Lifestyle Economics

The drug laws don’t work, they just make things worse


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Last week the government chose to ignore its own advisors and decided not to downgrade ecstasy to a “class B” drug. This is despite substantial evidence that existing policies have failed. The era of strict prohibition has been marked by increasing drug use, the imprisonment of thousands of addicts, huge resources flowing to criminal organisations, widespread corruption and even wars that have been caused or funded by the revenue from narcotics, not to mention the billions that have been spent on futile attempts at enforcement.

The failure of prohibition is entirely predictable if you think about the underlying economics. The price of the prohibited substance is artificially inflated, creating a huge incentive for criminals to enter the market in order to satisfy demand. Attempts at policing tend to be futile, because if successful, they simply push up the price and therefore increase the supply incentive. The high price also incentivises users to engage in criminal activity in order to purchase the drug. Worse still, the supplier is outside the law, so the threat of violence will inevitably be one of the methods of enforcing contracts.

The huge resources in the hands of criminal suppliers inevitably result in the corruption of legal and financial systems. Drug suppliers need to be able to invest those resources and one way is by moving them into the “legitimate” economy (money laundering). The other is to invest them back into their business, for example by paying off officials and politicians.

The negative consequences of prohibition could be avoided if the government followed a simple rule – adults should be allowed to do what they want provided it does not directly harm anyone else, even if it is harmful to themselves, and, here is the difficult bit, even if the government does not approve. And even if this principle is not accepted, it should be clear by now, after 30 years of the “war on drugs”, that it is the prohibition of drugs, not their consumption, that causes most of the harm.

IEA Pensions Fellow

Nick Silver is the Pensions Fellow at the Institute of Economic Affairs. Nick is also Director of Callund Consulting Limited, where he provides public policy advice on social security, pensions and consultancy services to corporate clients in all continents, in respect of non-state employee benefits. From 1998-2005, Nick was Director of Silver Actuarial Services. Prior to this, he was Manager of PricewaterhouseCoopers in the actuarial Department, and worked as an Actuary from 1991 to 1997. Nick received an MSc in Public Financial Policy (Merit) in 2004 from the London School of Economics and Political Science (LSE). He also has a BSc Hon in Mathematics from Bristol University. He is a Fellow of the Institute of Actuaries.


42 thoughts on “The drug laws don’t work, they just make things worse”

  1. Posted 17/02/2009 at 13:07 | Permalink

    Nick, I am delighted to see that you are not just right about pensions but right about drugs as well.

    Legalise ‘em and tax ‘em is my motto, that would raise somewhere in the order of £10 billion in tax and shave twice as much off the cost of police, prisons, higher insurance premiums, emergency medical treatment etc etc.

    What’s not to like?

  2. Posted 17/02/2009 at 13:07 | Permalink

    Nick, I am delighted to see that you are not just right about pensions but right about drugs as well.

    Legalise ‘em and tax ‘em is my motto, that would raise somewhere in the order of £10 billion in tax and shave twice as much off the cost of police, prisons, higher insurance premiums, emergency medical treatment etc etc.

    What’s not to like?

  3. Posted 17/02/2009 at 23:33 | Permalink

    The trouble is that there are too many vested interests which have a stake in perpetuating the status quo. From government agencies which derive bigger budgets from the scaremongering to the owners of competing legalised drugs. But let’s face the reality. There will be people who suffer from this and proponents of legalisation have to be ready for this but at least they would be identifiable and treatable sufferers.

  4. Posted 17/02/2009 at 23:33 | Permalink

    The trouble is that there are too many vested interests which have a stake in perpetuating the status quo. From government agencies which derive bigger budgets from the scaremongering to the owners of competing legalised drugs. But let’s face the reality. There will be people who suffer from this and proponents of legalisation have to be ready for this but at least they would be identifiable and treatable sufferers.

  5. Posted 18/02/2009 at 09:35 | Permalink

    The drug issue brings to the fore what, for me at least, is the key issue with libertarianism: there is a tendency to focus on personal freedom, when what libertarianism ought to be about is personal responsibility. Therefore we should focus as much on the effects of drugs as on access to them. The focus of any discussion should be that people who do drugs are stupid and irresponsible.

