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Just how good would drug legalization be?
John Nye, Megan McArdle and I debated this question at a party today (Robin Hanson asked that we not ban robots, some people called for open borders, John and I explained the hierarchy of the economics profession to Will Wilkinson, and Bryan Caplan told me I have the uncanny ability to predict when people will die, among other highlights; sadly Alex had to leave early). We also asked some questions that are seldom asked.
Under one model, local gangs have a more or less fixed ability to terrorize a neighborhood. Even if everything is legalized, the gangs will continue local monopolies to maximize tribute, subject of course to constraints from other gangs and the police. In this model, legalizing drugs doesn't do much good. The local gang either shifts its monopoly to another area (milk and sugar, if need be), or de facto the gang's local monopoly on the drug trade continues. The gang busts you if you try to get your supply of crack cocaine from Merck. I call this the Rio de Janeiro model; no, drugs are not formally legal there but I don't think it would much matter if they were.
Under a second model, the ability of a local gang to monopolize and terrorize depends on the availability of drug trade revenue. Take away illegal drugs and the gang collapses -- Merck outcompetes them -- and the neighborhood revitalizes.
Libertarian arguments for legalization typically envision the second model rather than the first. I expect something in between. So I don't favor the War on Drugs but I believe the benefits from stopping that war are often exaggerated. Note that whether the first or second scenario holds may depend on just how easy drugs are to get legally.
One claim was that -- a'la Freakonomics -- current drug suppliers don't reap huge rents, so legalizing drugs won't much discourage them.
Another question from the evening is how much the abolition of zoning in New York City would boost gross national product. I heard some overoptimistic estimates on that one.
On a scale of 1 to 10, I give the party at least a nine.
Posted by Tyler Cowen on April 26, 2008 at 09:33 PM in Law | Permalink
Comments
There are some internet communities/message boards where not only the vast majority of participants favor legalization of drugs, but they pretty much compete to see who can paint a rosier picture of a world where drugs are legal. Drug legalization is a panacea for all society's problems, in the minds of some.
Posted by: Mike at Apr 26, 2008 9:41:32 PM
You make a good observation, that criminal elements will simply move on to other activities.
However, the legalization crowd has a better argument than "legalize drugs, end crime". They state, "legalize drugs, put real criminals in prison". It's not that legalization or decriminalization suddenly makes all other types of crime disappear, it's that removing the buying and use of drugs as a crime allows police to focus on crimes that involve people directly harming other people.
That said, I think you have a real difficulty with the current investment in the War on Drugs.
Posted by: Xmas at Apr 26, 2008 9:52:03 PM
While the organized criminal element will simply move on, it won't stop the junkies. Junkies produce their own crime, both as the criminals and the victims. Legalizing heroin or crack doesn't suddenly make someone able to hold down a job who couldn't before.
Posted by: mouse at Apr 26, 2008 9:57:43 PM
>The gang busts you if you try to get your supply of crack cocaine from Merck.
Are there any real-life cases where gangs take vengeance on you if you purchase goods or services from legal suppliers instead of the gang? (With the exception of, say, security.)
Posted by: Phil at Apr 26, 2008 9:59:08 PM
Yes, I don't know how gangs would be able to compete/enforce against your getting drugs at the supermarket or through the mail. There's simply no way for them to verify your sources if drugs were legal.
Businesses could always undercut gang prices through the miracle of mass production.
Posted by: jamie at Apr 26, 2008 10:12:12 PM
How does one get invited to these parties?
Posted by: Luke G. at Apr 26, 2008 10:34:16 PM
Tyler,
We have a real life example of what happens after you end drug prohibition. It is called the 21st Amendment to the constitution. Distrubtion crime plummeted after repeal of Prohibition because everyone has protection under the law.
Do various wine vintners or liquor store owners engage in drive by shootings or assassinations of their competition? If you believe in you variation #1 listed above, it is incumbent upon you to explain why there is no liquor distribution crime today (excepting tariff violations), let alone liquor distribution violent crime.
Posted by: happyjuggler0 at Apr 26, 2008 10:35:02 PM
I am from Rio de Janeiro, and I think there may be something to your argument.
