Legalise it?

Not so long ago economist Paul Frijters mused about drug legalisation here at Troppo.

It seems that Paul is an international trendsetter.  Now economist elder statesman Gary Becker and the world’s most prolific judge/legal academic Richard Posner are musing on the same topic at their joint blogBecker is unequivocally pro-legalisation though not especially analytical, while Posner attempts an economic analysis based on a recent paper by Miron and Waldock resulting in a couple of reservations and a proposed field study to resolve them:

Most important, the authors also do not consider the possible social benefits of prohibition. Prohibition reduces the consumption of mind-altering drugs. Of course there are mind-altering drugs that are not prohibited, and many of these are close substitutes. These include the numerous prescription drugs that have mind-altering effects very similar to those of the illegal drugs, and of course there is alcohol and cigarettes. Moreover, a tax on legalized drugs would raise the price to the consumer and thus moderate the effect of legalization on consumption. But if the tax is too high, it will result in reviving the illegal industry. And the authors probably underestimate the increased consumption that would result from a lower price or even the same price (brought about by a particularly stiff excise tax) because they don’t mention concerns with impurities and with the stigma of being a “drug addict” that are created by the prohibition and would be substantially reduced by its repeal.

The question would then be whether the external costs of increased consumption of mind-altering drugs would exceed the savings in law enforcement costs from legalization. It seems doubtful that marijuana consumption generates significant social costs, but legalizing it would generate only modest cost savings–$8.7 billion a year, according to the authors’ estimates. But cocaine, especially the crack form, along with heroin, ecstasy, LSD, methamphetamines, and perhaps others, may induce behavioral changes that cause social damage. Most leaders of black communities believe that rampant drug usage is highly destructive to their communities, and not only because of the gang activity that prohibition induces. Drug gangs would disappear with legalization and that would reduce the violence in those communities, but the effect might be more than offset by the effects of greater drug use.

Concern with the huge budget deficits of our federal, state, and local governments may gain the authors a more sympathetic reading than advocacy of repealing the drug laws usually does. From a budgetary standpoint, the authors are estimating an annual savings of almost $90 billion. But without an estimate of the social costs of increased drug usage, the path to repeal is blocked. It would a step in the right direction if the Justice Department would take the position that it will not enforce a federal drug law in any state that repeals its parallel prohibition of that drug; that way we might obtain experimental evidence of the social costs of illegal drugs.

NSW government criminologist Don Weatherburn addressed these questions in a recent address to the Medico-Legal Society of NSW.  It’s relatively short anyway but I’ve extracted the most relevant passages over the fold:

Personally, I am not sure what caused the heroin shortage, but that is not the main issue. As long as prohibition makes drugs more expensive than they would otherwise be, the crucial question for policy is not whether or not police can push up the price, but whether or not higher prices lead to lower levels of consumption and drug-related harm. The available evidence suggests that they do, at least as far as consumption is concerned.  Economists call the sensitivity of demand for a product to changes in its price its ‘price elasticity’. …

Weatherburn concludes that the illicit drug market is price-elastic, meaning that successful law enforcement efforts that reduce supply and therefore increase price will tend to reduce consumption and therefore arguably harm.  However he goes on to observe:

This brings me, finally, to the issue of harm minimisation. Recognising these facts, some have retreated to the position that prohibition might reduce some drug-related harms, but it is certainly not the best way to minimise drug-related harm. …

You might think that the key imperative in illicit drug policy is to protect public health. Someone running a shop in Cabramatta might think that the key imperative is to keep needles out of the park and drug users off the street. You might think that the loss of civil liberty entailed in police searches is worth the benefit in terms of public amenity. Others might think that it is not.

It is easy to say the goal of drug policy should be to minimise drug-related harm, but whose harm should we try to minimise and how do we compare qualitatively different types of harm? …

Conclusion

There is nothing wrong with the idea that we should strive to reduce particular drug-related harms, such as crime, morbidity, mortality and drug-related problems of public amenity. We kid ourselves, though, if we think we can minimise all drug-related harm. Drug policy involves hard trade-offs between competing harm-reduction objectives. There is no such thing as a free lunch and there is no such thing as a drug policy which reduces one harm without increasing the risk of another.

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
This entry was posted in Economics and public policy, Health, Law. Bookmark the permalink.
Subscribe
Notify of
guest
17 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
FDB
FDB
10 years ago

“As long as prohibition makes drugs more expensive than they would otherwise be, the crucial question for policy is not whether or not police can push up the price, but whether or not higher prices lead to lower levels of consumption and drug-related harm. The available evidence suggests that they do, at least as far as consumption is concerned.”

Or in other words they DONT, except as far as consumption is concerned.

More consumption = more harm is still, here at least, an article of faith.

I’d say it’s a truism, but one with a very non-linear graph, and one where the optimal outcome requires some form of at least decriminalisation.

conrad
conrad
10 years ago

“More consumption = more harm is still, here at least, an article of faith”…”but one with a very non-linear graph”

I think this probably depends on the drug — The probability that more consumption equals more harm for pot is probably about the same as smoking (i.e., 100%). I imagine the graph for harm vs. consumption would also look very similar (probably worse actually given that most regular pot smokers also tend to get addicted to nicotine, and I seem to remember that the probably of getting cancer from both pot and cigarettes is higher than if you just smoke cigarettes alone).

Dave
Dave
10 years ago

The simple economist’s answer (and I am a simple economist) is to legalise drugs and place a Pigovian tax on them equal to the negative externalities that they create. If this tax needs to be so high that illegal supply continues, then that must be addressed through law enforcement.

