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Mia Attruia, Daniel Boyle, Kellie Ickes
Professor S. Kantor
ECP 4413
4 December 2015
DRUG POLICY AND THE U.S. ECONOMY
On June 17th
, 1971, President Richard Nixon declared drug abuse to be the
nation’s “Public enemy number one,” and many people pinpoint that press conference as
the moment where the war on drugs truly got its start (“Thirty Years…”). Fifteen years
later, in 1986, President Ronald Reagan established the country’s first official “Just Say
No to Drugs Week,” and, just two year later, there were over 12,000 “Just Say No” clubs
across the nation (“Just Say No”). In the decades since Nixon declared “war” on drugs,
the efforts and resources devoted to enforcing a drug policy based on drug prohibition
and criminal punishment for drug law offenses have grown massively. In fact, to look at a
very recent example of government expenditures on the war on drugs, the Executive
Office of the President requested $27.6 billion “to support 2015 National Drug Control
Strategy…efforts to reduce drug use and its consequences,” which represents an increase
of 4.7% over the previous year’s budget (Executive Office of the President). Given the
scale of the resources devoted to the war on drugs, it seems extremely prudent to
investigate the costs, benefits, consequences, and economic implications of continuing to
enforce these policies. A close analysis of these factors, among others, will demonstrate
that continuing with a policy of drug prohibition is not only extremely costly, but has also

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proven to be rather ineffective—an approach to drug control policy based in the
decriminalization of drugs, the treatment of addiction, and education about drug use and
abuse is not only lest costly, but also has the potential to be far more effective at reducing
drug use and its harmful consequences.
PART I: THE HISTORY OF THE WAR ON DRUGS
Even though President Nixon did not “declare war” on drugs until 1971, the
beginnings of the drug war can be traced back to the 1960s, when recreational drug use
rates began rising—this would prompt the Johnson administration to establish the Bureau
of Narcotics and Dangerous Drugs in 1968 (“Thirty Years…”). Drug legislation was
comprehensively expanded in October of 1970, with the aptly named Comprehensive
Drug Abuse Prevention and Control Act, a law that “[consolidated] previous drug
laws…[strengthened] law enforcement by allowing police to conduct ‘no-knock’
searches…[and included] the Controlled Substances Act, which [established] five
categories (‘schedules’) for regulating drugs based on their medicinal value and potential
for addiction” (“Thirty Years…”). With President Nixon’s declaration of a war on drugs
in 1971, the government’s stance on drug policy was made very clear. The government
was willing to devote vast amounts of time and resources in order to ensure that drug
laws were enforced.
The powers of the government to wage the war on drugs continued to grow
throughout the 1970’s. In January of 1972, the Office of Drug Abuse Law Enforcement
was founded, and this agency would eventually merge with the Bureau of Narcotics and

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Dangerous Drugs to form the Drug Enforcement Agency in July of 1973 (“Thirty
Years…”). In 1978, the Comprehensive Drug Abuse Prevention and Control Act was
amended to allow “law enforcement to seize all money and/or ‘other things of value
furnished or intended to be furnished by any person in exchange for a controlled
substance [and] all proceeds traceable to such an exchange” (“Thirty Years…”). This
power, known as asset forfeiture, has been used to seize “an estimated $12.6 billion,”
with the “growth rate during that time [averaging] +19.4% annually” (“Asset
Forfeiture”). By the 1980’s, the budget and powers of these agencies were growing
rapidly, and the rise of drug abuse violations associated with cocaine and crack in the
1980’s would be used to further increase the amount of resources devoted to fighting the
war on drugs.
1981 and 1982 saw the rise of the Medellin cartel, an “alliance between the Ochoa
family, Pablo Escobar, Carlos Lehder and Jose Gonzalo Rodriguez Gacha” (“Thirty
Years…”). This violent and ruthless cartel made billions of dollars from manufacturing
cocaine and smuggling it into the United States, and the organization was brought to the
forefront of the public’s awareness in March of 1982, when “The seizure of 3,906 pounds
of cocaine, valued at over $100 million wholesale, from a Miami International Airport
hangar permanently alters U.S. law enforcement’s approach towards the drug trade”
(“Thirty Years…”). In addition to the explosive growth of the illegal market for cocaine,
1985 saw crack “flourish in the New York region,” and the addictive and dangerous drug
“[devastated] inner city neighborhoods” (“Thirty Years…”). Between these two drugs,
and ongoing efforts combating other illicit drugs like marijuana and heroin, it was seen as

