Institutional innovation and ‘demarketising’ economic bads

institutional innovationMiles Kimball, for the uninitiated a sensible centrist commentator on economic policy is also an admirer of John Stuart Mill and has supported the case for decriminalising drugs.  At the same time, since he thinks drugs – certainly recreational drugs or the new ones – are bad news or likely to have substantial social downsides – he wants to hem in the damage they can do with all sorts of legal restrictions.

[We should] do whatever we can to drive down the usage of dangerous drugs consistent with taking the drug trade out of the hands of criminals:

  • Taxes on dangerous drugs as high as possible without encouraging large-scale smuggling;
  • Age limits on drug purchases as strict as consistent with keeping the drug trade out of the hands of illegal gangs;
  • Free drug treatment, financed by those taxes;
  • Evidence-based public education campaigns against drug use, financed by those taxes;
  • Demonization in the media and in polite company of those who (now legally) sell dangerous drugs;
  • Mandatory, gruesome warnings like those we have for cigarettes;
  • Widespread mandatory drug testing and penalties for use of dangerous drugs—but not for drug possession;
  • Strict penalties for driving under the influence of drugs.

I don’t know enough to have a primary view about whether or not drugs should be legalised – or if I do it’s a pretty tentative one that they should be – but if we were to do so, while I’m OK with Kimball’s list I think it doesn’t go far enough. He presumably agrees with plain paper packaging though he’d extend it to nasty pictures and warnings which is all good. But I’d do more. As I wrote on his blog post (I’ve slightly edited what I wrote there): 

I’d introduce some regime for trying to remove to the extent practicable the ability to profit from the trade. So drugs would have to be marketed and distributed (and perhaps produced, though one might want to ring fence production as it’s more efficient to allow the most efficiently production and then impose taxes on it) in a not for profit way. I realise that this is easy to say and difficult to do. To market drugs not for profit, one would need to set out a regime to prevent profits being creamed off disguised as non profit – for instance not for profits paying their workers above market wages. If this introduced some economic inefficiencies – though one might argue that if we conceptualise economic efficiency as the generation of utility from given economic resources then greater economic inefficiency in the delivery of a social ‘bad’ increases economic efficiency.

Put in another way, if well functioning markets often provide a very efficient means of making, marketing and distributing economic ‘goods’ then one might want to degrade that market’s efficiency when it’s producing economic ‘bads’. But in fact the main objectives here in my mind are social ones – I want to maintain the social stigma for being part of the drug economy. And I also want to maximise the extent to which the consumption of drugs is the product of a deliberate decision to do so, rather than as it often is, the product of boredom and taking the line of least resistance. Also one might argue that distributing drug taking should occur in the way we distribute opportunities to participate in choirs. One wants them to be done by and for people who have made a positive decision that they want to do this rather than people who spend their days trying to optimise strategies for manipulating people to maximise their consumption.

One might put such an idea down to institutional innovation. Often we debate the merits or otherwise of centralised or decentralised solutions to problems as if the former were government solutions and the latter involved free markets.  But just as Minister for Social Services Kevin Andrews recently endorsed the idea of public service mutuals, so one might argue that one wants markets out of the (recreational) drug trade – or out of important bits of them which do harm – without giving away the principle of decentralised decision making.

Anyway, O Troppodillians, what thinkest thou?

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conrad
conrad
7 years ago

I can add one to your list: I’d like to see them decriminalized one by one based on their potential harm, with harm to others weighted more heavily than harm to self. That way you could see what happened in the Australian context and if it really did increase consumption in ways we wouldn’t expect, and this could be done slowly and surely so you look at the outcomes easily before gettingonto more risky things.

For example, pot appears to do more or less nothing to you cognitively in the long term (c.f., short effects of around one month) if you don’t smoke it at too young an age, so users can return to normal if they give up. Alternatively, it gives you lung cancer and all the other nasty things associated with inhaling smoke, but this is self harm, so I’m not too fussed, and if it was readily available you sell it in far less harmful forms to take. Most pot users also don’t annoy others too much. So I’d put up with a fair bit of increased usage from legalization (if that really happened — I suspect it wouldn’t). Ice, alternatively, gives you brain damage like most amphetamines, and causes violence. So this is bad on all counts. I’d be very careful with trials of this (e.g., force people to go through a lot of hoops to get it) and only do them after good results from all the other stuff . Ecstasy alternatively, probably falls in the middle in that you probably get some lesser amount of permanent brain damage but you don’t annoy others. So I’d put up with trials if the use only increased a small amount as that would be a good trade-off to get rid of the crime.