But here's another aspect of the issue: a large (probably the largest) part of cocaine buyers are not the poor who live in the slums where the drug is sold. It's relativelly affluent people who live in neighbourhoods outside the control of gangs. These people could probably buy legal drugs in the supermarket with relative ease.
So, even if legalisation will not cause the gangs automatically to dissolve (in Rio, the main worry is, what kind of crime would they commit instead?), it would make a big dent on the gang's profits.
Another common objection against legalization in the local debate is: if we legalize before rich countries do, won't that cause a massive inflow of drug-addicted tourists? That's not exactly the crowd we've been trying to attract.
Posted by: Na Prática a Teoria é Outra at Apr 26, 2008 10:35:06 PM
The local gang either shifts its monopoly to another area (milk and sugar, if need be)
While I'm at it, what kind of economist thinks that an economic agent leaves that kind of money on the table, assuming they can make money coercively monopolizing milk and sugar?
If they aren't trying to make money off of milk and sugar now it seems silly to think they would be able to after the end of drug prohibition.
Posted by: happyjuggler0 at Apr 26, 2008 10:38:27 PM
In Russia during the 90's (somewhat less today, though only somewhat less) criminal gangs controlled most of the local markets where many people got most of their food (and also kiosks in the subways and under-passes in Moscow.) They did not literally control the milk and sugar trade as such, but they did control who could sell at such markets. If you didn't pay your "insurance" you'd find your kiosk or stand blown up. The Pushkin Square bombing in Moscow in '00 was almost certainly just one of the most dramatic of such events. Drugs _might_ become like that in the US if they were legalized. But, the big difference between the US and Russia in the 90's is that the US has a largely functional government. It's that sort of thing that makes me doubt the wisdom of more extreme libertarians and especially anarchists. What we'd get w/o a functional government is, it seems, government by gangs, a much worse option. Given that we do have a functional government (not ideal, of course, but functional) I'd expect us to be closer to the good than the bad side here, but only because we have a functional government.
Posted by: Matt at Apr 26, 2008 11:06:21 PM
Personally, I find the possibility to reduce the harm from drug use, and to reduce the number of people who start taking drugs, the most compelling argument, for legalization of drugs.
There is limited empirical evidence of how this would work. However MR readers may want to look at the positive impact of such a program in Zurich. An evaluation was published in The Lancet "Incidence of heroin use in Zurich, Switzerland: a treatment case register analysis" by Carlos Nordt and Rudolf Stohler. The authors found that the policy of making heroin use a medical problem rather than a crimial activity enabled them to implement a program that lowered incidence (of new users).
http://www.puk-west.unizh.ch/de/pdf/Nordt_Stohler_Lancet_2006.pdf
Posted by: April at Apr 26, 2008 11:39:48 PM
I echo Xmas's comments. Crime is not the only negative consequence of the drug war.
Posted by: Paul N at Apr 27, 2008 12:05:33 AM
World Bank economist Branko Milanovic makes a pretty compelling case that drug legalization would improve the governance of countries where drugs are a major export....so one could argue for drug legalization as a means to promote the economic development of, say, Afghanistan and Colombia.
http://yaleglobal.yale.edu/display.article?id=9920
And, this development strategy could be both more successful and cheaper than the current ones.
Posted by: April at Apr 27, 2008 12:08:50 AM
"I expect something in between."
This is the standard cop out statement. How far in between? Do you think one model more likely than the other and how much more likely and why?
I think you are right, but I think second model is closer to the truth. My biggest concern though is something Megan McArdle brought up. If this happens a lot of unskilled young people will suddenly be unemployed, which may increase the the crime rate in the short run. And it's not clear what happens in the long run.
"I believe the benefits from stopping that war are often exaggerated."
I do too and if legalization ever occurs and the promised utopia that libertarians fails to appear, then that will be a blow to other libertarian models. A realistic, fact based analysis is needed. The problem that people have when discussing this is the inability to grant reasonable argument of the other side. Libertarians downplay the damage that addiction causes. It is very real. However, the standard crack head that those in favor of prohibition brings out as evidence isn't representative of the typical drug user.
The questions that need to be addressed are:
1. What is the damage of drug use? How much is lost? How many can we expect to get so addicted they can no longer function in society?
