Graduate School of Arts and Sciences

Readings in Economics Final Report Paper

An Inquiry on Drug De-Regulation By Juan J. Barrios Spring 2010

Abstract This paper serves both as a summary of the existing literature on drug legalization, in order to synthesize the background in which current regulation settings originated. Secondly, as a description of how economic rationale has shown increasing influence in the way this problem is addressed and why this trend should gather traction.

An Inquiry into Drug De-Regulation

"Its impossible to refute a system, which has never been explained. In such a manner of fighting in the dark, a man loses his blows in the air, and often places them where the enemy is not present."
David Hume

Part I. Introduction: Tabula Rasa and the Burden of Proof Drugs pose a serious health problem, theres little room for doubt on that assertion. There is however, a well-documented case for changes in the way policy makers address the problem. Before analyzing the current settings of the drug-prohibition debate, it is necessary to understand its evolution. Hence this paper begins by giving a brief historical review of the drug prohibition problem and then argues that, in order to tackle these issues, the adequate question for policy and lawmakers should morph from Should drugs be legal? to What are the normative arguments for criminalization?.

The right question demands a justification for existing policy. It asks whether we have a good reason for doing what we now do to drug users. The wrong question does not demand a justification for existing policy. It asks whether we have a good reason to stop doing what we now do to drug users. In a debate about existing policy, those who support the status quo gain an enormous advantage by beginning with the wrong question. This advantage is wholly unwarranted. When debates focus on the issue of whether drug use should be decriminalized, critics of our policy are forced to identify the benefits of changing it.i

Law and Regulation

Page 2

An Inquiry into Drug De-Regulation The pressing issue is not only to ask the appropriate question, but also to acknowledge that, in the light of policy failure, those who propose maintaining the current legal regime regarding drugs should -at the very least- concede a leveled playing field to the debate. The burden of proof shouldnt be placed solely on those who stand for change, but also on those who want to keep things as they are: justified failure is somewhat better than unjustified failure. The first condition for a rational and productive debate there has to be a point-by-point exposition of the reasoning behind criminalization; otherwise its impossible to decide whether or not to change policy rules. Unless all reasons to keep banning drugs are clearly put on the table, opponents of the current regime have nothing to respond to. Criminalization needs an argument, so decriminalization has something to rebut. Part II. A brief historical perspective Drug prohibition in the United States is now almost eighty years old. Federal law first prohibited cocaine, heroin and related drugs in 1914, and marijuana in 1937. Most literature reviews on the origin of prohibition seem to be in extremes sides of the debate spectrum, either supporting prohibition or (for the most part) strongly suggesting that the leitmotif of such regulation is based upon flawed and subjective views on the problem, and certainly not based upon market principles. Theres however some sort of consensus in accepting that cultural elements influenced these policies. This paper will not emphasize on the cultural and historical aspects of the current illicit drug regime, but rather gleams over a brief historical legislative recount and places more focus in analyzing the current costs of policies and possible alternatives. For a more comprehensive approach over the historical aspects refer to Courtwright (2001) and Nolan (2001)ii. Religion is the opiate of the masses, or vice versa?

When we look back to eighty years of missionary labor [in China] our brows must be covered in shame and our hearts filled with sorrow. After eighty years of missionary labor we are thankful for thirty two thousand communicants, after eighty years of commercial labor there are one hundred and fifty millions of the Chinese who are either personally smokers of the opium or sufferers from the opium vice of husband or wife, father or mother, or some relative Ah! We have given China something beside the
Law and Regulation Page 3

An Inquiry into Drug De-Regulation

gospel, something that is doing more harm that in a week than the united efforts of all our Christian missionaries are doing good in a year [T]he opium traffic is the sum of all villainies. It debauches more families than drink; it makes more slaves directly than the slave trade
In Protestant missionaries: Creators of the International War on Drugsiii, Jerry Mandel makes an extensive historical research about the origins of drug prohibition and the role that the Protestant Missionaries in China and the Philippines played. His main argument is that the drug wars did not emerge, as the mainstream historians paradigm would have it, as self-defense, societys response to a steady, long standing, continuously growing drug problem that finally required a firm response Rather, drug prohibition was an act of will, a sudden takeover, a power grab, with no new or growing problem to justify it and goes further to state that the shift between viewing drug use as irrelevant and as a crime happened from one day to the next. The event that really triggered the war on drugs was The Opium Exclusion Act of 1909, and while some historians prefer the Harrison Act of 1914, Mandel argues that the amount of media attention and law enforcement was already significantly higher after 1909:

