March 20, 2005 to March 26, 2005
The Failure of the War on Drugs
The Failure of the War on Drugs-BECKER
Every American president since Nixon has engaged in a "war" on illegal drugs: cocaine, heroin, hashish, and the like. And every president without exception has lost this war. The explanation lies not in a lack of effort- indeed, I believe there has been too much effort- but rather in a basic property of the demand for drugs, and the effects of trying to reduce consumption of a good like drugs by punishing persons involved in its trade.
The war on drugs is fought by trying to apprehend producers and distributors of drugs, and then to punish them rather severely if convicted. The expected punishment raises the price that suppliers of drugs need to receive in order for them to be willing to take the considerable risks involved in the drug trade. The higher price discourages purchase and consumption of illegal drugs, as with legal goods and services. The harder the war is fought, the greater the expected punishment, the higher is the street price of drugs, and generally the smaller is the consumption of drugs.
Those suppliers who are caught and punished do not do very well, which is the typical result for the many small fry involved in distributing drugs. On the other hand, those who manage to avoid punishment- sometimes through bribes and other corrupting behavior-often make large profits because the price is raised so high.
This approach can be effective if say every 10% increase in drug prices has a large negative effect on the use of drugs. This is called an elastic demand. However, the evidence from more than a dozen studies strongly indicates that the demand for drugs is generally quite inelastic; that is, a 10% rise in their prices reduces demand only by about 5%, which means an elasticity of about '. This implies that as drug prices rise, real spending on drugs increases, in this case, by about 5% for every 10% increase in price. So if the war on drugs increased the price of drugs by at least 200%- estimates suggest this increase is about right- spending on drugs would have increased enormously, which it did.
This increased spending is related to increased real costs of suppliers in the form of avoidance of detection, bribery payments, murder of competitors and drug agents, primitive and dnagerous production methods, and the like. In addition, the country pays directly in the form of the many police shifted toward fighting drugs, court time and effort spent on drug offenders, and the cost of imprisonment. The US spends about $40,000 per year per prisoner, and in recent years a sizeable fraction of both federal and state prisoners have been convicted on drug-related charges.
After totaling all spending, a study by Kevin Murphy, Steve Cicala, and myself estimates that the war on drugs is costing the US one way or another well over $100 billion per year. These estimates do not include important intangible costs, such as the destructive effects on many inner city neighborhoods, the use of the American military to fight drug lords and farmers in Colombia and other nations, or the corrupting influence of drugs on many governments.
Assuming an interest in reducing drug consumption- I will pay little attention here to whether that is a good goal- is there a better way to do that than by these unsuccessful wars? Our study suggests that legalization of drugs combined with an excise tax on consumption would be a far cheaper and more effective way to reduce drug use. Instead of a war, one could have, for example, a 200% tax on the legal use of drugs by all adults-consumption by say persons under age 18 would still be illegal. That would reduce consumption in the same way as the present war, and would also increase total spending on drugs, as in the current system.
But the similarities end at that point. The tax revenue from drugs would accrue to state and federal authorities, rather than being dissipated into the real cost involving police, imprisonment, dangerous qualities, and the like. Instead of drug cartels, there would be legal companies involved in production and distribution of drugs of reliable quality, as happened after the prohibition of alcohol ended. There would be no destruction of poor neighborhoods- so no material for "the Wire" HBO series, or the movie "Traffic'- no corruption of Afghani or Columbian governments, and no large scale imprisonment of African-American and other drug suppliers. The tax revenue to various governments hopefully would substitute for other taxes, or would be used for educating young people about any dangersous effects of drugs.
To be sure, there would be some effort by suppliers of drugs to avoid taxes by going underground with their production and distribution. But since there would then be a option to produce legally-there is no such option now- the movement underground would be much less than under the present system. As a result, the police could concentrate its efforts more effectively on a greatly reduced underground drug sector. We have seen how huge taxes on cigarettes in New York and elsewhere have been implemented without massive movement of production and distribution underground in order to avoid the taxes.