2. What is the damage of prohibition? What is lost in terms of individual rights? Is this trade off worth it? How big of a role does prohibition itself play in the dangerousness of the drug world now?
Libertarians don't like to phrase the argument tackling 1. while prohibitionists don't like the phrasing of 2. But both are very important.
Posted by: Ken at Apr 27, 2008 12:10:52 AM
My impression from Freakonomics was that the soldiers earn less than minimum wage while the kingpin suppliers and distributors had huge margins.
My view is this. According to microeconomic game theory, less players in a market makes it more likely the players will collude to set monopoly pricing and less players in a market result from high barriers to entry.
To take The Wire, for example, in Season One Avon Barksdale and Proposition Joe came to an understanding that Avon had the west and Joe had the east. They both reaped huge profits because they agreed not to enter each other's markets and they killed whoever else tried to get on my turf. And with drugs illegalized, the upstart players can't exactly call the cops when they're threatened. If drugs are legalized, police could focus on those willing to use violence for market share and greatly reduce inner-city violence.
I still have issues though with the legalization of harder drugs. The price of drugs, both in dollars and in the threat of police protection, would greatly decrease and quantity sold would almost certainly increase. While the addicts wouldn't likely commit other crimes with drugs so cheap, more heroin addicts still isn't exactly a good thing.
Posted by: MW at Apr 27, 2008 12:19:38 AM
"While the addicts wouldn't likely commit other crimes with drugs so cheap, more heroin addicts still isn't exactly a good thing."
This is based on the assumption that if X heroin causes Y heroin addicts, then 2X heroin causes 2Y heroin addicts.
Most recent scientific evidence suggests that individuals are pre-disposed (or indisposed) to become addicted, based mostly on genetics, circumstances, access to mental healthcare—things other than the drug. So more drug addicts isn't a particularly likely outcome, even if there was a significant uptick in drug use (which is also unlikely).
That said, I expect there to be a migration of sorts from highly addictive drugs, like alcohol, to effectively non-addictive drugs, like marijuana. Keep in mind that most people are aware of consequences and choose drugs responsibly.
Posted by: Brandon at Apr 27, 2008 1:04:29 AM
"Keep in mind that most people are aware of consequences and choose drugs responsibly."
That is the most ridiculous statement I've ever heard someone make about drug use. Are you saying that people choose to do drugs responsibly, because that certainly isn't true. Or, are you saying that people who "do drugs" choose specific drugs responsibly, because I doubt that to be true, too. People don't make T- charts with the pros and cons of the drugs they're choosing between, they get high off of whatever is available to them.
Posted by: Brian at Apr 27, 2008 1:45:55 AM
An important thing to remember when consider the effect of legalisation on addiction is that if there is a legal prohibition on doing something, the people who do it will be more maladjusted than average.
In a legal drug market, the average drug user will be much more responsible than the average drug user now. In fact I'd be very surprised if there were a lot of people who are dysfunctional enough to destroy themselves with drugs, but can't or won't do so because drug use is illegal.
Posted by: James K at Apr 27, 2008 2:37:38 AM
"The price of drugs, both in dollars and in the threat of police protection, would greatly decrease and quantity sold would almost certainly increase. While the addicts wouldn't likely commit other crimes with drugs so cheap, more heroin addicts still isn't exactly a good thing."
MW, I agree with you about the increase of quantity sold, but I have some doubts about the increase of heroin(and other drugs) addicts.
I mean, some of the people that are already addict will consume more with lower prices, and maybe this explain better the increase of quantity sold than the increase of total addicts.
To simplify the discussion, let's imagine three group of people:
(1)- people that will not take any drugs, ever
(2)- people that are open to take some drugs to know how it works, but basically because they value the experience
(3)- people that will take a lot of drugs trough their lives
The first group wouldn't be affected by lower prices. The later group will be affected because they'll consume more drugs. The seconded group will be affected too, but how? Well, all depends of the difference between the price of actual illegal drugs if they were legalized.
Personally I believe that the number of addicts(in terms of percentage) would be quite the same that is today if we legalize this drugs.