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necessary to once again bolster the resources devoted to fighting the war on drugs, and
the public and Congress was quick to support the increase in efforts.
October of 1986 saw the passage of The Anti-Drug Abuse Act. The bill would
“[appropriate] $1.7 billion to fight the drug crisis,” and would also introduce mandatory
minimum sentencing penalties, which levied minimum jail sentences for drug violations
(“Thirty Years…”). In 1989, yet another agency, the Office of National Drug Control
Policy, was founded under the Bush administration and, in 1990, President Bush
“[proposed] to add an additional $1.2 billion to the budget for the war on drugs, including
a 50% increase in military spending (“Thirty Years…”). This huge rise in expenditures
devoted to the war on drugs continued into the new millennium, with President Clinton
pledging “$1.3 billion in U.S. aid” to help Columbia’s efforts to fight drug traffickers
(“Thirty Years…”). Support for drug prohibition has been something that administrations
of both parties have been quick to offer, mostly in the form of massive budgets and
grants. The second Bush administration gave witness to “the rapid escalation of the
militarization of domestic drug law enforcement,” and increasingly large grants to police
departments resulted in “about 40,000 paramilitary-style SWAT raids on Americans
every year—mostly for nonviolent drug offenses, often misdemeanors” by the end of
Bush’s term (“A Brief History…”). The war on drugs has grown larger and larger each
year, and the Obama administration has shown no signs of reigning in efforts, if their
budget proposal for 2016 is any indicator of the direction the administration is going,
policy-wise. With such vast amounts of resources diverted towards enforcing the
government’s current policy of drug prohibition, it is not only prudent but also necessary

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to closely examine these costs, both in terms of expenditures and economic opportunity
costs.
PART II: THE ECONOMIC COSTS OF DRUG PROHIBITION
A) EXPENDITURES & OPPORTUNITY COSTS
To note once more, the Executive Office of the President requested $27.6 billion
“to support 2015 National Drug Control Strategy…efforts to reduce drug use and its
consequences,” which represents an increase of 4.7% over the previous year’s budget
(Executive Office of the President…). To compare this amount to previous years, only
five years ago, in 2010, the “U.S. federal government spent over $15 billion dollars…on
the War on Drugs,” which is an astounding level of spending “at a rate of about $500 per
second”—and this does not even take into consideration spending by state and local
governments, which accounts for another $25 billion dollars of taxpayer money (“Drug
War Clock”). These massively high levels of spending were exorbitant for 2010, and
expenditures have risen even further since. It is impossible to say with certainty, but it is
highly likely that expenditures will either plateau or continue to rise into the future. These
costs place a huge burden on taxpayers, not to mention the opportunity costs once one
takes into consideration all of the other projects on which those billions of dollars could
be spent. If the goal is to truly “reduce drug use and its consequences,” then why is that
money not instead used to fund education initiatives, or low-cost housing, or economic
development, or other programs that promote the welfare of citizens and reduce the
likelihood that they will resort to drug abuse or crime (Executive Office of the

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President)? Enforcing drug prohibition is costly, and imposing punishments on those who
are accused of drug abuse violations does nothing to really help treat the roots of their
addictions.
There can also be another type of opportunity cost associated with drug
prohibition, if one considers the arguments regarding the outright legalization, taxation,
and regulation of a relatively harmless drug: marijuana. Four states—Washington,
Oregon, Colorado, and Alaska—have actually legalized the recreational use of marijuana,
and the legalization and taxation of marijuana has the potential to be a massive source of
tax revenue for the government; for example, California, if it were to regulate and tax the
sale of cannabis, stands to raise an estimated $1.4 billion per year in tax revenue, and, if
marijuana were legalized, regulated, taxed, and sold nationwide, the estimated annual tax
revenues would total $46.7 billion (“Drug War Statistics”). Obviously, during a period of
massive national debt, a potential source of revenue this substantial is sorely missed and,
while it is unlikely that the legalization and regulation of recreational marijuana will
occur at a national level, as states like Alaska, Colorado, Oregon, and Washington start
consistently seeing those annual revenues from marijuana taxation, it will be interesting
to observe how other states react.
Marijuana is only one drug that falls under the government’s prohibition of illicit
drug use, yet it is particularly interesting given recent developments in state drug policies.
In addition to those four states who have legalized the recreational use of marijuana, there
are currently twenty states “that have decriminalized marijuana by eliminating criminal
penalties for simple possession of small amounts for personal use” (“Drug War
Statistics”). Marijuana remains prohibited at the federal level, and there are still many