  6. Posted 18/02/2009 at 09:35 | Permalink

    The drug issue brings to the fore what, for me at least, is the key issue with libertarianism: there is a tendency to focus on personal freedom, when what libertarianism ought to be about is personal responsibility. Therefore we should focus as much on the effects of drugs as on access to them. The focus of any discussion should be that people who do drugs are stupid and irresponsible.

  7. Posted 18/02/2009 at 12:16 | Permalink

    Dear Peter, please read my open letter of 1990 (click link).

  8. Posted 18/02/2009 at 12:16 | Permalink

    Dear Peter, please read my open letter of 1990 (click link).

  9. Posted 18/02/2009 at 15:44 | Permalink

    The choice to take drugs or not is for individuals to make, just as it is for those who wish to drink or to smoke. Each person should have the ability to make that choice but should also bear the costs of those choices and not inflict them on the rest of us in the form of general charges or taxation. I believe that we should be able to do what we wish provided we cause no harm to others.

  10. Posted 18/02/2009 at 15:44 | Permalink

    The choice to take drugs or not is for individuals to make, just as it is for those who wish to drink or to smoke. Each person should have the ability to make that choice but should also bear the costs of those choices and not inflict them on the rest of us in the form of general charges or taxation. I believe that we should be able to do what we wish provided we cause no harm to others.

  11. Posted 18/02/2009 at 15:53 | Permalink

    What happens when alcohol is taxed and its price driven up? Well, people switch to cheaper alcoholic drinks of inferior quality, which have more harmful health effects. This applies a fortiori to drug prohibition, which multiplies the price of drugs. If drugs were legal, we would get competition in quality, and after a while, doing drugs could be fairly safe.

  12. Posted 18/02/2009 at 15:53 | Permalink

    What happens when alcohol is taxed and its price driven up? Well, people switch to cheaper alcoholic drinks of inferior quality, which have more harmful health effects. This applies a fortiori to drug prohibition, which multiplies the price of drugs. If drugs were legal, we would get competition in quality, and after a while, doing drugs could be fairly safe.

  13. Posted 18/02/2009 at 20:54 | Permalink

    If drugs were legal people would still die from them and dead people are not free to choose anything. We assume that people are free to choose because they are rational and capable. But becoming addicted to something harmful is not rational, rather it is stupid and irresponsible, and that it what the debate ought to be about. I don’t see this as an anti-libertarian argument, but rather the basis of what libertarianism is about – that we are responsible for ourselves and for how we treat others and should be judged accordingly.

  14. Posted 18/02/2009 at 20:54 | Permalink

    If drugs were legal people would still die from them and dead people are not free to choose anything. We assume that people are free to choose because they are rational and capable. But becoming addicted to something harmful is not rational, rather it is stupid and irresponsible, and that it what the debate ought to be about. I don’t see this as an anti-libertarian argument, but rather the basis of what libertarianism is about – that we are responsible for ourselves and for how we treat others and should be judged accordingly.

  15. Posted 18/02/2009 at 21:52 | Permalink

    Well we can judge this pragmatically or on libertarian grounds, or on moral grounds if we wish. The post was about pragmatic issues. Even somebody who judged the issue on moral grounds would have to make a judgement about whether prohibition actually was unenforcable and did more harm than good. Nick’s point is that prohibition appears to do substantial harm (and leads to criminality). An additional harm is that prohibition provides incentives to peddle drugs in their most addictive forms – in order to hook the addict (who is invariably hooked to a particular supplier). In the absence of prohibition, these incentives would be weaker.

  16. Posted 18/02/2009 at 21:52 | Permalink

    Well we can judge this pragmatically or on libertarian grounds, or on moral grounds if we wish. The post was about pragmatic issues. Even somebody who judged the issue on moral grounds would have to make a judgement about whether prohibition actually was unenforcable and did more harm than good. Nick’s point is that prohibition appears to do substantial harm (and leads to criminality). An additional harm is that prohibition provides incentives to peddle drugs in their most addictive forms – in order to hook the addict (who is invariably hooked to a particular supplier). In the absence of prohibition, these incentives would be weaker.