Posted by: Renato Drumond at Apr 27, 2008 2:45:06 AM
If the British system is any indication, then a system where drugs such as heroin are prescribed is on the whole a positive thing for society. The illegal drug trade is kept depressed by the handout of drugs, and mushrooms locally when a clinic closes. Demand remains constant, regardless of where the drugs come from. However, prescription allow doctors to standardize dosage and strength of drugs, which minimizes harmful effects on addicts. This helps them hold down jobs and lead a somewhat normal life. When addicts turn to the illegal market they have to depend on their own wits and discipline, which is hard enough for an addict but complicated by factors such as irregularity of supply and the varying strength of street drugs. There's also the financial stress of having to pay through their noses for drugs. Needless to say addicts often can't handle it, lose their jobs and become increasingly marginalized. Some die from overdosing, others turn to crime with a major increase in burglaries and theft in the closed clinic's area. People might argue moral hazard in handing out drugs, but it does bring addicts under some supervision and also hands them a good chance at being productive tax-paying citizens instead of free-loading petty criminals.
Of course, all the above is probably far too radical an option for almost any country. However, decriminalizing possession of small quantities could crudely mimic the effect of prescriptions in that it could help set a practical upper limit for personal consumption. The purity of the drugs would probably also increase (more bang per allowed gram), which could make it easier for addicts to measure their intake. And lower costs due to decriminalization could in turn lead to less property crimes if less money is needed for funding an addiction.
Posted by: Twinings at Apr 27, 2008 4:31:40 AM
Are the police in Rio largely not corrupt? Prohibition is a big corrupting influence. Legalization may look different in two different countries (or cities!) depending on what the cops will allow.
Besides, you say drugs might as well be because they have so many problems. But the aren't legal! So, why isn't it the prohibition itself as the problem?
As I recall, Freakonomics point was that the dealers on the street didn't make much. The kingpins disdained violence (used by low-level thugs to impress middle management) and wanted things copacetic because they were doing alright with their local monopoly.
And, my two cents: though not a panacea, deprohibition would make a lot of other crimes disappear. Imagine if a gas station couldn't make a profit selling gas. Don't you think their candy and beef jerky business would dry up eventually, or at least their ability to monopolize those markets as well? There are logistics involved in the drug business, and those logistics can support other endeavors and the other endeavors likewise support the drug trade. It would take time, but I wonder how big organized crime is in Las Vegas after years without illegal gambling and prostitution to support their infrastructure.
Posted by: Andrew at Apr 27, 2008 5:04:38 AM
Second line should say:
Besides, you say drugs might as well be legal because they have so many problems. But they aren't legal! So, why isn't it the prohibition itself as the problem?
Posted by: Andrew at Apr 27, 2008 5:06:07 AM
"Libertarians downplay the damage that addiction causes."
I don't. I focus on the market. What types of technology would arise under a free market versus what arises under the current prohibitionist system?
Current prohibitionist: drugs advance along the lines of potency (smaller for easier concealment, e.g. crack, or ability to make it at home, e.g. meth), all other technologies subordinated - addiction is good because you want to extract money from crackheads as quickly as possible, and if they die who cares, your whole business is already illegal.
Legalization: Wouldn't legal drug manufacturers focus on pleasing the customer? Wouldn't customers want a new drug? One that won't make you sick. One that won't make you talk too much, or make your head feel 3 feet thick? In other words, wouldn't they fix the addiction problem?
The question in my mind is this. What comes after meth? If we keep our current prohibitions in place, what will be the next technological advance along the lines of more potent, concealable and addictive?
"...they get high off of whatever is available to them." Is this not because there are limited choices available to them? Is the lack of availability of better choices not partly due to prohibition?
Posted by: Andrew at Apr 27, 2008 5:18:56 AM
Non-state gangs/political factions hostile to the US finance their actions by controlling and/or taxing drug production. Think Taliban in Afghanistan, FARC in Columbia. The cost of the war on drugs includes some percentage of US military and homeland security budgets.
Can the US afford the war on drugs?
Steven Zoraster
Posted by: Steven Zoraster at Apr 27, 2008 9:23:47 AM
With drugs legal, the demand curve moves left, meaning a lower equilibrium amount of crime. This happened after Prohibition. Gang resources would shift to other markets, which while more lucrative/attractive than legal behavior, were less so than drugs.
Posted by: Larry at Apr 27, 2008 9:25:58 AM