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states where one can be arrested, even for nonviolent possession charges. Additionally,
those arrest figures represent another, massive type of opportunity cost for the nation—
the costs associated with so many people being arrested and charged for drug abuse
violations, and not just for marijuana.
B) COST OF ARRESTS AND IMPRISONMENT
In 2013, 1.5 million people were arrested in the United States on nonviolent drug
charges (“Drug War Statistics”). In 2009, “Law enforcement made more arrests for drug
abuse violations (an estimated 1.6 million arrests, or 13.0 percent of the total number of
arrests) than for any other offense”—statistically-speaking, the rate of arrest in 2009 was
so high that one could estimate that a person would have been “arrested for violating a
drug law every 19 seconds,” and, when looking at just arrests for marijuana, a person
would have been “arrested…every 30 seconds” (“Drug War Clock”). In fact, the arrest
figures for marijuana are significantly higher than for any other illicit drug—from 2001
to 2010, over seven million people were arrested for possession of marijuana (“Marijuana
Arrests…”).
The FBI’s Uniform Crime Reporting (UCR) Program tracks “the number of times
that persons are arrested” per year for 28 different offenses, including drug abuse
violations (“Uniform Crime Reports…”). For data gathered on arrests in the year 2012, a
total of 82.2% of all arrests relating to drug abuse violations were for possession, with the
remaining 17.8% of arrests for manufacturing or the sale of illegal drugs (“Uniform
Crime Reports…”). Of those 82% of arrests, over half were for possession of

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marijuana—42.4% of all arrests for drug abuse violations were for possession of
marijuana, which represents a higher percentage than “heroin or cocaine and their
derivatives” (16.5% of arrests), “synthetic or manufactured drugs” (4.5%), and “other
dangerous nonnarcotic drugs” (18.7%) combined (“Uniform Crime Reports…”). These
numbers reveal that a majority of those who are arrested for drug abuse violations are not
producers, manufacturers, or distributers of the drugs—they are oftentimes nonviolent
individuals arrested for possession of a small amount of an illicit drug, which is likely to
be marijuana. Is this current approach to enforcing the nation’s drug control policy truly
effective? If the goal of drug policy is to curb the use of drugs and their harmful effects,
then would going after the drug producers and dealers not be more effective than
punishing small-time users? The current drug policy of prohibition is a policy that is
designed to punish drug users, not treat them, and the way in which these policies are
currently being enforced targets low level drug abusers, while those that supply the drugs
rarely have their operations interrupted. Additionally, in terms of how these drug policies
are being enforced, there has been a huge secondary cost imposed upon minority groups
who are far more likely to be arrested for drug abuse violations.
The American Civil Liberties Union estimates that, while African Americans and
non-Hispanic white Americans use marijuana at roughly the same rate, African
Americans are “nearly four times more likely to be arrested for marijuana possession”
than white Americans (“Marijuana Arrests…”). This represents a massive cost to African
American communities, which are far more likely to have members of the community
arrested for marijuana possession than other communities. When a significant number of
the members of a community are arrested and served with mandatory minimum

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sentences, or are subjected to asset forfeiture proceedings which may take their car or
their home from them, it is hard for that community to truly see economic advancement.
Indeed, many people have attacked the nation’s current drug policies as discriminatory,
because of the disparate impact they have on minority communities. Whether or not
current drug policies are discriminatory, these arrest figures represent a clear and
substantial cost to the nation, and to minority communities particularly—both in terms of
the costs of the process of arresting, trying, convicting, and incarcerating drug abuse
violators, and the costs associated with lost productivity.
In 2012, the “Vera Institute of Justice released a study…that found the aggregate
cost of prisons in 2010 in the 40 states that participated was $39 billion,” with an “annual
average taxpayer cost” of $31,286 per inmate (Santora). So, using this amount, and
assuming that roughly 10,000 people have been “incarcerated for drug law offenses this
year,” that represents an annual cost of approximately $313 million, just to house drug
law violators (“Drug War Clock”). These costs only continue to skyrocket when one
begins taking into account the legal costs and resources that are devoted to arresting and
prosecuting these low-level drug users.
There is also another cost that is substantial, yet somewhat hidden. This cost
involves the loss in productivity that results from the arrest of so many individuals. When
there are so many nonviolent, non-dangerous people who have been arrested for drug law
offenses, the result is a massive loss of productivity. Not only are those individuals’
employment prospects severely limited by their arrest, which would hinder their ability to
increase their personal wealth, but society also suffers because it has lost a source of

