no third solution

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Legalize ALL Drugs

February 27th, 2009

Last week I had a discussion about the legalization of drugs with a friend, who remained convinced that the legalization of drugs would cause an instant and damaging spike in the incidence of use/abuse despite what’s generally accepted as a relatively inelastic demand curve (and despite centuries of evidence to the contrary with alcohol) and that this spike in use/abuse would lead to an increase in violent crimes. Strangely enough he that Big Leaguers should be allowed to Roid Rage whenever they want, but that ordinary people shouldn’t be able to do lines of coke in their own living rooms without the fear that some Stasi Jackboot might kick down their doors, kill their Labrador retrievers, and haul them off to prison. There are countless flaws I could expose in the abbreviated summary of his arguments (above), but I’d like to take a more substantive approach:

People who overestimate the malevolence of human nature are quick to conclude that, upon legalizing marijuana and cocaine, for example, all of these drug dealers would quickly find another lucrative, criminal enterprise in which to engage. I reject this hypothesis for (at least) two reasons which come immediately to mind, but first let’s put the picture in perspective.

  • In Holland, the cannabis trade alone is valued at $3 Billion[1]. It is so profitable only because competition is artificially hindered.
  • Globally, the illicit drug trade is something like $1 Trillion per year. Even the production of opiates in U.S. military occupied and embattled Afghanistan has been increasing![2].
  • The U.S. alone spends over $20 Billion per year on the “drug war”, about one-third of which is used to incarcerate 250,000+ non-violent offenders, at an average cost of about $70/day[3].

If that sounds expensive, don’t stop there. The true cost of the drug war is far greater.

The explicit cost of incarceration is $70/inmate/day. The true cost would correctly include whatever productivity wouldn’t have been sucked out of the economy by the 1 in 3 state employees currently working in a correctional capacity. I’ve previously estimated that the true cost of incarceration is not the $28,000 widely reported, but rather that the true economic cost is closer to $100,000 per inmate, per year[4].

That works out to be $25 Billion annually, or about the size of the GM Bailout, in the U.S. economy alone!

The profits accruing in the illicit drug trade are kept artificially high by prohibition.

Any restriction in supply (partial or complete prohibition, etc.) only serves to cement the profitability of foreign cartels and warlords. If the cartels aren’t making money, then neither are the footsoldiers and corner dealers. Take away the monopoly profits, or eliminate the institution which encourages monopoly profits, and few people will want to waste their time on these endeavors.

Although some people would have you believe that your average, run-of-the-mill drug dealer is truly a “bad” person, the fact of the matter is that for most of them, they believe (rightly or wrongly) that selling controlled substances is the most lucrative opportunity afforded to them, even given the extreme risks involved[5].

In a report funded by the Wisconsin Policy Research Institute, researchers concluded that “drug sales in poor neighborhoods are part of a growing informal economy which has expanded and innovatively organized in response to the loss of good jobs.” The report characterizes drug dealing as “fundamentally a lower class response [to the information economy] by men and women with little formal education and few formal skills,” and the report notes “If the jobs won’t be created by either the public or private sector, then poor people will have to create the jobs themselves.”

At least one factor contributing to all crime (not just pseudo-crimes like drug-dealing) is lack of employment opportunities. Unable to earn a licit living, they will find another way to put food on the table. Some of them work off the books fixing cars, painting houses, etc. Others sell dope.

The availability of alternative means of earning incomes is artificially reduced.

There is a chapter in Freakonomics that examines drug gangs[6]. If I recall accurately, the authors find that the average drug dealer only earns something like $3 an hour, so, much less than minimum wage across the country which make it illegal for a gas station owner to hire someone for $4 an hour. There are so many other restrictions on who can be hired, how they must be employed, what they must be paid, what actions people are “permitted” or “licensed” by the state to perform, and the costs of these restrictions are borne disproportionately by the poor and the unskilled (who often happen to be poor). Inner cities everywhere are blights: vacant houses and buildings that man is forbidden to occupy, state-housing projects in gross disrepair, open fields that no man may farm. Unable to find employment, some of these people will eventually decide to take the other $4/hour job, where they face a one-in-four chance of being killed over a few rocks of crack.

Almost all violent crime can be traced back to the drugs, not because of some inherent quality in the drug itself, and not because of some malevolent human element, rather because the monopoly profits earned by cartels in the drug trade are sufficient to compensate for the costs of war, and the illusion of these profits is sufficient to entice those willing to do the dirty work. In reality, if we eliminate all of the pseudo-crimes like smoking pot or selling cocaine, pretty much all that’s left are actual crimes, against person and/or property, crimes against which it is infinitely easier to protect oneself.

