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Mia Attruia, Daniel Boyle, Kellie Ickes

Professor S. Kantor

ECP 4413

4 December 2015

DRUG POLICY AND THE U.S. ECONOMY

On June 17th, 1971, President Richard Nixon declared drug abuse to be the

nation’s “Public enemy number one,” and many people pinpoint that press conference as

the moment where the war on drugs truly got its start (“Thirty Years…”). Fifteen years

later, in 1986, President Ronald Reagan established the country’s first official “Just Say

No to Drugs Week,” and, just two year later, there were over 12,000 “Just Say No” clubs

across the nation (“Just Say No”). In the decades since Nixon declared “war” on drugs,

the efforts and resources devoted to enforcing a drug policy based on drug prohibition

and criminal punishment for drug law offenses have grown massively. In fact, to look at a

very recent example of government expenditures on the war on drugs, the Executive

Office of the President requested $27.6 billion “to support 2015 National Drug Control

Strategy…efforts to reduce drug use and its consequences,” which represents an increase

of 4.7% over the previous year’s budget (Executive Office of the President). Given the

scale of the resources devoted to the war on drugs, it seems extremely prudent to

investigate the costs, benefits, consequences, and economic implications of continuing to

enforce these policies. A close analysis of these factors, among others, will demonstrate

that continuing with a policy of drug prohibition is not only extremely costly, but has also

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proven to be rather ineffective—an approach to drug control policy based in the

decriminalization of drugs, the treatment of addiction, and education about drug use and

abuse is not only lest costly, but also has the potential to be far more effective at reducing

drug use and its harmful consequences.

PART I: THE HISTORY OF THE WAR ON DRUGS

Even though President Nixon did not “declare war” on drugs until 1971, the

beginnings of the drug war can be traced back to the 1960s, when recreational drug use

rates began rising—this would prompt the Johnson administration to establish the Bureau

of Narcotics and Dangerous Drugs in 1968 (“Thirty Years…”). Drug legislation was

comprehensively expanded in October of 1970, with the aptly named Comprehensive

Drug Abuse Prevention and Control Act, a law that “[consolidated] previous drug

laws…[strengthened] law enforcement by allowing police to conduct ‘no-knock’

searches…[and included] the Controlled Substances Act, which [established] five

categories (‘schedules’) for regulating drugs based on their medicinal value and potential

for addiction” (“Thirty Years…”). With President Nixon’s declaration of a war on drugs

in 1971, the government’s stance on drug policy was made very clear. The government

was willing to devote vast amounts of time and resources in order to ensure that drug

laws were enforced.

The powers of the government to wage the war on drugs continued to grow

throughout the 1970’s. In January of 1972, the Office of Drug Abuse Law Enforcement

was founded, and this agency would eventually merge with the Bureau of Narcotics and

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Dangerous Drugs to form the Drug Enforcement Agency in July of 1973 (“Thirty

Years…”). In 1978, the Comprehensive Drug Abuse Prevention and Control Act was

amended to allow “law enforcement to seize all money and/or ‘other things of value

furnished or intended to be furnished by any person in exchange for a controlled

substance [and] all proceeds traceable to such an exchange” (“Thirty Years…”). This

power, known as asset forfeiture, has been used to seize “an estimated $12.6 billion,”

with the “growth rate during that time [averaging] +19.4% annually” (“Asset

Forfeiture”). By the 1980’s, the budget and powers of these agencies were growing

rapidly, and the rise of drug abuse violations associated with cocaine and crack in the

1980’s would be used to further increase the amount of resources devoted to fighting the

war on drugs.

1981 and 1982 saw the rise of the Medellin cartel, an “alliance between the Ochoa

family, Pablo Escobar, Carlos Lehder and Jose Gonzalo Rodriguez Gacha” (“Thirty

Years…”). This violent and ruthless cartel made billions of dollars from manufacturing

cocaine and smuggling it into the United States, and the organization was brought to the

forefront of the public’s awareness in March of 1982, when “The seizure of 3,906 pounds

of cocaine, valued at over $100 million wholesale, from a Miami International Airport

hangar permanently alters U.S. law enforcement’s approach towards the drug trade”

(“Thirty Years…”). In addition to the explosive growth of the illegal market for cocaine,

1985 saw crack “flourish in the New York region,” and the addictive and dangerous drug

“[devastated] inner city neighborhoods” (“Thirty Years…”). Between these two drugs,

and ongoing efforts combating other illicit drugs like marijuana and heroin, it was seen as

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necessary to once again bolster the resources devoted to fighting the war on drugs, and

the public and Congress was quick to support the increase in efforts.