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potentially valuable labor. This loss in productivity, and other secondary effects of drug
prohibition, will be discussed shortly.
PART III: A CASE STUDY OF MARIJUANA—HAS IT BEEN WORTH IT?
Before moving onto some of the more nuanced economic consequences of current
drug control prohibition, it may be beneficial to take a moment and examine whether or
not these billions of dollars in government expenditures and millions of arrests have
achieved the nation’s drug policies’ main objective of reducing drug use and its
consequences. Given all of these massive costs, especially concerning the continued
enforcement of the prohibition of a relatively harmless drug, marijuana, would one not
expect to see the usage rates for drug use decrease, at least by a small amount? Well, a
focus on marijuana—the possession, sale, and cultivation of which, according to the
FBI’s Uniform Crime Reporting Program, accounted for 48.3% of all arrests for drug
abuse violations in 2012—reveals that the massive expenditures that have been devoted
to enforcing the prohibition of marijuana have failed to curb usage rates.
A recent Gallup poll collected data on the marijuana usage rates of American
adults from 1969 to 2013. Those forty-four years saw a dramatic rise in the percentage of
American adults who responded affirmatively to the question, “Have you, yourself, ever
happened to try marijuana?” (Saad). In 1969, the percentage of respondents who
answered, “yes” was 4%, and eight years later, by 1977, that percentage had risen to 24%
(Saad). From the 1970’s until 2013, that percentage steadily rose to 38% of American
adults who admit to trying marijuana (Saad). Clearly, even with the billions of dollars

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that have been specifically devoted to enforcing the prohibition of marijuana, current
cannabis laws have failed to prevent a rise in drug use; in fact, the steepest rise in the
percentage of Americans who admitted to trying marijuana, which occurred from 1969 to
1977, interestingly coincides with beginning of the “war on drugs.”
There are clearly powerful market forces at work when it comes to the demand for
and supply of illegal drugs, and current policies attempt to combat those market forces
with the goal of curbing drug use and its consequences. Enforcing a prohibition of drugs
simply directs the demand for those drugs underground to illegal black markets, where
gangs and cartels are more than eager to meet that demand. Drug prohibition, which
treats drug use as a criminal justice problem to be dealt with by punishing drug users,
does not do enough to reduce the demand for drugs—when a person is addicted to a drug,
they may rationally choose to risk the costs associated with arrest in exchange for the
benefits that come from using the drug. If one of the main goals of drug control policy is
to reduce drug use and it consequences, then a more effective and less costly way to
achieve that goal would be to treat drug abuse as a health problem that needs to be
treated, rather than a criminal problem that merits punishment. Treating the root causes of
addiction has a much better chance of reducing the demand for drugs by changing how
the person rationally views the costs and benefits of drug use, rather than just simply
increasing the costs of drug use slightly. Not to mention, there are also numerous
secondary effects and other economic implications that have accompanied drug
prohibition, which have had far-reaching consequences that are not always easy to
identify immediately.

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PART IV: SECONDARY EFFECTS
When examining the current policy of drug prohibition, it is impossible not to
recognize the significant negative secondary effects that occur as a result of this policy.
Health care costs are one area in which excessive losses are occurring. Not only are there
medical care costs associated with drug problems, but also there are more severe health
consequences to worry about. There are many people dying young due to drug related
complications, perhaps as a result of the avoidance of seeking treatment for fear of legal
consequences (Poret). This plight is similar to that of alcohol prohibition in the 1920s, at
which time many people were becoming ill and dying from alcohol laced with other toxic
substances, but refrained from seeking medical care.
In addition to the health costs that occur under current policy, there are also social
costs. One aspect that often angers taxpayers is the sheer amount of wasted resources that
are spent on ineffective drug prevention programs. American citizens tend to be very
passionate about where their money is going, and naturally many people are unhappy
about the amount of their money being taken for programs that produce little to no
results. Aside from direct financial social costs, there is also the matter of productivity to
consider. The people who are being convicted of drug related offenses have the potential
to be labeled as felons. This label is incredibly difficult for potential employers to
overlook in job candidates and can therefore prevent otherwise good applicants from
being employed as productive members of society.

