Professor Jeffrey Miron of Harvard University recently spoke at the National Economists Club about drug legalization. I summarize his remarks below:
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All
told, the United States spends $41 billion on drug prohibition every year.
There are 1.6 million drug related arrests every year. And as the jails
overflow and expenses mount, the US government is forgoing $47 billion in tax
revenue every year. There are also multiple unquantifiable costs to prohibition
such as the opportunity cost of allocating resources to enforce the law.
Advocates argue that prohibition reduces use and crime. But is this really the
case? Professor Jeffrey Miron of Harvard University argues that the costs of
prohibition far outweigh the benefits. The solution…a laissez faire approach to
legalization.
Miron
concedes that prohibition does in fact lower demand modestly, but it does not
eliminate the supply and demand for drugs. The expected penalty is rather low
which has negligible effects on demand. Advocates also argue that prohibition
makes production more expensive, driving up the price, decreasing consumption.
Certainly producers have to keep operations on the down low. However, since the
early 80s, prices are down 80%. Miron argues that if producers and dealers are
involved in an illegal activity, they aren’t going to be paying income taxes,
or abiding by child labor or minimum wage laws, etc. Therefore, a producer’s
marginal costs are extremely low, relative to legal businesses.
For
anyone who has seen an episode of Boardwalk Empire recently, the comparison
between the War on Drugs and the prohibition of alcohol in the 1920s is an easy
one. Looking at data on deaths from cirrhosis of the liver, Miron suggests consumption
only decreased 20%. Meanwhile violence increased. Producers and dealers can’t
settle their disputes by legal means so they resort to violence. The same goes
for other prohibited activities such as prostitution and gambling. Quality
control, the spread of HIV through dirty needles, corruption, and a litany of
other issues arise when a black market is created.
Miron
suggests there are four ways of looking at legalization. (1) Rational Drug
Consumption: Without making judgments on drug use one could say that people gain
utility out of it, otherwise they wouldn’t use drugs. In this respect
prohibition is a utility cost, not a benefit. (2) Paternalism: If we decide to
discourage drug use, a Pandora’s Box of government intervention is opened. One
should be able to respectfully differ in their opinion of drugs. At any rate, alcohol
is an easy substitute for drugs. (3) Externalities: Advocates of prohibition
argue that negative externalities of drug use such as the effects on unborn
children and the strain on the health care system are significant. Miron argues
the magnitudes of these externalities are highly exaggerated, particularly when
compared to alcohol. When a question about the effects on kids of having meth
addicted parents was brought up, Miron suggested irresponsible parents will be
irresponsible with or without access to drugs. The policy must balance costs
and benefits. (4) Morality: Advocates of prohibition argue that drug use is
immoral and has undesirable side effects. While this may be the case, Miron
notes that many of the side effects of prohibition are also considered immoral;
the increase in violence being the most notable. Surprisingly, Miron suggests
prohibition creates a redistribution of wealth in the direction of producers
and dealers due to the fact that income taxes are not being paid. With a little
smirk, Miron suggested most people would not want to subsidize this type of activity…
Jeffrey
Miron is a Senior
Lecturer and Director of Undergraduate Studies in the Department of Economics
at Harvard University, as well as a Senior Fellow at the Cato Institute. His
field of expertise is the economics of libertarianism. He has advocated for
many libertarian policies, including legalizing all drugs and allowing failing
banks to go bankrupt. He has written four books including "Drug War
Crimes: The Consequences of Prohibition" and "Libertarianism, from A
to Z." He served as the chairman of the Department of Economics at Boston
University from 1992 to 1998.
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It is my own personal opinion the the costs of prohibiting and incarcerating people for some drugs probably outways the benefits. However, I don't think a blanket laissez faire approach is appropriate. For instance: I don't think Meth has done anyone any favors. A drug by drug approach is probably best. It should be noted that I don't use drugs.