So legalization could have a greater effect in reducing drug use than a war on drug without all the large and disturbing system costs. How high the tax rate should be would be determined by social policy. This approach could accommodate a libertarian policy with legalization and low excise taxes, a socially "conservative" position that wants to greatly reduce drug use with very high tax rates, and most positions in between these two extremes. So if drug consumption was not considered so bad once it became legal, perhaps the tax would be small, as with alcoholic beverages in the US. Or perhaps the pressure would be great for very high taxes, as with cigarettes. But whatever the approach, it could be implemented far more successfully by legalizing drugs than by further efforts to heat up the failing war on illegal drugs.
The War on Drugs--Posner's Comment
I am in broad agreement with Becker. But I am somewhat hesitant to describe the war against drugs as having been "lost." By that token, so has the war against bank robbery, or any other crime, been lost, because there is a positive rate of these crimes as well. As Becker explains, law enforcement activity raises the cost and hence price of illegal drugs and as a result of the price increase reduces their consumption. If the object of the "war on drugs" is to reduce rather than completely eliminate the consumption of illegal drugs, then the war has been partially won. Which is not to say that the partial "victory" has been worth the considerable costs. If the resources used to wage the war were reallocated to other social projects, such as reducing violent crime, there would probably be a net social gain. For one thing, it is particularly costly to enforce the law against a "victimless" crime, more precisely a crime that consists of a transaction between a willing seller and a willing buyer. The low probability of apprehending such criminals has to be offset by very stiff sentences in order to maintain deterrence. Yet if potential criminals have high discount rates, an increase in sentence length may have little incremental deterrent effect because the increase is tacked on at the end of the sentence. The present disutility of an increase in sentence length from 20 to 30 years may, given discounting, be trivial. Still another consideration is that if the principal effect of illegal drugs is to impair the health and productivity of the consumer of the drugs, then it is just another species of self-destructive behavior and we normally allow people to engage in such behavior if they want; it is an aspect of liberty.
Drug crimes are often thought to be inherently violent because of their association with guns, gangs, turf wars, and fatal overdoses. Those characteristics are, however, merely artifacts of the fact that the sale of the drugs in question has been criminalized, so that the suppliers cannot use the usual, peaceable means of enforcing property rights and contracts and are not regulated in the interest of consumer safety, as legal drugs are.
To determine the full social effect of the war on drugs, we would have to know precisely how drug users respond to higher prices of drugs, since, from a consumer standpoint, higher prices are what the war on drugs achieves. One possibility is that the user spends the same amount of money on drugs, but, because the price is higher, consumes less. Another possibility is that he reduces his consumption so much that he has money left over, and he uses that to buy a harmless product. A third possibility, however, is that he reduces his consumption enough to have money left over but he uses it to buy a legal mind-altering drug, such as liquor. This seems in fact the likeliest response of someone who desires a certain level of mood alteration and faces a higher price for his drug of choice; he switches to a substitute that now costs him less because it is not burdened by costs imposed by law enforcement. If that is the principal consequence of the war on drugs, it is hard to see what is gained even if one embraces the paternalistic rationale of the war.
The political source of the war on drugs is mysterious if, as I am inclined to believe, there is a legal substitute for every one of the illegal drugs: selective serotonin uptake reinhibitors (e.g., Prozac, Paxil, Zoloft) and other antidepressive drugs for cocaine, liquor and tranquillizers for heroin, cigarettes for marijuana, caffeine and steroids for "uppers." Obviously these are not perfect substitutes; and some of the illegal drugs may be more potent or addictive or physically or psychologically injurious than the legal ones. But it is apparent that our society has no general policy against the consumption of mind-altering substances, and there seems to be a certain arbitrariness in the choice of the subset to prohibit. If these drugs were regulated instead of being prohibited, their content could be made less potent and addictive and consumers could be warned more systematically about their dangers, as they are about the dangers of cigarettes and prescription drugs.
As a judge sworn to enforce the law, I will continue as I always have to adjudicate drug cases without any hesitations based on my reservations about the wisdom of the war on drugs. That is a legislative issue.