October of 1986 saw the passage of The Anti-Drug Abuse Act. The bill would

“[appropriate] $1.7 billion to fight the drug crisis,” and would also introduce mandatory

minimum sentencing penalties, which levied minimum jail sentences for drug violations

(“Thirty Years…”). In 1989, yet another agency, the Office of National Drug Control

Policy, was founded under the Bush administration and, in 1990, President Bush

“[proposed] to add an additional $1.2 billion to the budget for the war on drugs, including

a 50% increase in military spending (“Thirty Years…”). This huge rise in expenditures

devoted to the war on drugs continued into the new millennium, with President Clinton

pledging “$1.3 billion in U.S. aid” to help Columbia’s efforts to fight drug traffickers

(“Thirty Years…”). Support for drug prohibition has been something that administrations

of both parties have been quick to offer, mostly in the form of massive budgets and

grants. The second Bush administration gave witness to “the rapid escalation of the

militarization of domestic drug law enforcement,” and increasingly large grants to police

departments resulted in “about 40,000 paramilitary-style SWAT raids on Americans

every year—mostly for nonviolent drug offenses, often misdemeanors” by the end of

Bush’s term (“A Brief History…”). The war on drugs has grown larger and larger each

year, and the Obama administration has shown no signs of reigning in efforts, if their

budget proposal for 2016 is any indicator of the direction the administration is going,

policy-wise. With such vast amounts of resources diverted towards enforcing the

government’s current policy of drug prohibition, it is not only prudent but also necessary

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to closely examine these costs, both in terms of expenditures and economic opportunity

costs.

PART II: THE ECONOMIC COSTS OF DRUG PROHIBITION

A) EXPENDITURES & OPPORTUNITY COSTS

To note once more, the Executive Office of the President requested $27.6 billion

“to support 2015 National Drug Control Strategy…efforts to reduce drug use and its

consequences,” which represents an increase of 4.7% over the previous year’s budget

(Executive Office of the President…). To compare this amount to previous years, only

five years ago, in 2010, the “U.S. federal government spent over $15 billion dollars…on

the War on Drugs,” which is an astounding level of spending “at a rate of about $500 per

second”—and this does not even take into consideration spending by state and local

governments, which accounts for another $25 billion dollars of taxpayer money (“Drug

War Clock”). These massively high levels of spending were exorbitant for 2010, and

expenditures have risen even further since. It is impossible to say with certainty, but it is

highly likely that expenditures will either plateau or continue to rise into the future. These

costs place a huge burden on taxpayers, not to mention the opportunity costs once one

takes into consideration all of the other projects on which those billions of dollars could

be spent. If the goal is to truly “reduce drug use and its consequences,” then why is that

money not instead used to fund education initiatives, or low-cost housing, or economic

development, or other programs that promote the welfare of citizens and reduce the

likelihood that they will resort to drug abuse or crime (Executive Office of the

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President)? Enforcing drug prohibition is costly, and imposing punishments on those who

are accused of drug abuse violations does nothing to really help treat the roots of their

addictions.

There can also be another type of opportunity cost associated with drug

prohibition, if one considers the arguments regarding the outright legalization, taxation,

and regulation of a relatively harmless drug: marijuana. Four states—Washington,

Oregon, Colorado, and Alaska—have actually legalized the recreational use of marijuana,

and the legalization and taxation of marijuana has the potential to be a massive source of

tax revenue for the government; for example, California, if it were to regulate and tax the

sale of cannabis, stands to raise an estimated $1.4 billion per year in tax revenue, and, if

marijuana were legalized, regulated, taxed, and sold nationwide, the estimated annual tax

revenues would total $46.7 billion (“Drug War Statistics”). Obviously, during a period of

massive national debt, a potential source of revenue this substantial is sorely missed and,

while it is unlikely that the legalization and regulation of recreational marijuana will

occur at a national level, as states like Alaska, Colorado, Oregon, and Washington start

consistently seeing those annual revenues from marijuana taxation, it will be interesting

to observe how other states react.

Marijuana is only one drug that falls under the government’s prohibition of illicit

drug use, yet it is particularly interesting given recent developments in state drug policies.