Events after 1909 proved that you did not have to be a missionary to love the war on drugs, but if it were not for the protestant missionaries in Asia just before then, I cannot see where a war on drugs could come fromiv
To be sure the war on drugs didnt take long to form a vast bureaucracy (legislators, judges, prison guards, drug agencies, etc), but the US government didnt become an active force until after prohibition had been established. The main difference between the US and Great Britain was the absence of a vested interest in the opium trade, and while protestant missionaries had been urging for prohibition for decades the British always fought them off until the US emerged as a world power and the balance was tipped off. In the case of marijuana, from the 1600 to the 1890 domestic production of marijuana crops were actually encouraged by the government. In 1906 the Pure Law and Regulation Page 4

An Inquiry into Drug De-Regulation Food and Drug Act was passed, requiring labels for cannabis sold over the counter. But it was during that period that Mexican immigrants, especially after the Mexican revolution, introduced the recreational use of marijuana leaf causing a growing prejudice over marijuanas effect on the minds of users and crimes associated with it. This situation worsened during the great depression, and by 1931 marijuana was officially outlawed. And the creation of the Federal Bureau of Narcotics helped passing the Uniform State Narcotic Act, which successfully strengthened the stance against marijuana use. In 1937 the Marijuana Tax Act effectively criminalized marijuana, restricting possession to individuals who paid and excise tax for certain authorized medical and industrial uses. During the years of WWII the U.S department of Agriculture launched its Hemp for victory program, resulting in 375,000 acres of hemp harvested by 1943 to produce cordage, parachutes and other military products. In 1944 the La Guardia report found marijuana to be less dangerous by the New York Academy of Medicine, stating that the use of marijuana did not induce violence, insanity or sex crimes. The report also refuted that marijuana lead to other drugs. During the post war years, there was yet another legislative reversal for marijuana producers when the Boggs Act (1952) and the Narcotics Control Act (1956) were enacted, setting mandatory sentences for drugrelated offenses, including marijuana. During the 60s a changing political and cultural climate was reflected in more lenient attitudes towards marijuana. Use of the drug became widespread in the white upper middle class. Reports commissioned by Presidents Kennedy and Johnson found that marijuana use did not induce violence nor lead to use of heavier drugs. Policy towards marijuana began to involve considerations of treatment as well as criminal penalties. In 1968 the FBN merged with the Food a Drug Administration, creating the Federal Bureau of Narcotics and Dangerous Drugs. In 1972 the bipartisan Shafer Commission, appointed by President Nixon at the direction of Congress, considered laws regarding marijuana and determined that personal use of marijuana should be decriminalized. Nixon rejected the recommendation, but over the course of the 1970s, eleven states decriminalized marijuana and most others reduced their penalties, although the Drug Enforcement Agency (DEA) was created in 1973. This was after The Comprehensive Drug Abuse

Law and Regulation

Page 5

An Inquiry into Drug De-Regulation Prevention and Control Act categorized marijuana separately from other narcotics and eliminated mandatory federal sentences for possession of small amounts. In 1976 a nationwide movement emerged of conservative parents' groups lobbying for stricter regulation of marijuana and the prevention of drug use by teenagers. Some of these groups became quite powerful and, with the support of the DEA and the National Institute on Drug Abuse (NIDA), were instrumental in affecting public attitudes, which led to the 1980s War on Drugs. In 1986 President Reagan signed the Anti-Drug Abuse Act, instituting mandatory sentences for drug-related crimes. In conjunction with the Comprehensive Crime Control Act of 1984, the new law raised federal penalties for marijuana possession and dealing, basing the penalties on the amount of the drug involved. Possession of 100 marijuana plants received the same penalty as possession of 100 grams of heroin. A later amendment to the Anti-Drug Abuse Act established a "three strikes and you're out" policy, requiring life sentences for repeat drug offenders, and providing for the death penalty for "drug kingpins." In 1989 President George Bush declares a new War on Drugs in a nationally televised speech. In 1996 California voters passed Proposition 215 allowing for the sale and medical use of marijuana for patients with AIDS, cancer, and other serious and painful diseases. This law stands in tension with federal laws prohibiting possession of marijuana.

