COSTS AND BENEFITS OF DRUG LEGALIZATION
Drug use is common in our society. Massive government spending to reduce drug use has been marginally successful at best. Whether we approve of drug use or not, the question can be asked should drugs be legalalized? Perhaps it is a necessary evil to legalize the activity because the gains to society will outweigh the costs.
The Facts
First, let's review some of the facts about illegal drug use. Click here to view the results of the 1994 National Household Survey on Drug Abuse.
Trends:
- Marijuana drug use is down since the mid-1980s, though it has been increasing since 1992. Click here for chart.
- Illicit drug use has declined substantially since the late 1970s. Click here for chart.
- Casual cocaine use continues to decline since the mid-1980s though hard-core use is steady. Click here for chart.
- Heavy alcohol use has shown no trend since the late 1970s. Click here for chart.
The U.S. Depatment of Justice Drug Enforcement Agency also keeps track of drug use statistics.
Moral/Philosophical Reasons for Legalization
The Libertarian approach argues that people (responsible adults) should have the freedom to make choices for themselves. Since the drug purchaser and seller each are engaging in mutually beneficial exchange, both are made better off. Why is this a crime? Imposing certain morals or values on all people is wrong and unconstitutional.
Moral/Philosophical Reasons for Drug Prohibition
Most or all would argue that drugs should be prohibited until a person is old enough to make an informed choice about them. Even then, however, there may be reasons for prohibiting drug use. There are numerous reasons for prohibiting an activity, but for drug prohibition two reasons predominate. First, the drug-user is lacking good information about the harmful effects of his activity and/or he is incapable of making an "informed" choice because of his environment. If good information were available and an informed decision could be made, noone would use drugs. Second, there are significant negative external effects. These occur when the drug user harms others. For example, an addicted person may abuse or neglect his children or kill another in an auto accident.
People can and should prevent others from likely harm even though certain individuals may wish to use drugs. The drug users clearly do not know what is best for themselves so society must prevent certain choices from being made.
Cost/Benefit Analysis of Drug Legalization
Like many other areas of economic analysis, it is possible to apply the efficiency standard. This approach essentially judges outcomes on a utilitarian basis. If the gains from legalization outweigh the losses to society, then legalization is a "good" thing. The reverse is also true. Note that there are many other criterion we could use. An analysis in which individual choice is the highest value leads to a different conclusion than one in which drug use is immoral or a sin. Nevertheless, let us proceed with our cost/benefit analysis.
The Benefits (Positive Consequences) of Legalization
A
reduction in crime. Drug demand is inelastic, meaning
that a one percent change in price leads to a less than one percent
change in quantity demanded. For marijuana the elasticity is estimated
at 0.4. This means that a 10% decrease (increase) in the price
of marijuana increases (reduces) quantity demanded by 4 percent.
Since price falls by more than quantity rises, total expenditures
on drugs go down. Since expenditures fall, crimes commited to
pay for drugs decline. In the chart, when we move down the demand
curve, the green area represents the amount that price falls.
The pink area represents the amount by which quantity rises. The
green area is larger than the pink area so total expenditures
fall.
- A reduction in the amount society spends on prosecuting drug offenders. Besides the fact that there are fewer victims of crime, there are also fewer criminals. Since users would no longer be classified as criminals, they do not consume precious resources in the justice system. The police and courts can turn their attention to reducing other crimes.
- Drugs become safer. When drugs become legal, the illegal nature of drug transactions disappears. When a drug user gets "bad" drugs, he can take the seller to court. Moreover, the government can regulate the content of drugs and can prosecute those that sell bad drugs. This decreases the probability that drugs will be altered. Also, drug related murders and crimes decrease because those involved in the transactions can use legal remedies instead of guns to settle contract disputes.
- Opportunities for youths to earn large sums as drug dealers decrease. If drug trafficing is legal, new entry into the market will reduce the profits that a seller can earn. Thus the youth are less likely to enter this market.
- Use of "hard-core" drugs may diminish. Under prohibition, the penalty for drug violations is possible jail time for the user and/or the dealer. Since there is high risk in trafficing drugs, one may as well sell the "hard-core" drugs. If drugs were legalized, both sellers and users are more likely to shift to less potent drugs.
The Costs of Legalization
The quantity of drugs consumed will unambiguously increase, thus harming the individuals who choose to consume them.
This can be shown in a supply and demand diagram for drugs. The
supply curve shifts to the right because the risk of getting caught
and imprisoned disappears. More people enter the supply side of
the market. The demand curve shifts to the right because many
who did not engage in an "illegal" activity under prohibition
will do so now. It is much easier (and safer) to purchase drugs,
and the consumer has legal recourse if she gets "ripped off"
with bad drugs. The rightward demand shift is partly (but not
fully) offset by a decreased demand for drugs because they are
now legal. Some users will no longer purchase drugs because
they are no longer illegal. In the chart, both the demand and
supply shifts make the equilibrium quantity rise.
- External effects increase. When drug use increases, the negative externalities imposed upon others also increase. There will be more third-party victims because more people are choosing to use drugs.
So how do we evaluate the costs and benefits? We must somehow "price" each of these costs and benefits. If benefits to legalization outweigh costs, then from an "efficiency" point of view we should legalize drugs.
Drug Enforcement Policy: Supply or Demand?
Rightly or wrongly, the United States has taken the approach that drug use is a crime and must be prohibited. The United States spends billions of dollars each year fighting the "drug war." There seems to be few positive results. Drug use is common and on the rise among young people. Should enforcement efforts concentrate on suppliers (trying to shift the supply curve for drugs to the left) or on consumers (shifting the demand curve to the left)?
Supply-Side Efforts
Supply-side efforts are aimed at the production and distribution systems. Success depends upon the ability of the government to curtail production directly or to stop the inflow of drugs to US markets. Since most production of the harder drugs occurs outside U.S. borders, we have very limited influence over direct production. Marijuana, on the other hand, is largely produced in the U.S. But the problem is that production can easily be concealed by going underground.
Curtailing distribution systems is also difficult because we do not have routine searches of vehicles or mail in the US. We may catch some of the distribution, but only a small fraction. (Estimates suggest that enforcement efforts lead to about a 10 percent reduction in supply.) Even if one distribution chain is cut down, another one will likely appear because of the big profits to be made.
Finally, if demand is inelastic, shifting the supply curve to the left will have only a minimal impact on demand. But property crime will increase as addicts spend more total dollars on drugs. Thus enforcement of drug laws has the perverse effect of increasing crime.
Demand-Side Efforts
One clear result of reducing demand is that supply will fall as well due to the falling price of the drug. Independent efforts to stop supply are not necessary. If the demand disappears, so will the profits. However, demand efforts take lots more money and time because demand is less centralized than supply. A big distribution system bust may disrupt drug flows for many of users, but a single individual who is arrested for drug use has no real impact on the overall market.
Click here for a review of the DEA's demand reduction program.
Summary
Unfortunately, there are no easy answers to the drug problem in the United States. If the goal of drug policy is to reduce drug use as much as possible, then prohibition makes sense and the government should probably focus efforts on suppliers while simultaneously waging a public relations war against the consumption of illicit drugs.
If the goal of drug policy is to achieve the best societal outcome, then drug legalization cannot be ruled out as a viable option. It is very possible that legalization could lead to net social benefits.
Links to Other Sites
Check these out:
Fiscal Analysis of Marijuana Decriminalization in California