In addition to those four states who have legalized the recreational use of marijuana, there

are currently twenty states “that have decriminalized marijuana by eliminating criminal

penalties for simple possession of small amounts for personal use” (“Drug War

Statistics”). Marijuana remains prohibited at the federal level, and there are still many

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states where one can be arrested, even for nonviolent possession charges. Additionally,

those arrest figures represent another, massive type of opportunity cost for the nation—

the costs associated with so many people being arrested and charged for drug abuse

violations, and not just for marijuana.

B) COST OF ARRESTS AND IMPRISONMENT

In 2013, 1.5 million people were arrested in the United States on nonviolent drug

charges (“Drug War Statistics”). In 2009, “Law enforcement made more arrests for drug

abuse violations (an estimated 1.6 million arrests, or 13.0 percent of the total number of

arrests) than for any other offense”—statistically-speaking, the rate of arrest in 2009 was

so high that one could estimate that a person would have been “arrested for violating a

drug law every 19 seconds,” and, when looking at just arrests for marijuana, a person

would have been “arrested…every 30 seconds” (“Drug War Clock”). In fact, the arrest

figures for marijuana are significantly higher than for any other illicit drug—from 2001

to 2010, over seven million people were arrested for possession of marijuana (“Marijuana

Arrests…”).

The FBI’s Uniform Crime Reporting (UCR) Program tracks “the number of times

that persons are arrested” per year for 28 different offenses, including drug abuse

violations (“Uniform Crime Reports…”). For data gathered on arrests in the year 2012, a

total of 82.2% of all arrests relating to drug abuse violations were for possession, with the

remaining 17.8% of arrests for manufacturing or the sale of illegal drugs (“Uniform

Crime Reports…”). Of those 82% of arrests, over half were for possession of

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marijuana—42.4% of all arrests for drug abuse violations were for possession of

marijuana, which represents a higher percentage than “heroin or cocaine and their

derivatives” (16.5% of arrests), “synthetic or manufactured drugs” (4.5%), and “other

dangerous nonnarcotic drugs” (18.7%) combined (“Uniform Crime Reports…”). These

numbers reveal that a majority of those who are arrested for drug abuse violations are not

producers, manufacturers, or distributers of the drugs—they are oftentimes nonviolent

individuals arrested for possession of a small amount of an illicit drug, which is likely to

be marijuana. Is this current approach to enforcing the nation’s drug control policy truly

effective? If the goal of drug policy is to curb the use of drugs and their harmful effects,

then would going after the drug producers and dealers not be more effective than

punishing small-time users? The current drug policy of prohibition is a policy that is

designed to punish drug users, not treat them, and the way in which these policies are

currently being enforced targets low level drug abusers, while those that supply the drugs

rarely have their operations interrupted. Additionally, in terms of how these drug policies

are being enforced, there has been a huge secondary cost imposed upon minority groups

who are far more likely to be arrested for drug abuse violations.

The American Civil Liberties Union estimates that, while African Americans and

non-Hispanic white Americans use marijuana at roughly the same rate, African

Americans are “nearly four times more likely to be arrested for marijuana possession”

than white Americans (“Marijuana Arrests…”). This represents a massive cost to African

American communities, which are far more likely to have members of the community

arrested for marijuana possession than other communities. When a significant number of

the members of a community are arrested and served with mandatory minimum

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sentences, or are subjected to asset forfeiture proceedings which may take their car or

their home from them, it is hard for that community to truly see economic advancement.

Indeed, many people have attacked the nation’s current drug policies as discriminatory,

because of the disparate impact they have on minority communities. Whether or not

current drug policies are discriminatory, these arrest figures represent a clear and

substantial cost to the nation, and to minority communities particularly—both in terms of

the costs of the process of arresting, trying, convicting, and incarcerating drug abuse

violators, and the costs associated with lost productivity.

In 2012, the “Vera Institute of Justice released a study…that found the aggregate

cost of prisons in 2010 in the 40 states that participated was $39 billion,” with an “annual

average taxpayer cost” of $31,286 per inmate (Santora). So, using this amount, and

assuming that roughly 10,000 people have been “incarcerated for drug law offenses this

year,” that represents an annual cost of approximately $313 million, just to house drug

law violators (“Drug War Clock”). These costs only continue to skyrocket when one

begins taking into account the legal costs and resources that are devoted to arresting and

prosecuting these low-level drug users.