  1. Kucharz, Christel. Holland: Cannabis Trade at All-Time High.
  2. No Third Solution archives: Afghanistan and Prohibition. 20-September-2006.
  3. Drug War Facts: Economics.
  4. No Third Solution archives: Police State. 2-May-2008.
  5. Hagedorn, John M., Ph.D., The Business of Drug Dealing in Milwaukee (Milwaukee, WI: Wisconsin Policy Research Institute, 1998), p. 3. (via Drug War Facts: Economics).
  6. Levitt, S. and Dubner, S. Freakonomics, Chapter 3: Why Do Drug Dealers Still Live with Their Moms?

Comments

32 Comments

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  • Brad says on: February 28, 2009 at 10:42 pm

     

    You beat me to it. I started thinking about writing something while watching Marijuana Inc on CNBC. This guy was making $1MIL a month back in the 80s. Just a smart business man.

  • skyd171 says on: March 22, 2009 at 9:04 am

     

    ending the war on drugs would increase drug abuse and it would also increase other forms of crime, as drug dealers with little to no skills would simply move to other sectors of the informal economy. while you can theorize all you want, real life evidence has proven this is the case. how can you argue that it is better to have a rash of robberies and thefts than drug dealing gang members? both are crimes with the possibilities of violence. at least with drug related homicides, less innocents will be involved.

    when you talk about taking away drug dealers jobs, a whole can of worms is opened that is not even considered in your arguments: where the drug dealers will go now that they have lost their drugs. Evidence suggests that it isnt to drop off a job application at McDonalds.

    source:
    <a href=”http://www.wowessays.com/dbase/ad2/arn148.shtml” target=”_blank”>http://www.wowessays.com/dbase/ad2/arn148.shtml

    if you dont bother to read the cited paper, please dont bother to reply…

    • nothirdsolution says on: March 22, 2009 at 2:32 pm

       

      your link doesn't work.

      Also, it is 100% controverted by real world evidence: e.g., the end of alcohol prohibition.

      Furthermore, one generally assumes a rather inelastic demand for such substances (which is why they command high prices in the informal economy), so there's no reason to assume that abuse would skyrocket.

    • nothirdsolution says on: March 22, 2009 at 2:51 pm

       

      edit: your link has an extra /A tag, which is why it doesn't work. It's a 4,000+ word essay without a single paragraph break on a website that sells term papers to lazy students! Wonderful.

      It reads like it was "written" by MS Word's auto-summarize feature. Nearly every sentence begins with a transition or another author's name.

      Come back when you've read Mark Thornton's economics of prohibition (link is just an introduction; you should read the whole book).

      • skyd171 says on: March 22, 2009 at 11:48 pm

         

        If you cant refute any of the evidence presented in the link i posted then the argument is clearly over. That paper is one of the best pieces i've read on prohibition, in fact it is the reason i changed sides from decriminalization to prohibition. that paper soundly deconstructs all of the arguments youve made and more. and it presents real world evidence that shows that legalization is not the answer to solving the drug problem. if you read it, you'll see that none of your arguments can withstand the logic presented.

      • skyd171 says on: March 22, 2009 at 11:53 pm

         

        If you cant refute any of the evidence presented in the link i posted then the argument is clearly over. That paper is one of the best pieces i've read on prohibition, in fact it is the reason i changed sides from decriminalization to prohibition. that paper soundly deconstructs all of the arguments youve made and more. and it presents real world evidence that shows that legalization is not the answer to solving the drug problem. if you read it, you'll see that none of your arguments can withstand the logic presented.

        i used to make all the same arguments you have, and more, until i read about the actual facts on the ground. sorry, but your ideals of drug legalization dont hold true in the real world.

  • nothirdsolution says on: March 22, 2009 at 9:06 pm

     

    drug dealers with little to no skills would simply move to other sectors of the informal economy.

    Sure, some of the drug dealers would probably find some other criminal way to make money, and some of them wouldn't. Assuming that 100% of drug dealers would be inclined to commit actual crimes (i.e., against person or property) is, quite frankly, retarded.

    Currently, there are far more drug users who are pushed to criminality (i.e., robbery, etc) than there are drug dealers, and it's the users who are committing the crimes, predominately because they can't afford the drugs otherwise.

  • skyd171 says on: March 22, 2009 at 11:57 pm

     

    I said drug dealers with little or no skills; clearly not 100% of all drug dealers have little or no skills. Your concern is duly alleviated.

  • nothirdsolution says on: March 23, 2009 at 12:19 am

     

    Prohibition "was not given enough time to work"?