conrad
conrad
7 years ago
Reply to  Nicholas Gruen

I have seen a few talks by Australia’s leading expert on this, and read a number of the papers looking at it out of curiosity. In terms of mental functioning, the most detrimental effects I could see were from people smoking before they reach their early 20s (which might be fun to legislate against since we use 18 as the magic number for these things). There are a number of studies now with people who have had over 50,000 (!) joints in them and a few with largish samples of people who had over 10,000 and have then given up for one reason or another (holes in their lungs probably..). You don’t find any great level of impairment in cognitive function compared to controls with these groups. That surprised me, but it seems fairly consistent.

I suspect what you see as zombification comes from leading a stoner lifestyle for many years, rather than the THC itself ( although it’s surprising how well some stoners can function). Imagine doing SFA with your life for, say, a decade and trying come back to the world. It’s also not clear where causation lies in other things like depression either since it seems reasonable to suspect that many people get stoned (and drink etc.) as self medication, and so are a population likely to be more susceptible to these things when not stoned. In addition, it must be depressing for many long term stoners who get off it to realize how much of their life they have basically wasted.

There are also hypotheses that I wouldn’t place very much faith in (although I don’t know much about this level of functioning so I can’t really evaluate it fairly) about some groups of stoners being like that because their cannabinoid receptors are out of whack, and being stoned gets them back in by providing an exogenous influence making up for what is endogenously lacking. If this was true, then not being stoned could potentially be causally linked to depression in these people. That is, rather than being stoned causing later depression, being stoned stopped it at the time.

john Walker
john Walker(@johnrwalker)
7 years ago

Prohibition of marihuana (and or alcohol ) has apparently driven an increase in the concentration/ strength of the active ingredient. Any ideas as to how we could use market inefficiency to reverse that trend ?

The hypothesis “some groups of stoners being like that because their cannabinoid receptors are out of whack,” seems plausible- Am told that amphetamines work on attention deficit children by stimulating the, otherwise under active, inhibitory centers in their brains.

conrad
conrad
7 years ago
Reply to  john Walker

It’s probably plausible for a small number of people, but until someone gives me decent evidence for whether that means 20%, 2% or .2%, I wouldn’t pay too much attention to it. Things like people being stoned all day as cure for depression/anxiety etc. are no doubt far more common.

john Walker
john Walker(@johnrwalker)
7 years ago
Reply to  conrad

I have had varying degrees of ‘up and down’, depression/anxiety? all my adult life, but pot really never did appeal to me.
BTW is it known what receptors ‘cannabinoid’ compounds bind to?

conrad
conrad
7 years ago
Reply to  john Walker

I’m not sure what the latest research on how cannabinoid receptors work is — the best I could tell you is just from a textbook. Even if I look at what that says, going from there to complex behavior is like trying to predict what a beach looks like from the individual grains of sand.

john Walker
john Walker(@johnrwalker)
7 years ago
Reply to  john Walker

Asked my brother in law – brain chemistry is his area.

“The cannabinoid receptors are specific to cannabinoids and are termed CB1 and CB2 receptors.CB1 are mainly found in the brain and CB2 in the immune system…”
“..we have endocannabinoids present in the body. Two so far identified are anandamide and 2-arachidonyglycerol. Natural functions involve gastrointestinal activity and regulation of appetite. May be a role in obesity.
Other function known is regulation of bone mass and therefore a role in osteoporosis.”

Paul frijters
Paul frijters
7 years ago

Agreed with most of this, ie that drug production and sale should be organised by the state.

I can add that to a large extent, drug production and sale already is a state activity in Australia. Tasmania is one of the world’s biggest producers of legal opiates, worked into many medical products, ie with sales heavily regulated by the state. Ritalin, a drug given to millions of ADHD kids around the world has been aptly described as smart cocaine, again state-regulated. Etc. We tend not to see medical drug provision as part of the drugs market, but economists should have no such blinkers: the drugs debate is not, in reality, about the principle of legalisation, but about the extent of legalisation and the use of particular labels to build popular support for it.