Law and Regulation

Page 6

An Inquiry into Drug De-Regulation Part III. The Economic analysis of Drug Prohibition: Is Cost Benefit possible? The drug prohibitions rationale can be summarized as follows: First, the cost of a drug, unlike the price of legal goods, comprises the associated risk of arrest, severe punishment, and social opprobrium. Most of these are incurred in during the transportation and delivery of the good, although theres also some risk involved during production. Second, the idea goes that without aggressive enforcement of prohibition, the high cost of drugs will decrease, causing supply & demand market forces to provoke a skyrocketing the level of drug abuse. This is especially worrisome in the case of highly addictive drugs like cocaine, and it wouldnt be unreasonable to assume that under legalization the number of cocaine abusers would hover near the levels of cigarettes and alcohol, at least. While Economic logic is sound, its also heavily reliant on a set of assumptions. If one tweaks these assumptions, the differences in forecasts can be sizeable. Borrowing from Cleveland (2006)v, the following opposing assumptions are summarized: Prohibitionists Illicit drugs are all extremely dangerous and addictive. Marijuana is a gateway drug. All use of illicit drugs, or underage use of licit drugs constitutes abuse. Alternative All drugs vary greatly in danger and addictiveness. Most marijuana users dont go on to try other drugs. Most use is not abuse. Drug users have the same categories as alcohol drinkers: problem, regular and casual users. Due to higher addictiveness, young drug users are liable to become hooked. Thus the number of abusers is proportional to availability. Theres causality between violent The number of abusers is proportional to the number of abusers is proportional to the number of emotionally troubled users. Most illicit drug users do not commit non-drug-related crimes. Although the majority of criminals have used drugs,

behavior/crime and drug use. Sometimes the earlier to support the latter.

Law and Regulation

Page 7

An Inquiry into Drug De-Regulation theres no causality. Cost and access are major determinants of drug abuse. Personal tastes and social norms are more important than cost and access.

The following table shows, people reporting ever using marijuana are almost 7 times more than those who have ever tried it. This 1/7 ratio is several times lower than for licit drugs. However, the information retrieved for illicit drugs might not be as reliable, as drug use is probably understated due to lack of confidence to admit engaging in illegal activities. % Of US population over age 12 that reports trying substances Substance Alcohol Tobacco Marijuana Cocaine Inhalants Stimulants Tranquilizers Sedatives Heroin Ever 83.1 73.1 40.4 14.4 9.7 9 8.2 4.2 1.6 Last Year 66.1 36.07 11 2.5 0.9 1.4 2.1 0.4 0.2 Last Month 51 30.4 6.2 0.9 0.3 0.5 0.8 0.2 0.1

Law and Regulation

Page 8

An Inquiry into Drug De-Regulation Costs and Benefits of Drug Prohibitionvi There are two kinds of errors of errors that one might make in the absence of a clear and unbiased Cost Benefit Analysis (CBA): 1. An erroneous rejection of current policy in favor of a proposed alternative. 2. An erroneous continuation of current policy in lieu of the alternative. It is commonly argued by prohibitionists that legalization would lead to an increase in the use of drugs: you should maintain policy A because if you dont, undesirable consequences will ensue. The challenge one faces when comparing policy B to policy A is to account for relative costs and benefits of each to be reach an optimal decision. From a purely economic perspective, drug prohibition is fundamentally wrong. It is not hard to think of more efficient and less intrusive mechanisms of controlling resulting externalities of drug usage. The fact of the matter is that current prohibition is constantly exposed as a sub-optimal policy, mainly because most visible costs of drug abuse derive from its prohibition rather than from its actual use. It is also necessary to explain the assumptions (about consumers behavior) made by either part of the debate, mainly the very nature of drug consumption and the corresponding human behavior. When the drug prohibition rationale was explained before, two sets of assumptions were tabulated; now a different but not unrelated set of assumptions will be exposed. Since most effects of drug prohibition are unambiguously undesirable, except from a possible reduction in drug consumption, then one must be clear from the get-go on the different perspectives one can take on drug diminished consumption, namely if it a cost or a benefit. This idea might strike the reader as an oxymoron, since drug consumption seems to be clearly a bad thing; however the rationale of this argument is exhaustively discussed in Becker, Murphy and Grossman (2004).