    And by "work", you mean: threatening perfectly reasonable and responsible people with violence? Remember that the vast majority of drug users are not violent criminals, thieves, murderers, etc.

    a quick look at the political power of the mafias of the 20s will show you that they basically ran cities and controlled the local police

    And as I've discussed here and elsewhere, this problem is endemic of prohibition. If the officials in government are not initially corrupt (an argument which is suspect), then the advent of a new prohibition will at the very least, tend to make those governments corruptible.

    • skyd171 says on: March 23, 2009 at 12:39 am

       

      "Remember that the vast majority of drug users are not violent criminals, thieves, murderers, etc. "

      "Currently, there are far more drug users who are pushed to criminality (i.e., robbery, etc) than there are drug dealers, and it's the users who are committing the crimes, predominately because they can't afford the drugs otherwise. "

      your use of hyperbole confuses the amount of magnitude you assign to these problems . but the main point is that prohibition in the 20s was much less weakly enforced by an extremely corrupt police force than exists now. you will be hard pressed to describe any drug dealing organization that has co-opted law enforcement and politics to the extent of the 20s 30s mafia under Al Capone et al. Corruption now is much less widespread and less visible and more punished. and as i stated, if cirrhosis rates decreased during prohibition, surely it can be posited that alcohol usage declined as well. since actual usage rates are not available, this is the best evidence we have, and it gives credence to the assertion that usage decreased.

      prohibition certainly reduced consumption of alcohol, the main point of dissenters is that it was ineffective at removing consumption. and as i stated, this was largely due to a corrupt and co-opted legal system, political system, and law enforcement agency to extents that do not exist by todays standards. It is time for the alcohol prohibition argument to be thrown out.

  • skyd171 says on: March 23, 2009 at 12:34 am

     

    "Remember that the vast majority of drug users are not violent criminals, thieves, murderers, etc. "

    "Currently, there are far more drug users who are pushed to criminality (i.e., robbery, etc) than there are drug dealers, and it's the users who are committing the crimes, predominately because they can't afford the drugs otherwise. "

    you should make up your mind. but the main point is that prohibition in the 20s was much less weakly enforced by an extremely corrupt police force than exists now. you will be hard pressed to describe any drug dealing organization that has co-opted law enforcement and politics to the extent of the 20s 30s mafia under Al Capone et al. Corruption now is much less widespread and less visible. and as i stated, if cirrhosis rates decreased during prohibition, surely it can be posited that alcohol usage declined as well. since actual usage rates are not available, this is the best evidence we have, and it gives credence to the assertion that usage decreased.

    prohibition certainly reduced consumption of alcohol, the main point of dissenters is that it was ineffective at removing consumption. and as i stated, this was largely due to a corrupt and co-opted legal system, political system, and law enforcement agency to extents that do not exist by todays standards. It is time for the alcohol prohibition argument to be thrown out.

  • nothirdsolution says on: March 23, 2009 at 12:34 am

     

    that paper soundly deconstructs all of the arguments youve made and more.

    In fact it does no such thing! Nowhere does it address the chief concern of my article, which was the argument that monopoly profits (a result of prohibition) contribute to corruption and violence in the drug trade. There's a reason that Pepsi or Phillip Morris or Diageo doesn't hire assassins to take out Federales along the Mexican border.

    As an aside, according to the essay you linked, the average heroin addict spends 10k/year on drugs – financed largely by crime. If he could spend only $1,000 a year on heroin, we can't reasonably expect an increase in habit-financing crime.

    your ideals of drug legalization dont hold true in the real world

    The only ideal at play here, is why reasonable, responsible, and non-violent people deserve to be threatened with violence for smoking a joint. The laws are always aimed at "the bad guys" but surely you'll admit that there are a lot of drug users who aren't bad people, who've never stolen to finance their habit etc.

    Quite honestly, I don't give a shit what we do with the bad people. I care about the other majority, the good people. Subjecting them to jackboot fascism on account of a small proportion of miscreants is a lot of things. But fair and just, it's not.

    • skyd171 says on: March 23, 2009 at 3:44 pm

       

      While we may cut the homicide rate by say 50% (an extremely generous assumption), economically motivated homicide would still exist and so would crime. it would simply shift to other sectors of the economy. Criminals are dynamically efficient and will always find ways to make a profit illegally. By taking away their drugs, we are not taking away their ability generate new means to kill or earn profits through illegal means.