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Perhaps the most hotly contested issue that arises from drug policy is the crime
level that spurs from the drug market and subsequent drug policy. The drug market is
entirely composed of black markets that have no private property rights or enforcement
of contracts, leading to suppliers who resort to violence in order to keep up with
competition in the market. Violence among suppliers also tends to increase as prices rise.
This occurs because as price increases there are fewer buyers, causing the market to
become increasingly competitive, and therefore creating a situation in which dealers
resort to “turf wars” to defend their territory and maintain a solid customer base (Poret).
As addictive drugs become involved, the likelihood of drug related crimes occurring
increases, as well as the severity of the crimes (Doyle & Smith 5). This evidence suggests
that current drug policy is creating far too much crime with no end in sight as long as the
policy remains.
Another effect of the current War on Drugs is racial inequality. Disproportionate
numbers of minorities are steadily being arrested and incarcerated for drug offenses when
compared to non-minorities, and this is not because minorities are committing more
offenses (Solano 179). There are already substantial income and wealth gaps between
minorities and non-minorities, and these excessive crime charges are only causing
increases in this disparity. If imprisoned or labeled as a felon, people have a difficult time
being active members of society. While this is troubling for all people, it is especially
harmful to minority groups who already feel the sting of discriminatory legal practices.
There is quite a substantial amount of resources being devoted to the War on
Drugs, with a large percentage of government expenditures focusing on drug prohibition.
Money is constantly being poured into the War on Drugs, as it has been for the past few

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decades, with virtually no progress to show for it. These resources and money could be
better used on basically any other program that will use them more efficiently and have
some actual results. In 2002, total costs of the War on Drugs (health, social, crime,
“foregone production,” etc.) were estimated to come to about $180.9 billion (Poret). This
amount of money is too large to be wasted on a project that is having no effect on drug
usage.
In addition to these demand side effects there are some severe supply side
consequences of the current drug policy, the most prominent being those that occur in the
Latin American and Caribbean (LAC) region. It is within this region where much of the
U.S. illegal drug supply comes from. In 2010, U.S. government spent over $888 million
in an effort to dissuade illegal drug trafficking in the LAC (Francis and Mauser). Despite
the exorbitant amount of money being spent in this region, crime and violence rates have
soared astronomically. The U.S. government’s efforts to combat drug trafficking have
been rather ineffective, as these drug traffickers are continuously retaliating against their
efforts. Francis and Mauser offer a correlation between murder rates and drug prohibition
policies, and then mention that the LAC region has the highest murder rate in the world.
Based on the expenditures and the level of violence occurring in this region, it is apparent
that the supply side of U.S. Drug Policy is experiencing negative externalities just as the
demand side is.

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PART V: THE PROPOSITION OF A NEW POLICY
One possible solution to fixing all these negative externalities associated with
drug policy is the adoption of a policy of decriminalization. It is not that a policy of
decriminalization advocates for drug use; rather, it seeks to provide those with drug
problems a means to seek treatment, improve their lives, and therefore improve society as
a whole. The proposition of this policy comes not from the belief that drugs are good and
should be consumed, but from a belief that people in undesirable situations should be
able to seek and receive help instead of being penalized for their burdens. Under a policy
of decriminalization, criminal punishment for usage and possession would be eliminated.
Criminal punishments would be replaced with civil punishments, such as paying a fine.
However, the production and sales of drugs would remain punishable by law. The hope is
that under a decriminalization policy, people would feel able to seek help and
consequently the number of drug related deaths would reduce significantly. European
policies with more tolerance for drug use have resulted in less drug use, less addiction,
and decreased drug-related violence. In the 1970s, 12 U.S. state governments
implemented decriminalization policies for marijuana. When rates of marijuana usage
under these policies were compared with rates of usage under prohibition, there was little
to no impact on prevalence (Solano 180-181). By changing the drug policy into one that
refrains from labeling drug users as criminals, many of the negative effects that occur
under prohibition would be negated.
The current drug policy aims to reduce drug use, which is quite obviously not
working. The United States has approximately twice the number of drug experimenting