There is also another cost that is substantial, yet somewhat hidden. This cost

involves the loss in productivity that results from the arrest of so many individuals. When

there are so many nonviolent, non-dangerous people who have been arrested for drug law

offenses, the result is a massive loss of productivity. Not only are those individuals’

employment prospects severely limited by their arrest, which would hinder their ability to

increase their personal wealth, but society also suffers because it has lost a source of

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potentially valuable labor. This loss in productivity, and other secondary effects of drug

prohibition, will be discussed shortly.

PART III: A CASE STUDY OF MARIJUANA—HAS IT BEEN WORTH IT?

Before moving onto some of the more nuanced economic consequences of current

drug control prohibition, it may be beneficial to take a moment and examine whether or

not these billions of dollars in government expenditures and millions of arrests have

achieved the nation’s drug policies’ main objective of reducing drug use and its

consequences. Given all of these massive costs, especially concerning the continued

enforcement of the prohibition of a relatively harmless drug, marijuana, would one not

expect to see the usage rates for drug use decrease, at least by a small amount? Well, a

focus on marijuana—the possession, sale, and cultivation of which, according to the

FBI’s Uniform Crime Reporting Program, accounted for 48.3% of all arrests for drug

abuse violations in 2012—reveals that the massive expenditures that have been devoted

to enforcing the prohibition of marijuana have failed to curb usage rates.

A recent Gallup poll collected data on the marijuana usage rates of American

adults from 1969 to 2013. Those forty-four years saw a dramatic rise in the percentage of

American adults who responded affirmatively to the question, “Have you, yourself, ever

happened to try marijuana?” (Saad). In 1969, the percentage of respondents who

answered, “yes” was 4%, and eight years later, by 1977, that percentage had risen to 24%

(Saad). From the 1970’s until 2013, that percentage steadily rose to 38% of American

adults who admit to trying marijuana (Saad). Clearly, even with the billions of dollars

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that have been specifically devoted to enforcing the prohibition of marijuana, current

cannabis laws have failed to prevent a rise in drug use; in fact, the steepest rise in the

percentage of Americans who admitted to trying marijuana, which occurred from 1969 to

1977, interestingly coincides with beginning of the “war on drugs.”

There are clearly powerful market forces at work when it comes to the demand for

and supply of illegal drugs, and current policies attempt to combat those market forces

with the goal of curbing drug use and its consequences. Enforcing a prohibition of drugs

simply directs the demand for those drugs underground to illegal black markets, where

gangs and cartels are more than eager to meet that demand. Drug prohibition, which

treats drug use as a criminal justice problem to be dealt with by punishing drug users,

does not do enough to reduce the demand for drugs—when a person is addicted to a drug,

they may rationally choose to risk the costs associated with arrest in exchange for the

benefits that come from using the drug. If one of the main goals of drug control policy is

to reduce drug use and it consequences, then a more effective and less costly way to

achieve that goal would be to treat drug abuse as a health problem that needs to be

treated, rather than a criminal problem that merits punishment. Treating the root causes of

addiction has a much better chance of reducing the demand for drugs by changing how

the person rationally views the costs and benefits of drug use, rather than just simply

increasing the costs of drug use slightly. Not to mention, there are also numerous

secondary effects and other economic implications that have accompanied drug

prohibition, which have had far-reaching consequences that are not always easy to

identify immediately.

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PART IV: SECONDARY EFFECTS

When examining the current policy of drug prohibition, it is impossible not to

recognize the significant negative secondary effects that occur as a result of this policy.

Health care costs are one area in which excessive losses are occurring. Not only are there

medical care costs associated with drug problems, but also there are more severe health

consequences to worry about. There are many people dying young due to drug related

complications, perhaps as a result of the avoidance of seeking treatment for fear of legal

consequences (Poret). This plight is similar to that of alcohol prohibition in the 1920s, at

which time many people were becoming ill and dying from alcohol laced with other toxic

substances, but refrained from seeking medical care.

In addition to the health costs that occur under current policy, there are also social

costs. One aspect that often angers taxpayers is the sheer amount of wasted resources that

are spent on ineffective drug prevention programs. American citizens tend to be very

passionate about where their money is going, and naturally many people are unhappy

about the amount of their money being taken for programs that produce little to no

results. Aside from direct financial social costs, there is also the matter of productivity to

consider. The people who are being convicted of drug related offenses have the potential

to be labeled as felons. This label is incredibly difficult for potential employers to

overlook in job candidates and can therefore prevent otherwise good applicants from

being employed as productive members of society.

