The Economics Of Drug Prohibition And Drug Legalization

The economics of drug prohibition and drug legalization (Jeffrey A. Miron)

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 prohibitedoutright. 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 thedrug 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 notto 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.
To make this case, the paper first presents an economic analysis of drug prohibition and demonstrates how drug marketsunder prohibition compare to drug markets under legalization. The analysis shows that many negative outcomes typically attributed to drugs are the result of prohibition, and it explains why these outcomes would be reduced or eliminated under legalization. This analysis does not by itself imply that legalization is preferable to prohibition; the analysis suggests that one effect of prohibition isreduced consumption of drugs, and under some views this is a desirable outcome. The analysis simply makes clear that some features of drug markets and drug use are the result of drug prohibition--independent of the physical or pharmacological properties of drugs--and it provides a framework for thinking about the consequences of alternative policies.
The second part of the paper discusses theconditions under which drug prohibition is likely to be the right public policy response to the negative outcomes that can accompany drug use. Since most effects of prohibition are undesirable, the main potential benefit of prohibition is any reduction in drug consumption relative to what would occur under legalization. I discuss different perspectives on drug consumption and how these relate to thevirtues, or not, of prohibition. The discussion explains that standard arguments used to justify policies to reduce drug consumption are less compelling than commonly asserted, even though drug use causes substantial harm in some cases. The discussion also explains that, even if reducing drug use is an appropriate public policy goal, other methods for reducing drug consumption are available thatpotentially achieve a better balance between the harms of drug use and the harms of drug policy.
The paper's third section discusses alternatives to prohibition and legalization, such as sin taxation, subsidized treatment, medical provision of drugs, needle exchanges, and public health campaigns. Many of these policies can and do coexist with prohibition or legalization, but they are distinct policiesthat require separate analysis. I show that each policy has positive and negative aspects, and that evaluation of each depends on views about drug consumption and on relevant evidence.
II. The Positive Analysis of Drug Prohibition
In this section I present what economists refer to as a "positive" analysis of prohibition, meaning one that describes the effects of prohibition without addressing...