    • skyd171 says on: March 23, 2009 at 3:45 pm

       

      Data also shows that if you legalize a drug, dealers may begin to more aggressively import their products, and push them harder via commercialization. Why would we risk enduring such scenarios? The track record of legalization is not solid enough to provide good reason to end prohibition. It is better to spend a mere 20 billion dollars or so yearly to fight the drug war, than to have our drug-related healthcare costs spike in a few years due to the increased usage that will occur, and has been shown to occur under legalization regimes. Our economy is already buckling under the high cost for healthcare, why would we risk adding to its financial stress, risking true collapse? If we want to preserve our healthcare system and economy, our society must be one that shuns the use of drugs and combats their use to the utmost extent.

    • skyd171 says on: March 23, 2009 at 3:48 pm

       

      to finalize, the number of externalities concommitant withlegalization render its implementation highly risky and uncontrollable. And consider that if we legalize with the stipulation of regulated use of drugs, there will still exist an underground black market for drugs that are not regulated. Thus the issue of drug dealers would still exist even in a legalized but regulated regime. There will still remain a market for underaged users, and there will still remain a market for users who require drugs of high potentcy that the government is not willing to provide. The black market will continue to live on in numerous ways, and so will criminal activity.

  • nothirdsolution says on: March 23, 2009 at 12:50 am

     

    your use of hyperbole confuses the amount of magnitude you assign to these problems

    Hyperbole? I think it's abundantly clear that there are many times more users than there are dealers, this isn't hyperbole, it's a reasonable deduction. Just to put things in perspective, what proportion of users do you estimate are violent criminals who routinely (or even occasionally) attack people, burglarize their homes, etc? Keep in mind that there are like 25 million recreational drug users in this country (used within the past 30 days) and about 40 million people who have used within the past year. [source]

  • nothirdsolution says on: March 23, 2009 at 12:57 am

     

    make up my mind about what? You're reading two sentences entirely out of context.

    1. A majority of drug users are not violent criminals.
    2. There are more drug users than drug dealers. The "users" are more likely to commit robberies/etc. than are the "dealers."

    prohibition was a failure

  • skyd171 says on: March 23, 2009 at 2:06 am

     

    "As an aside, according to the essay you linked, the average heroin addict spends 10k/year on drugs – financed largely by crime. If he could spend only $1,000 a year on heroin, we can't reasonably expect an increase in habit-financing crime."

    What is to say he would be limited to $1000 per year? if drugs are legalized, that person will be able to buy more heroin as the market price goes down. When he is out of money, he will go back to crime to finance the habit again. this cycle will not be ended by legalization.

    in addition, the article i posted showed proof that legalization experiments resulted in increased usage. The idea of elasticity, while being nice in a classroom setting, is not always applicable to real life scenarios. If usage is increased, then we can expect to see a rise in healthcare costs associated with drug abuse. It is a lose lose situation. the fact is, society would be better off if drugs didnt exist. regardless of what people say about marijuana, it does have side effects, and recent medical data show its impact on the brain, and short term memory, as well as its addictive potential. It decreases productivity among other things. people consider marijuana harmless even though one puff has been measured to have the same amount of tar as 4 puffs on a cigarette (filtered or not i cant remember).

    society as a whole has to pay because of healthcare costs associated with caring for junkies, not to mention cigarette and alcohol users.

    before you retort, i want to see hard evidence behind your statments.
    The only evidence you've had so far is rhetoric. PS spain and italy have legalized heroin and now have the highest usage rates around the world. officials are now starting to try to rollback the legalization laws.

    The example of spain and italy (only two places to legalize the drugs) is real world evidence that your idealistic vision did not pan out the times it was tried. Someone else had the same theory as you and it failed.

  • skyd171 says on: March 23, 2009 at 4:20 am

     

    Your statement that alcohol consumption was unaffected by prohibition is completely fallacious given that consumption data during the prohibition era is unavailable. Jeffrey Miron, a legalization proponent who cites Warburton, doesnt even have these data in his analysis of prohibition.

    However he does have data charts which depict, as I stated before, a decline in cirrhosis rates during the prohibition years. This decline remained steady during the prohibition years. rates of cirrhosis did not increase until after prohibition was repealed. It took them a long steady climb to return to previous levels. This is fact and it is demonstrated by the data.

    Ergo alcohol related deaths decreased and, by making an educated guess, we can infer that consumption must have decreased as well.

    finally, your argument that prohibition should be repealed because people still have access to drugs exposes itself to as much ridicule as an assertion that DUI laws should be repealed because there are still drunk drivers.