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Perhaps the most hotly contested issue that arises from drug policy is the crime

level that spurs from the drug market and subsequent drug policy. The drug market is

entirely composed of black markets that have no private property rights or enforcement

of contracts, leading to suppliers who resort to violence in order to keep up with

competition in the market. Violence among suppliers also tends to increase as prices rise.

This occurs because as price increases there are fewer buyers, causing the market to

become increasingly competitive, and therefore creating a situation in which dealers

resort to “turf wars” to defend their territory and maintain a solid customer base (Poret).

As addictive drugs become involved, the likelihood of drug related crimes occurring

increases, as well as the severity of the crimes (Doyle & Smith 5). This evidence suggests

that current drug policy is creating far too much crime with no end in sight as long as the

policy remains.

Another effect of the current War on Drugs is racial inequality. Disproportionate

numbers of minorities are steadily being arrested and incarcerated for drug offenses when

compared to non-minorities, and this is not because minorities are committing more

offenses (Solano 179). There are already substantial income and wealth gaps between

minorities and non-minorities, and these excessive crime charges are only causing

increases in this disparity. If imprisoned or labeled as a felon, people have a difficult time

being active members of society. While this is troubling for all people, it is especially

harmful to minority groups who already feel the sting of discriminatory legal practices.

There is quite a substantial amount of resources being devoted to the War on

Drugs, with a large percentage of government expenditures focusing on drug prohibition.

Money is constantly being poured into the War on Drugs, as it has been for the past few

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decades, with virtually no progress to show for it. These resources and money could be

better used on basically any other program that will use them more efficiently and have

some actual results. In 2002, total costs of the War on Drugs (health, social, crime,

“foregone production,” etc.) were estimated to come to about $180.9 billion (Poret). This

amount of money is too large to be wasted on a project that is having no effect on drug

usage.

In addition to these demand side effects there are some severe supply side

consequences of the current drug policy, the most prominent being those that occur in the

Latin American and Caribbean (LAC) region. It is within this region where much of the

U.S. illegal drug supply comes from. In 2010, U.S. government spent over $888 million

in an effort to dissuade illegal drug trafficking in the LAC (Francis and Mauser). Despite

the exorbitant amount of money being spent in this region, crime and violence rates have

soared astronomically. The U.S. government’s efforts to combat drug trafficking have

been rather ineffective, as these drug traffickers are continuously retaliating against their

efforts. Francis and Mauser offer a correlation between murder rates and drug prohibition

policies, and then mention that the LAC region has the highest murder rate in the world.

Based on the expenditures and the level of violence occurring in this region, it is apparent

that the supply side of U.S. Drug Policy is experiencing negative externalities just as the

demand side is.

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PART V: THE PROPOSITION OF A NEW POLICY

One possible solution to fixing all these negative externalities associated with

drug policy is the adoption of a policy of decriminalization. It is not that a policy of

decriminalization advocates for drug use; rather, it seeks to provide those with drug

problems a means to seek treatment, improve their lives, and therefore improve society as

a whole. The proposition of this policy comes not from the belief that drugs are good and

should be consumed, but from a belief that people in undesirable situations should be

able to seek and receive help instead of being penalized for their burdens. Under a policy

of decriminalization, criminal punishment for usage and possession would be eliminated.

Criminal punishments would be replaced with civil punishments, such as paying a fine.

However, the production and sales of drugs would remain punishable by law. The hope is

that under a decriminalization policy, people would feel able to seek help and

consequently the number of drug related deaths would reduce significantly. European

policies with more tolerance for drug use have resulted in less drug use, less addiction,

and decreased drug-related violence. In the 1970s, 12 U.S. state governments

implemented decriminalization policies for marijuana. When rates of marijuana usage

under these policies were compared with rates of usage under prohibition, there was little

to no impact on prevalence (Solano 180-181). By changing the drug policy into one that

refrains from labeling drug users as criminals, many of the negative effects that occur

under prohibition would be negated.

The current drug policy aims to reduce drug use, which is quite obviously not

working. The United States has approximately twice the number of drug experimenting

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youth when compared to countries with more lenient drug laws, including Portugal which

has recently adopted a policy of decriminalization. Drug use will never be able to be fully

eradicated as long as people maintain the desire to use drugs. No matter how many

restrictions or laws are set on drug usage, people will always find a way to obtain and use

drugs. Rather than attempting to minimize drug usage, a decriminalization policy instead

places an emphasis on minimizing societal harm related to drug market and maximizing

social welfare (Poret).