Law and Regulation

Page 9

An Inquiry into Drug De-Regulation Rational use of Illicit Drugs People consume drugs because it makes them better off. Prohibition induced reduction is a cost, not a benefit. All prohibition effects are negative. model Full evaluation of prohibition must include as a cost any reduction in drug use by individuals who use drugs responsibly. Consumption might still harm innocent 3rd parties. Externalities are just as present in this model. Policy should aim to a reduction of drug use. Some drugs appear to fit the rational Irrational use of Illicit Drugs Consumers are not rational. Consumers harm themselves because the fail to account for the negative externalities. People are not forward looking. All users have little self-control. Policy induced reduction in drug use benefit the users by preventing them from harming themselves. An increase in drug use is therefore a cost of legalization.

The following tables summarize the research of Professor Jeffrey Miron. In these tables, as in most CBAs several assumptions are made. Some of these assumptions are very strong and thus require to be taken with a grain of salt but according to the author the estimates are conservative. The implications of the results are that legalization would produce net benefits in the region of $130 Billion per year. This would require a reshuffling of government expenditure to account for negative externalities, but the results do not take the tax benefits of legalization as an extra benefit, as it is conceptualized as a transfer from drug users to general taxpayer. One of the most important caveats of this calculation is the use of Willingness to Pay (WTP) measures that are fairly unreliable in the case of crime reduction; it is assumed to be $100 per person (US population) per annum.

Law and Regulation

Page 10

An Inquiry into Drug De-Regulation Summary of Mironsvii findings in his CBA:

Drug Legalization CBA Benefits Elimination of enforcement expenditure Reduced crime and corruption Removed spread of AIDS Improved welfare to drug users Others Increased law respect Fewer restriction on civil liberties No redistribution to criminals Total Costs Increased externalities Increased Irrational Drug Use Total costs from legalization 12 12 24 89 3 Amount (US $ Billion) 35 30 15 6

The costs are calculated by assuming them equal to the externalities (as is usually done in the case of cigarettes), since those tend to be roughly the same magnitude as the underlying private costs of production, the total amount consists of the addition of US spending on illicit drugs estimates and the externalities derived from (upper bound) an increase of 50% in drug consumption to total 24 Billion (assuming irrational consumption increases by the same magnitude of $12B). For a more nuanced explanation of the assumptions and estimates, please refer to Miron (2004).

Law and Regulation

Page 11

An Inquiry into Drug De-Regulation The discount rate effects can be viewed in the following table, where ratios are estimated according to the Copenhagen Consensus guidelines of 3 and 6%:
Present value of Benefits Discount rate 3% Benefits Costs Net Benefits Ratio B/C 3.71 3.71 5625 1517 4108 6% 2957 798 2160

Note: Time Horizon 100 years

Becker, Murphy and Grossmann (2004) concentrate on both positive and normative effects of punishments that enforce laws to make production and consumption of particular goods illegal. After a very nuanced quantitative approach to modeling the drug market they found that fighting a war on drugs by legalizing drug use and taxing consumption may be more effective than continuing to prohibit the legal use of drugs: Optimal public expenditures on apprehension and conviction of illegal suppliers obviously depend on the extent of the difference between the social and private value of consumption of illegal goods, but they also depend crucially on the elasticity of demand for these goods. In particular, when demand is inelastic, it does not pay to enforce any prohibition unless the social value is negative and not merely less than the private value. We also compare outputs and prices when a good is legal and taxed with outputs and prices when the good is illegal. We show that a monetary tax on a legal good could cause a greater reduction in output and increase in price than would optimal enforcement, even recognizing that producers may want to go underground to try to avoid a monetary tax.