I cannot see how, in any dimension, this Pigovian approach would/could be worse than the status quo.

Paul Frijters
Paul Frijters
10 years ago

Ken,

thanks for the thumbs up. To be fair though, economics has a long tradition of arguing for legalisation of drugs. Milton Friedman was probably the one who pushed the idea onto the young Gary Becker.

Btw, Milton Freedman looks eerily like the photo up there…..

Mark
Mark
10 years ago

Weatherburn concludes that the illicit drug market is price-elastic

there have been some large drug bust recently in Australia and the price of those drugs has hardly moved

Paul Frijters
Paul Frijters
10 years ago
hc
hc
10 years ago

It is Milton Friedman.

The heroin drought in Australia seemed to be caused by much intensified police activity interdicting imported heroin. Heroin prices rose sharply and heroin use and overdose deaths collapsed.

Those on the pro-drug lobby including many who make their living from harm minimization have invented a fantastic set of stories to conceal the simple facts here but we know heroin demands are quite elastic so the outcomes are consistent with economic evidence.

Levels of marijuana use and of cigarette smoking are at record low levels among youth – current policies have high effectiveness.

We do not legalize homicides because the law is expensive to enforce and fails to be effective. The counterfactual where there are no laws against an activity is difficult to evaluate but in countries where opiates are freely available levels of use and of addiction have been high.

The positive message should be stressed that there are better ways of getting high than taking drugs. Certainly the activity should not be seen as something socially approved.

hc
hc
10 years ago

The idea that events in Afghanistan or elsewhere drove up prices is implausible. Heroin is generally an internationally traded good and if this had been the explanation then heroin droughts would have occurred around the world. This was not the case. The price spike in Australia was very distinctive.

In any event such explanations don’t bear on the fundamental idea that heroin demands are surprisingly price elastic. Regardless of reasons if you can increase price people will use less.

It is not adults who typically start using drugs like heroin but impulsive teenagers. They have high discount rates which become lower as they move into their mid-twenties. I think it is incorrect to suppose a rational agent model describes the behaviour of such users.

Think about it yourself Ken. How many crazy things did you do at age 18 that you either regretted later on or looked back on with astonishment. Its a phase of risk-taking that probably prepares people for adulthood but involves some poor choices in relation to driving cars and taking drugs for example. At about age 25 the brain settles down into a less risk-taking more rational mode and more responsible choices are made.

conrad
conrad
10 years ago

“Even with drugs like heroin and cannabis, frequent users tend to become semi-vegetative and are likely to be unproductive citizens and social welfare burdens on the state”

The politically incorrect counter argument to this is that they die earlier too, hence saving the state money at the end of their lives (I imagine it should be possible to empirically determine this trade-off).

I also think that this statement is somewhat stereotyped — what percentage of frequent users are really burdens on the state that wouldn’t be otherwise? Despite the common stereotype, it’s quite possible to be a heroin addict and functional enough (especially if you don’t have to go around committing crime to pay for it), and there are innumerable heavy stoners that can function quite fine in many jobs (and for some jobs, probably better — just imagine if you clicked through groceries all day). Again, I think this is something that needs empirical evidence in an Australia-specific context to determine.

Tel
Tel
10 years ago

It may well be true that effective law enforcement and large busts played a part, but it’s very likely that events in places like Afghanistan (viz the US bombing ans then invasion) and the Golden Triangle played a bigger part.

I fully agree, the Taliban were brutally effective at stamping out opium crops… very hard to hide a field of poppies in that landscape, when there are religious nutters in every village. They were also brutally effective at stamping out a whole bunch of other activities. In the year 2007, during US occupation, production was triple what it was under the Taliban 10 years earlier. There’s a graph on wikipedia (source data from UNODC).

http://en.wikipedia.org/wiki/File:Afghanistan_opium_poppy_cultivation_1994-2007b.PNG

Note that 2001 was an exceptionally poor harvest… now correlation does not prove causation, it is conceivably possible that the high street prices in Sydney influenced those Afghans to trample down their cash crops… but very basic economics would suggest the opposite. Actually there was an agreement between Mullah Mohammed Omar and United Nations the year before, needless to say that experiment was somewhat abruptly terminated.

Weatherburn concludes that the illicit drug market is price-elastic

Fiddlesticks. The heroin drought in Australia immediately promoted amphetamines as a ready and cheap substitution. I can dig up a reference if people can’t find it for themselves.

conrad
conrad
10 years ago

“It’s a different and much more aggro society than a decade ago, and the large increases in aggravated assault rates bear that out.”

I agree with you about youth culture, although maybe it’s because the new generation simply forgets what it’s really like in the long run — even if it was really cheap in, say, 2002, seeing people on the nod and collapsed all over the place in the nineties is a pretty good practical lesson about the long term effects it might have.

However, your comment about assault rates is incorrect — these rates been growing very slowly for the last decade (albeit with other crimes falling a lot), and most of the growth over the last two decades was in the period when heroin was everywhere and cheap. see here — note that these are not corrected for population growth.

fxh
fxh
10 years ago

Most users of most drugs, illegal or legal, are not problem users. Yes even most heroin users aren’t problem users. Most heroin users never cross paths with the law.

Most problem drug users are poly users – a heroin shortage just shifts to substitutes – not even close substitutes – so many will shift to alcohol.

A shortage will show price elasticity but harm can, and does, also result from the substitutes.

Just as not all users are problem users – not all problem users are addicts as portrayed by the media.

Legalization does not mean free for all and heroin available at kinda. Alcohol and cigarettes are legal, but illegal in some circumstances.