noting that much of the analysis made no reference to any specific property of drugs, such as addictiveness. The basic analysis applies to any commodity for which there is substantial demand and relatively imperfect substitutes. So the key message is that the legal treatment of drugs plays a huge role in explaining how drug markets operate, not the physical or psychopharmacological properties of drugs.
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Jeffrey A. Miron is Professor of Economics at Boston University and President of Bastiat Institute, Incorporated. He has published more than twenty-five articles in refereed journals and thirty op-eds in the Boston Herald, Boston Business Journal, and Boston Globe. His area of expertise is the economics of libertarianism, with emphasis on the economics of illegal drugs.
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