Law and Regulation

Page 12

An Inquiry into Drug De-Regulation If the private value of a good is larger than the social value, economic theory dictates that the most effective policy is to allow the good to be legal, and subsequently impose the right monetary tax to account for the difference between social and private value. The reason behind the persistence of suboptimal policies is explain to a great extent by the fact that policies affect different social and economic groups heterogeneously. In other words, if poor people have less political power, goods that they use wind up being illegal: the difficulty today lies in reversing policies that were put in place in a different time (as explained in Part I). Even if the increase in price when a good is illegal was the same as when the good is legal and subject to taxation, the consumption (income and substitution) effects would differ by income groups. Even if preferences didnt differed among income groups, if the income elasticity of a goods demand is less than one (various studies estimate income elasticity of marijuana and cocaine well below one), the poor would be more affected. Making goods illegal and punishing both consumers and suppliers are always more costly to the rich than to the poor, hence consumption tends to be decreased mostly in the upper percentiles of the income distribution.

Part IV. The Case for Selective Prohibition: Evidence. In 1995, the New York Times interviewed Dr. Jack Block, the director of a major ongoing longitudinal study of several hundred children in Oakland, California. Block Reported: When the teenagers reached 18 not all adolescent drug use boded a grim future. In this study, those teenagers who had experimented with drugs like marijuana during their teenage years compared both to those who used it heavily as to those who abstained- were the best adjusted. The teenagers who used drugs most frequently were the most alienated, had the poorest impulse control and the most emotional distress, while those who had never tried any drugs were the most anxious, emotionally constricted and socially inept Dr. Blocks conclusion was that [problem] drug use is a symptom of maladjustment,

Law and Regulation

Page 13

An Inquiry into Drug De-Regulation not a cause, and that it can be best understood in the context of the larger course of life.viii The following table is a modified version to Acute Toxicity: Meta-analysis of three thousand articles on comparative drug toxicity by Robert S. Gable. (Drugs & Society, Chapter 7):
Safety Ratio and Dependency Potential of Psychoactive Drugs Safety Ratio Narcotics Heroine Morphine Depresants Rohynol Ethanol Stimulants Caffeine Cocaine Ephedra Nicotine Hallucinogens LSD Cannabis Marijuana Dependency

6 15 30 10 100 15 140 50 1000? >1000

Very High High

Moderate Moderate

Moderate/Low Moderate/High Moderate High

Very Low

Moderate/Low

Safety Ratio= (Lethal dose/Effective dose)

The table in the previous page exposes how drugs differ greatly in their safety and potential addiction. By assuming that drug consumption is irrational, scientific evidence is being blatantly ignored. Even in the face of uncertainty from the possible negative externalities and increase in the number of irrational consumers, it is simply unrealistic to keep the war on drugs as it stands today. Theres compelling evidence, both economic and medical, that supports the view of those who argue for a change of regime.

Law and Regulation

Page 14

An Inquiry into Drug De-Regulation The following table is a modified version of Use, Abuse, Adverse health effects and addiction by Mary M. Cleveland. (Drugs & Society, Chapter 9A): Henningfield and Benowitz relative seriousness of drugs (1 worst, 6 least serious) Substan ce Heroin Alcohol Henningfield Cocaine Nicotine Marijua na Caffeine Heroin Alcohol Benowitz Cocaine Nicotine Marijua na Caffeine 4 5 5 6 3 5 5 6 5 4 22 26 6 5 2 3 1 3 5 6 2 1 3 4 6 5 2 1 4 4 6 5 2 3 4 1 4 6 2 3 1 6 27 27 10 11 13 18 Withdraw al 2 1 4 3 Reinforceme nt 2 3 1 4 Toleran ce 1 3 4 2 Dependen ce 2 4 3 1 Intoxicati on 2 1 3 5 Tot al 9 12 15 15

The above table shows the ranking carried out by to medical doctors from the National Institute of Drug Abuse and University of San Francisco. The total index for Marijuana is on par with that of Caffeine. Even cocaine seems to fare better than alcohol in these rankings.