  • skyd171 says on: March 22, 2009 at 11:39 pm

     

    and after prohibition, the usage rates of alcohol skyrocketed did they not? now there are 1.5 million DUI arrests nationwide per annum. in addition, prohibition cant really be cited, it was not given enough time to work. a quick search on wikipedia turned up that many people criticized prohibition efforts as weak. The mafia was extremely powerful and easily co-opted law enforcement officers to look the other way from their speakeasies. studies show that cirrhosis deaths decreased towards the end of prohibition, suggesting that it could have had an effect. the mafiosos of the 1920s such as al capone had major political power, and the ability to bribe police officers to ensure their speakeasies would continue to run.

  • skyd171 says on: March 22, 2009 at 11:46 pm

     

    Prohibition is not compatible for a number of reasons. First, it was not given enough time to work. many people criticized prohibition efforts as weak and plagued with corruption. The mafia was extremely powerful and easily co-opted law enforcement officers to look the other way from their speakeasies. actual studies show that cirrhosis deaths decreased towards the end of prohibition, suggesting that it had an effect. a quick look at the political power of the mafias of the 20s will show you that they basically ran cities and controlled the local police. It is no wonder that prohibition would be considered a failure under such circumstances.

  • skyd171 says on: March 23, 2009 at 1:49 am

     

    i have already shown that your assertion that prohibition was a failure was widely a result of systemic corruption that plagued legal, political, and law enforcement officials. systemic corruption of the sort that existed during prohibition is in fact, history. now there are small groups of officers instead of entire police forces and they are being prosecuted for their transgressions. you ignore evidence that shows usage declined, e.g. decline in rates of cirrhosis. this is the only data available which we can use to measure the effect of prohibition, and it indeed shows a drop. so how can you say it was a failure if indicators show it was a success? add that to the fact that systemic law enforcement corruption existed in the 20s, making prohibition a priori less effective, and your argument suddenly seems weak.

    prohibition is much more strongly enforced today, with a more accountable police force.

    • nothirdsolution says on: March 23, 2009 at 3:12 am

       

      i have already shown that your assertion that prohibition was a failure was widely a result of systemic corruption

      which I counter with the argument that prohibition can cause corruption even where none exists ex ante.

      Per capita consumption of alcohol was largely unaffected by prohibition, according to data compiled in 1932 by Clark Warburton, a prohibition proponent. The homicide rate increased according to the census bureau. It's all there in Thornton's essay at CATO.

      prohibition is much more strongly enforced today, with a more accountable police force.

      Yes, it's so successfully enforced today that almost any high-school student in the country has easier access to marijuana than s/he does to alcohol, and prison inmates still have access to illegal narcotics! I'm not sure I'd call that a success.

      • skyd171 says on: March 23, 2009 at 3:34 pm

         

        Your statement that alcohol consumption was unaffected by prohibition is completely fallacious given that consumption data during the prohibition era is unavailable.

        Jeffrey Miron, a legalization proponent who cites Warburton, doesnt even have these data in his analysis of prohibition.

        However he does have data charts which depict, as I stated before, a decline in cirrhosis rates during the prohibition years. This decline remained steady during the prohibition years. rates of cirrhosis did not increase until after prohibition was repealed. It took them a long steady climb to return to previous levels. This is fact and it is demonstrated by the data.

        Ergo alcohol related deaths decreased and, by making an educated guess, we can infer that consumption must have decreased as well.

        frankly, your argument that prohibition should be repealed because people still have access to drugs exposes itself to as much ridicule as an assertion that DUI laws should be repealed because there are still drunk drivers.

  • skyd171 says on: March 23, 2009 at 3:41 pm

     

    If you say that the essay does not refute your point , then I will do so presently.
    Police do not fight the drug war to stop dealers from selling, they fight the drug war because people should not use drugs which harm their bodies; we all have to pay for their use through increased healthcare costs, social, and family costs. Society would be better off if we did not have the thousands of drug and alcohol induced deaths that occur each year. Legalizing drugs would not reduce these deaths, it would increase them by making it more acceptable to use drugs. This is evidenced by observational data. Your theories of inelasticity do not hold in real world examples. You can continue to cite a theory, but if it does not hold in real life, it is a poor theory. Your theory is poor.

  • skyd171 says on: March 23, 2009 at 3:43 pm

     

    Finally, many drug dealers are career criminals who have been arrested numerous times for different offenses. Just because you take away their drugs does not imply that crime will decrease. Criminals will simply move to other criminal activities which can earn them a profit, e.g.: your assertion that economic profit attracts market entry. Criminals will simply move to the next profitable activity in the criminal sector. Some of them may get "legal" jobs, but those who have criminal records and would not be hired. Many drug dealers have criminal records, and would not be hired. We can then infer that they would again rely on the informal sector to finance their livelihoods, since the formal economy will not accept them.

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