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youth when compared to countries with more lenient drug laws, including Portugal which
has recently adopted a policy of decriminalization. Drug use will never be able to be fully
eradicated as long as people maintain the desire to use drugs. No matter how many
restrictions or laws are set on drug usage, people will always find a way to obtain and use
drugs. Rather than attempting to minimize drug usage, a decriminalization policy instead
places an emphasis on minimizing societal harm related to drug market and maximizing
social welfare (Poret).
One often-overlooked solution of the high cost of drug policy is an improvement
in treatment for those with drug problems. While there are treatment options currently
available to drug users, not enough of the government budget is contributing to these. It is
especially difficult for those who are of lower economic status to obtain treatment. Many
people with drug problems will not have the treatment option become available to them
until they are arrested. This one problem could have very beneficial effects if changes
were made to improve this system.
There have been a number of studies showing the economic and social benefits of
replacing incarceration with treatment. One case study provided results that clients of the
TOPS treatment facility who had undergone methadone treatments had shown a “direct
relationship between drug abuse treatment and crime reduction.” This study showed a
$34.54 million reduction in combined tangible and intangible costs related to crime
(Rajkumar and French 311-312). Another set of studies provided similar results in which
community and counseling based treatment plans have been effective in significantly
reducing “drug use and drug-related criminal behavior.” These studies also provided
insight into the opportunity costs of incarceration versus treatment, where the monthly

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cost of incarceration averaged about $22,000 per month while methadone treatment cost
only $4000 per month on average (Chandler, Fletcher, and Volkow). Not only does
treatment reduce economic costs, but it has also been shown to be more effective in
reducing drug use as well as drug-related crimes. Moreover, avoiding incarceration also
allows those in treatment for drug abuse to avoid losses in career productivity and social
separation that occur during jail time. Based on these studies, it is evident that the
government should be expending more effort on the improvement of drug treatment.
When government creates drug policy it is assumed that society is composed
primarily of non-drug users, and therefore policy is directed toward the preferences of
these non-drug users. By implementing a decriminalization policy, utility levels of non-
drug users are increased as government solves the inefficiencies felt by society under
current policy. Drug users will also reap benefits from a policy of decriminalization as
incarceration and other criminal penalties for drug usage will no longer be an issue.
Increased economic utility will come from reduced taxes and social utility will also
improve with a reduction in negative secondary effects (Solano 178). Theoretically, all
members of society will benefit overall with increased utility.
PART VI. RATIONALE FOR GOVERNMENT INTERVENTION AND LIMITATIONS
If a drug-free society seized to exist, than drug use may be considered normal. It
is argued that drug demand is fueled by a desire for escape, implicitly a deficit model,
which is deficits in either the user or the context that motive drug use (Mugford). Here,

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the user may have poor coping skills and live in a high stress environment and the context
being, for example, lack of employment. When bureaucrats’ argue for prohibition type
models, they do not address the concept of elasticity. In fact, when addressing people
who are already addicted to such drugs, they will do anything and will pay any amount in
order to have the drug. Most drugs, especially marijuana because of its’ non-addictive
characteristics, are substitutable for one another to a considerable degree. What are
sought are not escape, but rather excitement and intoxication (Mugford). Since many
drugs and other activities are also exciting, they may substitute for on one another to a
degree as well as being combined in all sorts of manners (Mugford).
Attempted control is overt behavior by a human in the belief that the behavior
increases or decreases the probability of some subsequent condition and that the increase
or decrease is desirable (Mugford). Government attempts control for two reasons: first, it
forces recognition of the crucial distinction between successful and unsuccessful control.
Second, it underscores the purpose quality of human behavior. In a world of
consumption, successful control does not limit consumption, but increases it. Drug use
has powerful values in which self-indulgence, that of consumer cultures adopt, is not an
exception to the market functions of consumption. In terms of public health that sees
limitations of drug use as a way to reduce harm, market controls and regulatory agencies
are not successful policy control, and is in fact, the opposite. If limitation is indeed the
goal, it is thought that the market will produce rather excessive, optimal, or insufficient
outcomes on the topic of drug use (Mugford).
Government intervention in the consumption of drugs sees limitations as a
governmental responsibility for two reasons. First, consumption is seen as a general