Law and Regulation

Page 15

An Inquiry into Drug De-Regulation Part V. Drug violence: Cross-border supply and demand. Drug usage elasticity has been the focus of economic studies for decades. As mentioned before, elasticity plays an important role when carrying out ex-ante analyses that ponder a change in regulation, and its linkages with the demand side of this issue. However, while illegal drug markets correlation with violence is a straightforward proposition, causality isnt. There are three main sources for illegal drug markets contributing to increased violence: 1. Drug addicts that commit crimes to generate income. 2. Drug induced behavioral changes that decrease inhibitions, making addicts prone to criminal activity. 3. Drug producers profit driven competition causes extreme violence between suppliers. According to Cooter and Ullen (2008), federal expenses in the U.S during the 1980s went from $1 billion to $6.7 billion, and all levels of government by the mid 1990s were spending more than $15 billion per year. Much like the failed alcohol wars that in the 1920s failed, and once government legalized it again murder rates plummeted, its not far fletched to assume that the third and most dangeroussource of drug related violence would follow a similar path. The violence arising from competition between drug cartels is, in central a south America, a major cause of concern, due to a combination of weak institutions and lack of resources. In intermediary countries like Nicaragua, where drug production doesnt take place but its key geographic location makes it a drug smuggling highway, police and military forces attempt to obstruct the traffic aiming to maintain governability instead of being driven to fight Cartels to curtail consumption: the end-user and target market are not located there, and guerilla like warfare has produced increasing volumes of cocaine crackdowns while the consumption in the U.S and even more violent outbursts in the northern Mexican cities continues unabated.

Law and Regulation

Page 16

An Inquiry into Drug De-Regulation While not explicit, this research like most- has an information bias. Views are aimed at the decriminalization of the drugs from an Americanized perspective that disregards the geographic and dynamic elements of drug markets: as in any other economic activity, these markets possess producers, intermediaries and consumers. The Americanized perspective looks at the end of the supply chain. Cocaine trafficking for instance, begins with coca fields in Colombia, followed by a complex network of freight intermediaries along Central America, moves on to the Chiapas region in Mexico and its powerful drug Cartels before finally ending up in the hands of American retailers. There are different degrees of vertical integration among lines of distribution, to be sure, but the fact herein discussed is that changes in regulation in the U.S would have a major ripple effect in the beginning if the chain. Propensity to consume drugs, elasticity, social norms and values, and vulnerability are markedly different across the spectrum. The depth and quality of research of these differences is almost null, and should be fertile ground for future exploration. The following table shows a time series graph of drug related arrests in the US, and the upward trend in the number of adults arrested since the 1970s reinforces the 1st Part take on the spiraling effects of an unwinnable war. The US represents the biggest market for illegal drugs, and the ease of concealment of such substances, added to the huge profit margins that the key players are obtaining; make the current trade-offs in resource allocation mentioned in the CBA analysis, unacceptable.

Law and Regulation

Page 17

An Inquiry into Drug De-Regulation Part VI. Concluding Remarks Most of the participants in the drug debate have very polarized views; Economists are not exempt from this charge. However, as it has been shown in this paper, theres a vast amount of scientific literature on this subject, and at the very least, it is very difficult to defend to current legal standing of some drugs as an optimal policy. Some leading economists argue for a total legalization of drugs, applying sound economic logic to their statements. But in reality, both sides of the debate rely on heavy assumptions regarding human behavior. In the CBA exposed, the one of assumptions regarding the increase in the number of irrational drug users is that all drugs follow the same pattern as the well documented cigarette industry, but as show in the previous set of tables, drugs differ vastly on both their lethal dosage and in the level of control that consumers can harness over their consumption. I have struggled to find different ways of justifying a discretional legalization of some substances over others, and knowing that legalizing selectively is still as suboptimal policy, I still find a more prudent approach to legalize those substances that are proven to be less medically dangerous than currently legal drugs: namely marijuana. Even if this represents no more than a single step it will be one in the right direction. The problem is that beyond subjective views marijuana legalization alone will hardly make a dent in the bigger health and social problems that come from harder illicit drugs such as cocaine and heroin. The price of marijuana can never rise too high for too long, its widely available and easy to grow domestically. Halfway moves towards legalization would allow for the current dichotomy to remain unchanged, and the wasteful war on drugs would hardly subside or even be ameliorated. The advantages of legalization, as explained in part III revolve around the removal of black market incentives towards more dangerous drugs, encouraging consumers to use safer ones. It is very tempting to keep drawing arbitrary lines between legal and illegal drugs, but in the long run, and as long as theres a market for drugs, there will be supply. It is important to remember that psychoactive drugs are just chemical substances that alter brain functioning, in a mild or drastic manner, under a legal or illegal setting. Some use it for spiritual reasons, such as Native-Americans or Chinese Law and Regulation Page 18