Oddly, one of the strongest cases for prohibiting drugs is the use of steroids by athletes. The reason is the arms-race character of such use, or in economic terms the existence of an externality. Ordinarily if a person uses a drug that injures his health, he bears the full costs, or at least most of the costs, of the injury. But if an athlete uses steroids to increase his competitive performance, he imposes a cost on his competitors, which in turn may induce them to follow suit and use steroids themselves, provided the expected costs, including health costs, are lower than the expected benefits of being able to compete more effectively. There is no offsetting social benefit from an across-the-board increase in athletes" strength. Football games are no more exciting when linesmen weigh 500 pounds than when they weigh 200 pounds; and baseball would be totally unmanageable if every player could hit every other pitch 1000 feet.
The War on Drugs--Posner's Response to Comments
The fact that the price of illegal drugs is not only low but falling, and indeed has fallen to quite low levels, is often treated as compelling evidence that the war on drugs has failed. That is true if the war metaphor is taken literally. But if the "war" is redescribed realistically as a campaign to reduce the consumption of illegal drugs, it could be thought at least a partial success even if the price of illegal drugs is extremely low. The reason lies in the distinction that economists draw between the full price of a good and its nominal price. The nominal price is the dollar amount charged by the seller; the full price includes any additional costs borne by the buyer, such as search costs (the costs involved in finding and negotiating with the seller'in other words, shopping costs) and any health risks associated with the consumption of the good. The war on drugs has had a significant effect on these additional costs. As a result of the drugs" illegality, it takes some effort to find a seller, there is a risk of arrest and prosecution, and there is a risk of an accidental overdose resulting from lack of quality control in the manufacture of the product. (There is also a stigma to using illegal drugs, but this might remain if the drugs were legalized; heavy drinking, though legal, is stigmatized.) These costs would be eliminated if drugs were legal. It might seem that with the drugs worth more to consumers, price would rise, but this is unlikely; price would be constrained to cost by competition, and the additional benefits of the drugs'that is, the benefits generated by removing the costs resulting from criminalization'would be realized by consumers as consumer surplus (the difference between what a consumer would pay for a good and the price of the good). With the good more valuable to consumers but the nominal price no higher, consumption would increase.
This point is potentially very important empirically, because the effect of criminalizing drugs on the full price of the drugs may be much greater than the effect on the nominal price. Suppose criminalization raises the nominal price of a dose of cocaine from $1 to $1.l0, a 10 percent increase; then using Becker's elasticity estimate, legalizing cocaine would result in a 5 percent increase in demand. But now suppose that the war on drugs has increased the full price of cocaine from $1 a dose to $2.10 a dose (the 10" increase in nominal price plus a $1 increase in other costs of consumption); then legalizing cocaine could be expected to have a much more dramatic effect on consumption. However, as Becker points out, this effect could be offset by a tax (in the example, a $1.10 tax), though some incentive to smuggling would be created by so stiff a tax, as in the case of cigarettes. The important thing is that because of the difference between full and nominal price, the tax might have to be very stiff.
Regarding performance-enhancing drugs, such as steroids, one comment points out that sports fans appreciate better performance, and notes that professional football is more popular than college football (alumni loyalties to one side). But there is a difference between skill and strength; if the principal effect of steroids is to increase strength rather than skill, it is not clear that entertainment value is enhanced. But suppose it is. Then what must be considered is the tradeoff between the increased income that steroid-consuming athletes can expect to obtain and the risks to their health. The tradeoff is complicated because some athletes will prefer the higher income and others will prefer to have better health and, being thus at a competitive disadvantage, will drop out of the sport. It is unclear whether there will be a net increase in performance, since some killed athletes will be lost to the sport, though those that remain will be better performers.
Let me make clear that I have no ethical objection to performance-enhancing drugs. Suppose there's a drug that adds 10 IQ points to everyone who takes it, and it has no adverse health consequences. Once some people start taking the drug, this will put pressure on others to follow suit. But I don't see any difference between this effect and that resulting from an effort by a young business person to gain a competitive edge by getting an MBA, which will place pressure on his competitors to do likewise. That kind of competition improves economic welfare.