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instrument of economic policy, where as periods of high interest rates are driven in an
attempt to dampen inflation or rectify the balance of payments. Second, the state may
seek to limit any area of consumption that is help either to imperil civil order or that
causes costs to the state itself or to business. Drug use may fit into either these types and
as a consequence it might be expect to see states intervening in the area of drug
consumption. In all, there may be expectations to see attempted government control
through measures of which take interest in market factors such as taxation, licensing
laws, age limits, and so forth. Other means of limitation may be thought cognitive control
such as educational campaigns and even direct legal control. Legal control is the most
prominently seen today with the heavy laws against the possession or distribution of
drugs. It is easy to see that state control is likely to conform to the condition of over-
limitation or excessive outcomes rather than insufficient when addressing the degrees of
limitation. Civil society has a large effect on the limitations of drug consumption. What
this means is it may be deemed socially unacceptable to practice a particular act. In
example, it is socially unacceptable to drink alcohol during work hours. This limitation
theory is more likely to create a more optimal level of limitation than any other means.
The factors that encourage drug consumption among illicit drug users is that the
market is illicit and for this reason prices tend to be very high. One factor portrays that
since these prices are rather high, the market itself reduces drug consumption. Second,
the normal state is a result of those ties and relationships we call civil society (Mugford).
If civil society is strengthened, it will provide an answer to limiting drugs. However,
problems occur that restrict the capacity of civil society to limit successfully the use of
drugs at the optimal level (Mugford). For instance, societies are diverse and internally

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differentiated. People live in societies where they also face internal conflicts such as the
differences in alcohol consumption among different occupational groups. When drugs are
under-limited, extrinsic harm tends to arise in the form of consumer exploitation and
excessive pressure to buy (Mugford). Adulteration of alcohol with impurities like
methanol is an example of under-limitation; a situation where proper manufacturing
standards are slighted to curtail production costs (Mugford). Inadequate limitations on
alcohol or tobacco advertising and sales, which lead to underage activities, are an
example of under-limitation (Mugford). Under-limitation seems to occur mostly in
respect to licit drugs rather than elicit (Mugford). Over-limitation, however, portrays
extrinsic harms from drug use, used great means such as completely cutting of drugs,
which is believed to be purposeful adulteration of profit by apparent increase in quantity,
the sharing of dirty equipment, secondary crime to support use when prices are high, and
so forth (Mugford). Such harm arises because limitation does not automatically produce
its intended consequences. Such consequences are the development of the black market,
growth in organized crime, the corruption of state officials, an increase in secondary
crimes, and a sharp increase in extrinsic direct health costs for users. Prohibition of drugs
keeps their price above their costs. If individuals are willing to pay more for a good than
it costs to produce, then it is inefficient to prohibit the production and consumption of
that good. An increase in consumption that occurs because of legalization is a benefit
rather than a cost of legalization. Commodities and drugs are not the same because of the
addiction that drugs inhabit. Illegal drugs have a significant characteristic that causes the
standard economic reasoning to fail (Miron). Decriminalization will lead to lower drug
prices and more use of drugs, which will generate additional externalities, some in which

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are positive such as crime rate will be decreased. There are approaches in which offset
the effect of possible lower drug prices such as equating social and private prices and
costs via subsidies and taxes (Taubman). Victims could be reimbursed for losses and low
birth weight children; addicted children born prematurely can be given extra attention.
Cocaine addicts could be given vouchers with each purchase of the drug. These vouchers
could be used to provide medical care or tutors to others. However, there are hypothetical
and could be very costly. The government could also decriminalize drug use while
stepping up antidrug education. The rationale for this behavior is that the government
wants people to make informed choices and they could provide more information at a
social cost less than the social costs arising from the use of the drug. Although the quality
and quantity of research available could be improved, it seems likely that the price
elasticity of demand is not zero (Taubman).
VII. EXPERIMENTAL AND COMPARATIVE DATA
A) AN EXPERIMENT
In 1980, a group of economic researchers at the Walter Reed Army Institute of
Research conducted a behavioral economics experiment on monkeys to assess abuse
liability, drug reinforce interactions, the framework for designing drug abuse
interventions, and to develop a strategy for formulating drug abuse policy. In short, the
study involved testing the daily consumption of food pellets as a function of fixed ratio
schedule, in log-log coordinates, along with other factors that involve pricing (Hursh).
Providing free food in this experiment is analogous to providing the community of drug