  17. Posted 19/02/2009 at 16:47 | Permalink

    So what’s your conclusion, Peter? Are you saying that drugs should be prohibited, or that they should be legal but their consumers ostracised?

    “If drugs were legal people would still die from them”
    Keith Richards may be still alive because he was able to afford drugs in the purest form. In a legal drug market, the consumption pattern of the average drug user would move closer to what is now only attainable to rock stars.
    Richards might not make it to the cover page of “Men’s Health”, but he can still do concerts after years of drug use.

  18. Posted 19/02/2009 at 16:47 | Permalink

    So what’s your conclusion, Peter? Are you saying that drugs should be prohibited, or that they should be legal but their consumers ostracised?

    “If drugs were legal people would still die from them”
    Keith Richards may be still alive because he was able to afford drugs in the purest form. In a legal drug market, the consumption pattern of the average drug user would move closer to what is now only attainable to rock stars.
    Richards might not make it to the cover page of “Men’s Health”, but he can still do concerts after years of drug use.

  19. Posted 20/02/2009 at 09:08 | Permalink

    Kris, why choose Richards and not Joplin, Garland, Monroe, Cobain, Jones, Hendrix or any other? But still my basic question is why do you want to, or be seen to, encouraging people to become addicted to destructive chemicals? So, no, I do not believe drugs should be legalised.

    In answer to Philip – one of the purposes of the criminal law is to criminalise those forms of behaviour we see as objectionable. Oh, were it not for Original Sin …!

  20. Posted 20/02/2009 at 09:08 | Permalink

    Kris, why choose Richards and not Joplin, Garland, Monroe, Cobain, Jones, Hendrix or any other? But still my basic question is why do you want to, or be seen to, encouraging people to become addicted to destructive chemicals? So, no, I do not believe drugs should be legalised.

    In answer to Philip – one of the purposes of the criminal law is to criminalise those forms of behaviour we see as objectionable. Oh, were it not for Original Sin …!

  21. Posted 20/02/2009 at 11:40 | Permalink

    “why do you want to, or be seen to, encouraging people to become addicted to destructive chemicals”
    I was talking about creating an incentive system in which these chemicals would become less destructive. I haven’t said a word about what I personally think about drug consumption.

    “one of the purposes of the criminal law is to criminalise those forms of behaviour we see as objectionable”
    I know a lot of people who see the spreading of liberal and libertarian ideas as “objectionable” behaviour. (Some of them would probably ban it if they could.)

  22. Posted 20/02/2009 at 11:40 | Permalink

    “why do you want to, or be seen to, encouraging people to become addicted to destructive chemicals”
    I was talking about creating an incentive system in which these chemicals would become less destructive. I haven’t said a word about what I personally think about drug consumption.

    “one of the purposes of the criminal law is to criminalise those forms of behaviour we see as objectionable”
    I know a lot of people who see the spreading of liberal and libertarian ideas as “objectionable” behaviour. (Some of them would probably ban it if they could.)

  23. Posted 20/02/2009 at 13:13 | Permalink

    Because people differ on what is objectionable is not sufficient grounds for saying nothing should ever be banned.

  24. Posted 20/02/2009 at 13:13 | Permalink

    Because people differ on what is objectionable is not sufficient grounds for saying nothing should ever be banned.

  25. Posted 20/02/2009 at 13:29 | Permalink

    Peter, taking the original sin argument, I can see this from a non-libertarian perspective. But, if we are going to use a religious phraseology (and ignoring libertarian arguments) then we must ask whether the prohibition promotes the common good. Sometimes it might, on other occasions it might not. Of course, removing the prohibition is a big risk but I do not get a strong sense that the prohibition is doing the job people would like it to do.