One often-overlooked solution of the high cost of drug policy is an improvement

in treatment for those with drug problems. While there are treatment options currently

available to drug users, not enough of the government budget is contributing to these. It is

especially difficult for those who are of lower economic status to obtain treatment. Many

people with drug problems will not have the treatment option become available to them

until they are arrested. This one problem could have very beneficial effects if changes

were made to improve this system.

There have been a number of studies showing the economic and social benefits of

replacing incarceration with treatment. One case study provided results that clients of the

TOPS treatment facility who had undergone methadone treatments had shown a “direct

relationship between drug abuse treatment and crime reduction.” This study showed a

$34.54 million reduction in combined tangible and intangible costs related to crime

(Rajkumar and French 311-312). Another set of studies provided similar results in which

community and counseling based treatment plans have been effective in significantly

reducing “drug use and drug-related criminal behavior.” These studies also provided

insight into the opportunity costs of incarceration versus treatment, where the monthly

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cost of incarceration averaged about $22,000 per month while methadone treatment cost

only $4000 per month on average (Chandler, Fletcher, and Volkow). Not only does

treatment reduce economic costs, but it has also been shown to be more effective in

reducing drug use as well as drug-related crimes. Moreover, avoiding incarceration also

allows those in treatment for drug abuse to avoid losses in career productivity and social

separation that occur during jail time. Based on these studies, it is evident that the

government should be expending more effort on the improvement of drug treatment.

When government creates drug policy it is assumed that society is composed

primarily of non-drug users, and therefore policy is directed toward the preferences of

these non-drug users. By implementing a decriminalization policy, utility levels of non-

drug users are increased as government solves the inefficiencies felt by society under

current policy. Drug users will also reap benefits from a policy of decriminalization as

incarceration and other criminal penalties for drug usage will no longer be an issue.

Increased economic utility will come from reduced taxes and social utility will also

improve with a reduction in negative secondary effects (Solano 178). Theoretically, all

members of society will benefit overall with increased utility.

PART VI. RATIONALE FOR GOVERNMENT INTERVENTION AND LIMITATIONS

If a drug-free society seized to exist, than drug use may be considered normal. It

is argued that drug demand is fueled by a desire for escape, implicitly a deficit model,

which is deficits in either the user or the context that motive drug use (Mugford). Here,

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the user may have poor coping skills and live in a high stress environment and the context

being, for example, lack of employment. When bureaucrats’ argue for prohibition type

models, they do not address the concept of elasticity. In fact, when addressing people

who are already addicted to such drugs, they will do anything and will pay any amount in

order to have the drug. Most drugs, especially marijuana because of its’ non-addictive

characteristics, are substitutable for one another to a considerable degree. What are

sought are not escape, but rather excitement and intoxication (Mugford). Since many

drugs and other activities are also exciting, they may substitute for on one another to a

degree as well as being combined in all sorts of manners (Mugford).

Attempted control is overt behavior by a human in the belief that the behavior

increases or decreases the probability of some subsequent condition and that the increase

or decrease is desirable (Mugford). Government attempts control for two reasons: first, it

forces recognition of the crucial distinction between successful and unsuccessful control.

Second, it underscores the purpose quality of human behavior. In a world of

consumption, successful control does not limit consumption, but increases it. Drug use

has powerful values in which self-indulgence, that of consumer cultures adopt, is not an

exception to the market functions of consumption. In terms of public health that sees

limitations of drug use as a way to reduce harm, market controls and regulatory agencies

are not successful policy control, and is in fact, the opposite. If limitation is indeed the

goal, it is thought that the market will produce rather excessive, optimal, or insufficient

outcomes on the topic of drug use (Mugford).