An Inquiry into Drug De-Regulation cultures; some others use it recreationally as a way to alter ones consciousness (which includes illegal drug usage). Psychoactive drugs are also used for studying or augmenting the mind and as medication. All these different uses apply to the same family of substances, a group of man-made mind-altering chemicals that developed into a man-made war. I believe that in the end, market forces will take care of reducing the consumption of harder drugs. If Cocaine was as cheap as crack, users will immediately discriminate in favor of the former just as they do in favor of 86 proof alcohol instead of 120 proof alcohol, both are readily available and consumers know that the psychological effect they look for is achieved faster with the latter. At any rate, change is needed in the way this health problem is dealt with, and policymakers shouldnt turn their backs on scientific research and empirical evidence. Even if legalization starts in the form I propose, gradually and conservatively, positive results will encourage future, more comprehensive reform. As in with any goods, the market needs to be allowed to set the prices, and the social costs of not doing so are always going to be higher than the benefits. I would like to end quoting Schopenhauers The world as will and idea, in what I believe is a fitting phrase to take a step back, and try to concede a point to the philosophical problem of free will that transcends both the economic and the legal spheres: thus when I reach for a drink to quench my thirst, I am doing one thing which can be known in two ways. First, by ordinary sense of perception: you and I can both see my reaching and that it is prompted by thirst. But I, alone, am also in the position to experience this same motivated action inwardly in a more direct, less mediated way. I do not need to see my hand moving to know that I have acted. What am I aware of here? What distinguishes this inner awareness from the outward perception that is accessible to all?...

Law and Regulation

Page 19

An Inquiry into Drug De-Regulation Bibliography

Drug War Heresies: Learning from Other Vices, Times, and Places by Robert J. Macoun ; Peter Reuter. Source: Journal of Economic Literature, Vol. 41, No. 2 (Jun., 2003), pp. 540-544 Potential Tax Revenue from a Regulated Marijuana Market: A Meaningful Revenue Source Author(s): Michael R. Caputo and Brian J. Ostrom Source: American Journal of Economics and Sociology, Vol. 53, No. 4 (Oct., 1994), pp. 475-490 The Effect of Drug Prohibition on Drug Prices: Evidence from the Markets for Cocaine and Heroin Author(s): Jeffrey A. Miron Source: The Review of Economics and Statistics, Vol. 85, No. 3 (Aug., 2003), pp. 522-530

Bibliography (End Notes)

i

Review: The Criminalization of Drug Use. Douglas N. Husak.. Sociological Forum, Vol. 18, No. 3 (Sep., 2003), pp. 503-513

ii

Forces of Habit: Drugs and the Making of the Modern World. David T Courtwright Cambridge, MA: Harvard University Press, 2001. And also Reinventing Justice: The American Drug Court Movement. James L. Nolan Jr. Princeton, NJ: Princeton University Press, 2001.

iii
iv

Jefferson M. Fish (2005) Drugs and society: U.S public policy. Published by Rowman & Littlefield.Chapter 2.

Idem (pp. 37)

Fishers Drugs & Society (2006). Chapter 9. Economics of illegal Drug Markets. By Mary M. Cleveland.

vi

This part is based loosely on The Economic Theory of Illegal Goods: the Case of Drugs. Authors: Gary S. Becker, Kevin M. Murphy, and Michael Grossman. Source: NBER Working Paper No. 10976 (Dec., 2004).

vii

Solutions for the Worlds Biggest Problems, Costs and Benefits. Author: Bjorn Lomborg. Part IV, Chapter 16 Drugs By Jeffrey Miron (2007)
viii

Goleman 1995a, Shedler and Block 1990

Law and Regulation

Page 20