  26. Posted 20/02/2009 at 13:29 | Permalink

    Peter, taking the original sin argument, I can see this from a non-libertarian perspective. But, if we are going to use a religious phraseology (and ignoring libertarian arguments) then we must ask whether the prohibition promotes the common good. Sometimes it might, on other occasions it might not. Of course, removing the prohibition is a big risk but I do not get a strong sense that the prohibition is doing the job people would like it to do.

  27. Posted 20/02/2009 at 14:16 | Permalink

    IIRC Joplin, Garland, Monroe and Hendrix died through misusing legal drugs (alcohol and downers). Ecstasy, meanwhile, is mostly harmless – unless you fall victim to rabid propaganda and drink 20 litres of water…

  28. Posted 20/02/2009 at 14:16 | Permalink

    IIRC Joplin, Garland, Monroe and Hendrix died through misusing legal drugs (alcohol and downers). Ecstasy, meanwhile, is mostly harmless – unless you fall victim to rabid propaganda and drink 20 litres of water…

  29. Posted 20/02/2009 at 14:33 | Permalink

    Who’s saying that? Nick proposed a clear dividing line:
    “Adults should be allowed to do what they want provided it does not directly harm anyone else, even if it is harmful to themselves.”

  30. Posted 20/02/2009 at 14:33 | Permalink

    Who’s saying that? Nick proposed a clear dividing line:
    “Adults should be allowed to do what they want provided it does not directly harm anyone else, even if it is harmful to themselves.”

  31. Posted 22/02/2009 at 22:14 | Permalink

    Peter, from this debate, your view on libertarianism is that people can do whatever they like as long as its not “stupid and irresponsible” How is this libertarianism? I go rock climbing, which is also dangerous and addictive, is this “stupid and irresponsible” and therefore should be banned? Why not ban cigarettes, alcohol and unprotected sex? In the UK, a few million people use illegal drugs, who are you or the government to dictate to them that this is “stupid and irresponsible” and that they shouldn’t do it?

  32. Posted 22/02/2009 at 22:14 | Permalink

    Peter, from this debate, your view on libertarianism is that people can do whatever they like as long as its not “stupid and irresponsible” How is this libertarianism? I go rock climbing, which is also dangerous and addictive, is this “stupid and irresponsible” and therefore should be banned? Why not ban cigarettes, alcohol and unprotected sex? In the UK, a few million people use illegal drugs, who are you or the government to dictate to them that this is “stupid and irresponsible” and that they shouldn’t do it?

  33. Posted 23/02/2009 at 08:15 | Permalink

    Nick, my argument is that the basis of libertarianism should be personal responsibility: that we focus on the consequences for others and ourselves on what we do. We are responsible for what we do and should be prepared to accept the consequences. Some acts such as drug taking will always affect others and ourselves adversely; rock climbing might do this, but not necessarily. Any decision, in an ideal world, should be left to the individual concerned. In a non-ideal world we should be careful about what we legalise.

    Incidentally your suggestion that I have no right to ‘dictate’ to others rather negates the notion of libertarianism: why can’t I say what I like?

  34. Posted 23/02/2009 at 08:15 | Permalink

    Nick, my argument is that the basis of libertarianism should be personal responsibility: that we focus on the consequences for others and ourselves on what we do. We are responsible for what we do and should be prepared to accept the consequences. Some acts such as drug taking will always affect others and ourselves adversely; rock climbing might do this, but not necessarily. Any decision, in an ideal world, should be left to the individual concerned. In a non-ideal world we should be careful about what we legalise.

    Incidentally your suggestion that I have no right to ‘dictate’ to others rather negates the notion of libertarianism: why can’t I say what I like?

  35. Posted 23/02/2009 at 12:44 | Permalink

    It’s important to remember that in a free-market/libertarian society private owners would have the right to prohibit drugs on their own property, which could include rather large areas. Accordingly those who were anti-drugs could choose to live in such ‘drug-free’ areas, though owners and residents would have to bear any associated costs (e.g. enforcement). At the same time owners with different views could tolerate drugs on their property. They too would have to bear the associated costs (e.g. anti-social behaviour etc.). A market process would be set in train that would reflect and coordinate different preferences. State prohibition, with its one-size-fits-all approach, prevents this.