Marks
Marks
7 years ago
Reply to  Nicholas Gruen

Nicholas,

I am not sure how anyone would bother to produce it legally if there were no profit in it for them. If that were to happen, I suspect that the usual suspects would keep producing as they do now, and sell as they do now. It might not end up as a legalisation process at all, merely change the nature of the illegal production slightly.

Without any thought to this at all, why not licence someone like the tobacco companies, but under the usual packaging and other restrictions?

RC
RC
7 years ago

Ice, alternatively, gives you brain damage like most amphetamines, and causes violence. So this is bad on all counts.

Is this a study based on those who use ice from the black market, or clean, regulated, supply.

Too much drug research fails to account for the fact those taking illegal substances must engage with a very undesirable market place. All sorts of mental pressures are placed on those looking to “score”, or time wasting, being removed from a more functioning set of society. Do they control, for example, those who ensure they take care of themselves whilst only high, or are they only monitoring effects of those dedicated to daily use with poly use habits?

Very skeptical all the damage described in research can be attributed solely to the substance, and not in some significant way be attributed to prohibition.

conrad
conrad
7 years ago
Reply to  RC

There’s any amount of evidence that methamphetamines cause brain damage, including studies on animals using well controlled substances. Try searching for “methamphetamines and brain damage” on Google scholar and you can have a look yourself.

john Walker
john Walker(@johnrwalker)
7 years ago
Reply to  conrad

Yes , have often been told by those who were actually there , that in the swinging 60s in London speed did far more damage than all the other drugs combined.

conrad
conrad
7 years ago
Reply to  john Walker

These sorts of observations are a worry given the strength of the current stuff getting to Australian — I think the damage you get is generally thought to be exponential based on how much you have (which is why they allow tiny amounts for ADHD — let’s hope they’re right!), so the long term outcomes of the current cycle of use might quite bad.

john Walker
john Walker(@johnrwalker)
7 years ago
Reply to  john Walker

Only anecdotal -the long term consequences of using a lot of speed, from what I saw in some, was a strange sort of, unmistakeable once you had seen it once, ‘tick’ (a sort of mental stutter), and a propensity for heart attacks at about age 50.

conrad
conrad
7 years ago
Reply to  john Walker

That ‘tick’ is probably a sign of temporal lobe damage (if you’re interested: http://www.jneurosci.org/content/24/26/6028.full.pdf)

RC
RC
7 years ago
Reply to  conrad

I think you missed the point of my post. I am skeptical the damage can be ascribed soley to the substance in question. There are societal factors brought in due to prohibition which lead to horrible outcomes for users.

How many long-term studies of causual users of methamphetamine have been conducted where the supply was safe, legal, clean, consistent etc etc? How many looking at addicts have used such a supply?

No one is suggesting it’s a healthy choice, I am however 100% convinced through both personal experience and my reading of the research, prohibition and unregulated supply have a massive impact on health outcomes for users. Likely, for a large majority of people, to far outweigh the actual target substance itself.

conrad
conrad
7 years ago
Reply to  RC

RC, I don’t disagree prohibition leads to bad outcomes (including health ones), although with methamphetamines, if they are being cut which causes users to have less, it is potentially a healthier alternative than having an unlimited supply and people having more (I realize people may simply have more if the quality is worse), even if what they are being cut with is unhealthy. I remember in the late 80s and early 90s before ecstasy and then heroin took off and people didn’t care about speed anymore, the quality was poor and it was expensive, so its abuse was somewhat self limiting for many groups (e.g., people I knew at the time who were students and simply couldn’t afford it, which is also true of cocaine for many groups which is apparently still very expensive in Aus).

This means the problem is working out the function that gives the best outcome between the problems caused by extra users taking the drugs because they are easy to get and smaller numbers getting additional poor outcomes because they are illegal. I think this is very hard to apriori estimate (probably impossible), especially if you include long term outcomes (e.g., brain damage, lung cancer for dope, etc.). This is why with things that clearly cause significant brain damage even in their pure form, and which also cause users to become involved in things that cause problems for others (ranging for the specific like violence to the more general like unemployment; c.f., dope, where users don’t generally bother others too much), my preference is to have these as the last drugs in trials for legalization. This is not to say that if other trials showed good results (e.g., no or small increases in usage, which is apparently what was found in Portugal for some things), that I wouldn’t be happy to see drugs with poorer outcomes legalized. This would be be fine, I just don’t think we need to do everything overnight.