Government intervention in the consumption of drugs sees limitations as a

governmental responsibility for two reasons. First, consumption is seen as a general

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instrument of economic policy, where as periods of high interest rates are driven in an

attempt to dampen inflation or rectify the balance of payments. Second, the state may

seek to limit any area of consumption that is help either to imperil civil order or that

causes costs to the state itself or to business. Drug use may fit into either these types and

as a consequence it might be expect to see states intervening in the area of drug

consumption. In all, there may be expectations to see attempted government control

through measures of which take interest in market factors such as taxation, licensing

laws, age limits, and so forth. Other means of limitation may be thought cognitive control

such as educational campaigns and even direct legal control. Legal control is the most

prominently seen today with the heavy laws against the possession or distribution of

drugs. It is easy to see that state control is likely to conform to the condition of over-

limitation or excessive outcomes rather than insufficient when addressing the degrees of

limitation. Civil society has a large effect on the limitations of drug consumption. What

this means is it may be deemed socially unacceptable to practice a particular act. In

example, it is socially unacceptable to drink alcohol during work hours. This limitation

theory is more likely to create a more optimal level of limitation than any other means.

The factors that encourage drug consumption among illicit drug users is that the

market is illicit and for this reason prices tend to be very high. One factor portrays that

since these prices are rather high, the market itself reduces drug consumption. Second,

the normal state is a result of those ties and relationships we call civil society (Mugford).

If civil society is strengthened, it will provide an answer to limiting drugs. However,

problems occur that restrict the capacity of civil society to limit successfully the use of

drugs at the optimal level (Mugford). For instance, societies are diverse and internally

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differentiated. People live in societies where they also face internal conflicts such as the

differences in alcohol consumption among different occupational groups. When drugs are

under-limited, extrinsic harm tends to arise in the form of consumer exploitation and

excessive pressure to buy (Mugford). Adulteration of alcohol with impurities like

methanol is an example of under-limitation; a situation where proper manufacturing

standards are slighted to curtail production costs (Mugford). Inadequate limitations on

alcohol or tobacco advertising and sales, which lead to underage activities, are an

example of under-limitation (Mugford). Under-limitation seems to occur mostly in

respect to licit drugs rather than elicit (Mugford). Over-limitation, however, portrays

extrinsic harms from drug use, used great means such as completely cutting of drugs,

which is believed to be purposeful adulteration of profit by apparent increase in quantity,

the sharing of dirty equipment, secondary crime to support use when prices are high, and

so forth (Mugford). Such harm arises because limitation does not automatically produce

its intended consequences. Such consequences are the development of the black market,

growth in organized crime, the corruption of state officials, an increase in secondary

crimes, and a sharp increase in extrinsic direct health costs for users. Prohibition of drugs

keeps their price above their costs. If individuals are willing to pay more for a good than

it costs to produce, then it is inefficient to prohibit the production and consumption of

that good. An increase in consumption that occurs because of legalization is a benefit

rather than a cost of legalization. Commodities and drugs are not the same because of the

addiction that drugs inhabit. Illegal drugs have a significant characteristic that causes the

standard economic reasoning to fail (Miron). Decriminalization will lead to lower drug

prices and more use of drugs, which will generate additional externalities, some in which

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are positive such as crime rate will be decreased. There are approaches in which offset

the effect of possible lower drug prices such as equating social and private prices and

costs via subsidies and taxes (Taubman). Victims could be reimbursed for losses and low

birth weight children; addicted children born prematurely can be given extra attention.

Cocaine addicts could be given vouchers with each purchase of the drug. These vouchers

could be used to provide medical care or tutors to others. However, there are hypothetical

and could be very costly. The government could also decriminalize drug use while

stepping up antidrug education. The rationale for this behavior is that the government

wants people to make informed choices and they could provide more information at a

social cost less than the social costs arising from the use of the drug. Although the quality

and quantity of research available could be improved, it seems likely that the price

elasticity of demand is not zero (Taubman).

VII. EXPERIMENTAL AND COMPARATIVE DATA

A) AN EXPERIMENT

In 1980, a group of economic researchers at the Walter Reed Army Institute of

Research conducted a behavioral economics experiment on monkeys to assess abuse

liability, drug reinforce interactions, the framework for designing drug abuse

interventions, and to develop a strategy for formulating drug abuse policy. In short, the

study involved testing the daily consumption of food pellets as a function of fixed ratio

schedule, in log-log coordinates, along with other factors that involve pricing (Hursh).

Providing free food in this experiment is analogous to providing the community of drug

22

users a low-cost or free source of drugs through government sponsored clinics (Hursh).