  36. Posted 23/02/2009 at 12:44 | Permalink

    It’s important to remember that in a free-market/libertarian society private owners would have the right to prohibit drugs on their own property, which could include rather large areas. Accordingly those who were anti-drugs could choose to live in such ‘drug-free’ areas, though owners and residents would have to bear any associated costs (e.g. enforcement). At the same time owners with different views could tolerate drugs on their property. They too would have to bear the associated costs (e.g. anti-social behaviour etc.). A market process would be set in train that would reflect and coordinate different preferences. State prohibition, with its one-size-fits-all approach, prevents this.

  37. Posted 23/02/2009 at 14:20 | Permalink

    This one runs and runs doesn’t it. Also pertinent to Richard’s point is that the relevant owning authorities (private or state) could ban drugs on streets and also (a subject close to Peter’s heart) so-called social landlords (housing associations etc.) could ban drug use in their properties. Indeed, there could be much greater use of such contracts to control behaviour in rented accommodation. The only problem is that the civil penalties that could be used are perhaps too limited.

  38. Posted 23/02/2009 at 14:20 | Permalink

    This one runs and runs doesn’t it. Also pertinent to Richard’s point is that the relevant owning authorities (private or state) could ban drugs on streets and also (a subject close to Peter’s heart) so-called social landlords (housing associations etc.) could ban drug use in their properties. Indeed, there could be much greater use of such contracts to control behaviour in rented accommodation. The only problem is that the civil penalties that could be used are perhaps too limited.

  39. Posted 23/02/2009 at 19:43 | Permalink

    Well said Nick.

    Of course, nearly +all+ the problems associated with recreational drug use are actually the result of prohibiton itself.

    Unfortunately the current situation is rather profitable to politicians and those involved in the drug prohibition industry. Politicians because the subject is useful to stir up fear among voters; the prohibion industry because they directly benefit from never-ending drug wars.

    The saddest thing is that when prohibition manifestly fails, this failure is invariably exploited as an excuse to further expand prohibition activities.

    Altogther a real tragedy for our society, which will be seen as such in years to come.

  40. Posted 23/02/2009 at 19:43 | Permalink

    Well said Nick.

    Of course, nearly +all+ the problems associated with recreational drug use are actually the result of prohibiton itself.

    Unfortunately the current situation is rather profitable to politicians and those involved in the drug prohibition industry. Politicians because the subject is useful to stir up fear among voters; the prohibion industry because they directly benefit from never-ending drug wars.

    The saddest thing is that when prohibition manifestly fails, this failure is invariably exploited as an excuse to further expand prohibition activities.

    Altogther a real tragedy for our society, which will be seen as such in years to come.

  41. Posted 25/02/2009 at 12:02 | Permalink

    A few years ago, two rich Bavarian businessmen set up a kind of private social housing village and wanted to rent houses to families virtually for free – on the condition that three generations live under one rooftop. The two were obviously very socially conservative and wanted to promote family values.
    It was banned. The official justification was that it was unacceptable to let some rich folks “dictate” their values on others.

    While the right of owners to demand adherence to a certain code of conduct on their property is strictly limited, we got all sorts of government prohibitions that apply to everyone and everywhere. The latter, I cannot avoiding by simply avoiding a particular area.

  42. Posted 25/02/2009 at 12:02 | Permalink

    A few years ago, two rich Bavarian businessmen set up a kind of private social housing village and wanted to rent houses to families virtually for free – on the condition that three generations live under one rooftop. The two were obviously very socially conservative and wanted to promote family values.
    It was banned. The official justification was that it was unacceptable to let some rich folks “dictate” their values on others.

    While the right of owners to demand adherence to a certain code of conduct on their property is strictly limited, we got all sorts of government prohibitions that apply to everyone and everywhere. The latter, I cannot avoiding by simply avoiding a particular area.

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