22. 22
users a low-cost or free source of drugs through government sponsored clinics (Hursh).
The effects of such medicalization of drug use may be inferred from these results with
free food. Prices above about 50 responses per pellet, free food had the effect of reducing
earned consumption at any given price compared to baseline and reducing total revenues
(Hursh). Even if the market price is adjusted to the peak of the revenue function, total
revenues will drop dramatically with increases in free availability of drugs. This
reduction in expenditures and revenues would be expected to reduce drug-related crime,
reduce incentive to supply drugs, and reduce the incentive to engage in risky distribution
related crime (Hursh). However, with positive outcomes, there runs the risk of negative
as well. In this case, total food consumption was higher with free food available than
without, causing the subjects to overeat. By analogy, one might expect that in a condition
of both illicit drug availability and clinically dispensed free drugs, overall drug use will
increase. Thus, this approach to reducing illicit drug demand would best be combined
with aggressive and effective program of individual therapy to reduce overall level of
drug demand (Hursh). If the market price is optimally positioned at the point of
maximum revenue for the supplier, then price increase will lead to proportional decreased
in consumption and reductions in supplier revenues (Hursh). On the other hand, if the
market price is well within the inelastic range, then price increases will have a
proportionately smaller effect on consumption and will lead to an increase in user
expenditures and supplier revenues (Hursh).
B) PORTUGAL DRUG POLICY

23. 23
In 2001, Portugal enacted one of the most extensive drug reforms in the world
when it decriminalized low-level possession and use of all illicit drugs in 2001 (Drug
Policy Alliance). Since decriminalization, there has been no major increase in drug use;
in fact, rates of illicit drug use have mostly remained flat. Rates of drug use in the past
year and in the past months have not changed significantly or have actually declined
since 2001 (Drug Policy Alliance). The amount spent on the war on drugs annually in the
U.S. has surpassed $51 billion. The number of people arrested in 2013 alone for
nonviolent drug charges were $1.5 million, and 693,482 for marijuana violations alone
(Drug Policy Alliance). Daily teenage marijuana usage has plummeted 75% since 1978
when the president and his top drug advisor at the time sought to decriminalize the drug.
Portugal’s drug use rates remain below the European average and much less than the U.S.
The number of people arrested on drug charges has declined by more than 60 percent
since 2001. Portugal’s Dissuasion Commission released a statement mentioning that the
criminal system is not best fitted to deal with situations dealing with drug use and the best
option should be to get people treatment. Between 1998 and 2011, the number of people
in drug treatment increased by more than 60 percent (Drug Policy Alliance). Treatment is
voluntary, making Portugal rates of uptake higher than most countries. The number of
HIV and AIDS diagnoses has fallen considerable (Drug Policy Alliance). A 2015 study
found that, since the adoption of the new Portuguese national drugs strategy, which paved
the way for decriminalization, the per capita social cost of drug misuse decreased by 18
percent (Drug Policy Alliance). It was also found that the cost-effectiveness ratios for
preventative measures and treatments are much alike. Thus, opportunities for efficient
investment in healthcare programs are almost equal for prevention and treatment. The

24. 24
table below shows the cost-effectiveness
ratios for selected interventions of various
types of preventative measures1
(Joshua T.
Cohen). It is evident that the standard
approach in the U.S. is inefficient in terms
of cost when referring to this graph. There
are much more feasible approaches to a more structured policy for drug addiction and
imprisonment factors.
There are numerous arguments that demonstrate how and why the nation’s current
approach to drug control policy is failing—not only is there little evidence that drug
control efforts are achieving their goals of reducing the use of drugs and the harms
associated with them, but the enforcement of drug prohibition has imposed massive costs
on society in terms of expenditures on drug policy enforcement and drug law offense
prosecution, the loss in productivity to society, and the secondary effects of current
legislation (like violent black markets and disproportionate impact on minority
communities). Additionally, it is clear that the forces that dictate the supply and demand
for these illegal drugs are powerful market forces that government regulation and
intervention has little hope of restricting. Instead of continuing to pour billions and
billions of dollars into enforcing outdated policies, a new policy approach to drug abuse
should be adopted—one based on the treatment of addiction, education about drug use
and abuse, and the removal of mandatory minimum jail sentences. This new approach
1 Figure 1 Data are from the Tufts–New England Medical Center Cost-Effectiveness Registry. QALY denotes quality-adjusted life-
year

25. 25
would not only be more compassionate than the current approach, but also stands to be
far less costly and see far more success in terms of reducing the harms associated with
drug abuse. The policy of drug decriminalization does not try to combat the market forces
that have already established such lucrative black markets in the same way that drug
prohibition attempts to do—a drug control policy centered around treatment and
education, rather than punishment and arrest, has the potential to shift the demand for
illegal drugs in a way that drug prohibition has never been able to.

26. 26
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