The effects of such medicalization of drug use may be inferred from these results with

free food. Prices above about 50 responses per pellet, free food had the effect of reducing

earned consumption at any given price compared to baseline and reducing total revenues

(Hursh). Even if the market price is adjusted to the peak of the revenue function, total

revenues will drop dramatically with increases in free availability of drugs. This

reduction in expenditures and revenues would be expected to reduce drug-related crime,

reduce incentive to supply drugs, and reduce the incentive to engage in risky distribution

related crime (Hursh). However, with positive outcomes, there runs the risk of negative

as well. In this case, total food consumption was higher with free food available than

without, causing the subjects to overeat. By analogy, one might expect that in a condition

of both illicit drug availability and clinically dispensed free drugs, overall drug use will

increase. Thus, this approach to reducing illicit drug demand would best be combined

with aggressive and effective program of individual therapy to reduce overall level of

drug demand (Hursh). If the market price is optimally positioned at the point of

maximum revenue for the supplier, then price increase will lead to proportional decreased

in consumption and reductions in supplier revenues (Hursh). On the other hand, if the

market price is well within the inelastic range, then price increases will have a

proportionately smaller effect on consumption and will lead to an increase in user

expenditures and supplier revenues (Hursh).

B) PORTUGAL DRUG POLICY

23

In 2001, Portugal enacted one of the most extensive drug reforms in the world

when it decriminalized low-level possession and use of all illicit drugs in 2001 (Drug

Policy Alliance). Since decriminalization, there has been no major increase in drug use;

in fact, rates of illicit drug use have mostly remained flat. Rates of drug use in the past

year and in the past months have not changed significantly or have actually declined

since 2001 (Drug Policy Alliance). The amount spent on the war on drugs annually in the

U.S. has surpassed $51 billion. The number of people arrested in 2013 alone for

nonviolent drug charges were $1.5 million, and 693,482 for marijuana violations alone

(Drug Policy Alliance). Daily teenage marijuana usage has plummeted 75% since 1978

when the president and his top drug advisor at the time sought to decriminalize the drug.

Portugal’s drug use rates remain below the European average and much less than the U.S.

The number of people arrested on drug charges has declined by more than 60 percent

since 2001. Portugal’s Dissuasion Commission released a statement mentioning that the

criminal system is not best fitted to deal with situations dealing with drug use and the best

option should be to get people treatment. Between 1998 and 2011, the number of people

in drug treatment increased by more than 60 percent (Drug Policy Alliance). Treatment is

voluntary, making Portugal rates of uptake higher than most countries. The number of

HIV and AIDS diagnoses has fallen considerable (Drug Policy Alliance). A 2015 study

found that, since the adoption of the new Portuguese national drugs strategy, which paved

the way for decriminalization, the per capita social cost of drug misuse decreased by 18

percent (Drug Policy Alliance). It was also found that the cost-effectiveness ratios for

preventative measures and treatments are much alike. Thus, opportunities for efficient

investment in healthcare programs are almost equal for prevention and treatment. The

24

table below shows the cost-effectiveness

ratios for selected interventions of various

types of preventative measures1 (Joshua T.

Cohen). It is evident that the standard

approach in the U.S. is inefficient in terms

of cost when referring to this graph. There

are much more feasible approaches to a more structured policy for drug addiction and

imprisonment factors.

There are numerous arguments that demonstrate how and why the nation’s current

approach to drug control policy is failing—not only is there little evidence that drug

control efforts are achieving their goals of reducing the use of drugs and the harms

associated with them, but the enforcement of drug prohibition has imposed massive costs

on society in terms of expenditures on drug policy enforcement and drug law offense

prosecution, the loss in productivity to society, and the secondary effects of current

legislation (like violent black markets and disproportionate impact on minority

communities). Additionally, it is clear that the forces that dictate the supply and demand

for these illegal drugs are powerful market forces that government regulation and

intervention has little hope of restricting. Instead of continuing to pour billions and

billions of dollars into enforcing outdated policies, a new policy approach to drug abuse

should be adopted—one based on the treatment of addiction, education about drug use

and abuse, and the removal of mandatory minimum jail sentences. This new approach 1Figure 1 Data are from the Tufts–New England Medical Center Cost-Effectiveness Registry. QALY denotes quality-adjusted life-year

25

would not only be more compassionate than the current approach, but also stands to be

far less costly and see far more success in terms of reducing the harms associated with

drug abuse. The policy of drug decriminalization does not try to combat the market forces

that have already established such lucrative black markets in the same way that drug

prohibition attempts to do—a drug control policy centered around treatment and

education, rather than punishment and arrest, has the potential to shift the demand for

illegal drugs in a way that drug prohibition has never been able to.

26

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