Thu, 16 Oct 2003

The War on Drugs

An economist would be irresponsible not to decry the war on drugs. There are a number of economic problems with the war on drugs. I'll go through them paragraph by paragraph.

Economists have known for some time that it's very difficult to stop willing buyers from buying from willing sellers. Whenever you try to do this, you end up with a black market. The trouble with a black market is that they are not efficient. Competition is reduced. Transaction costs increase. Advertising is impossible (one might as reasonably put the handcuffs on oneself).

We are told that illegal drugs are addictive, so that there are no drug users, only drug addicts. If this is true, then the demand for drugs will not be sensitive to price. We are also told that one of the reasons to make drug possession and use illegal is to drive up the price to discourage people from using drugs. Well duh, this conflicts with the very principle of price insensitivity. Either people are addicted and will pay whatever is necessary, or else people will reduce their drug use in the face of higher prices. Somebody's lying to us about drugs.

Prosecuting drug distribution causes the job to have two sources of profit: buying drugs at wholesale prices and selling them at retail prices (same as any other business), and accepting a business risk. The risk, of course, is that one's business will be destroyed by the county prosecutor. People have to be compensated for taking a risk, otherwise they won't take the risk. As a consequence, being a drug dealer is quite a profitable business. When a county prosecutor destroys one drug business, those profits seek other vendors. Jailing a drug dealer doesn't reduce the supply of drugs -- it just creates a job opening.

The courts will use the violence of the state to enforce private property rights. It's illegal to steal, rob, or burgle. If someone commits such a crime against you, you can go to the court and seek recourse. There are also civil offenses. If you have a contract with someone to supply a service, and they break that contract, you can sue them in the public courts. This only works for legal goods. Obviously, if you're selling something which is illegal, the courts will not enforce the law.

Fortunately, the violence of the state is used many more times in theory than in practice. Not so for drug dealers. Because they cannot use the proxy violence of the state to enforce their property rights, they must use actual violence. If they make an agreement with a drug wholesaler, and that agreement is broken, they have no choice but to use their guns to decide the issue.

Illegal drug use is what is called a "victimless crime". That doesn't mean that people are not victimized; merely that they do so to themselves. Society has no specific source of income to address victimless crimes. The victim has no incentive to pay to stop themselves because they chose that harm. Therefore, stopping victimless crimes must be paid for by a tax on the general public. If, on the other hand, drugs were legal, they could be taxed, and those taxes used to pay for those people who were truly addicted and needed help to stop.

For all these reasons, and others, economists won't like the war on drugs.

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