It’s Time to Legalize Drugs (continued)

I’ve seen a number of new thoughts pro and con since I blogged that drugs should be legalized.

Fred Wilson would like to see the Democratic Party come out in favor of legalizing drugs as “an example of social pragmatism (and fiscal responsibility)”.  I’d like to see the Republican Party take the same position both because legalization would be a great way to cut terrorists off from their funding and, more importantly, because it’s the right thing to do.  I think both Fred and I are going to be disappointed.  Legalization is one of those political issues which can easily be fatal if espoused.  It is at least as dangerous as talking about the need for restraint in Social Security and that subject is known as the “third rail of American politics” for good reason.  Maybe a gutsy second term President will tackle this some day.

However, the Libertarian Party, in accord with their principals and with nothing to lose, does make legalization a key issue.  They point out that the issue is really “re-legalization.”  According to their online brochure, drugs were legal before 1914 and cocaine was found in the original Coca Cola recipe.  They also say that the first anti-drug laws were racist “to prevent Chinese laborers from using opium and to prevent blacks and Hispanics from using cocaine and marijuana.”

Another Libertarian Party document makes effective use of government sources to support the proposition that income from illegal drugs fuels terrorist movements.  They point to government sponsored http://www.theantidrug.com which says “Drugs form an important part of the financial infrastructure of terror networks. Twelve of the 28 listed terror organizations identified by the U.S. State Department in October 2001 traffic in drugs.”  [nb. I verified that this quote is on the site and that the site is government sponsored.]  They also quote House Speaker Hastert (R-IL) as saying: "The illegal drug trade is the financial engine that fuels many terrorist organizations around the world, including Osama bin Laden."  [nb. I didn’t verify this one.]  I doubt if Hastert would like the logical conclusions the Libertarians and I draw from this statement.

There is a lot of discussion about what drugs should cost if legalized.  Fred Wilson and Albert Wenger both point to the brilliant Becker-Posner Blog which contains four posts on drug legalization that are very worth reading.  Becker estimates the marginal elasticity of drug prices at .5.  That means that a 10% increase in price would reduce consumption by 5% and a 10% decrease would increase consumption by 5%.  He argues that the War on Drugs is a partially successful attempt to raise prices and reduce consumption.  The problem is that the “extra” profits go to bad guys instead of government (which might or might not be a bad guy).  He points out that we could raise the price of legal drugs to any point that we want to discourage consumption up to the point where legal drugs are substantially more expensive than illegal ones at which point the drug cartels reappear.  However, Becker and Posner also point out that the street price is only part of the price: the high risk of dealing with dealers, quality issues, and the danger of incarceration are all part of the real price of illegal drugs.  Legal and unadulterated drugs would still be much cheaper over all even if they had the same street price as illegal drugs.

I’m a cynic on the pricing discussion.  We have the example of tobacco and alcohol to tell us that taxes will be imposed very efficiently to take prices up to just below where smuggling will get to be a serious problem.  Governments are better at maximizing excise tax revenue than they are with income-based taxes.  And sin taxes are so tempting! 

The takeaway is that the street price of legal drugs (tax included) will probably be somewhat higher than the current street price of the same drugs but the total price will be just a little lower.  So the cartels go out of business and bin Laden needs to find another source of funds.  But usage goes up somewhat because the real price is lower and there is elasticity.  Higher usage isn’t a good thing but we have to face that it is a probable consequence of legalization.  Somewhat offsetting is that we should be able to do a better job of keeping drugs away from children when the trade is in the open and we will reduce the significant collateral damage that illegal drugs cause because they are illegal – turf wars, dangerous impurities, and the funding of terror.

A long article in The City Journal by Theodore Dalrymple is the best summary of anti-legalization arguments I’ve seen.  It is worth reading if you think this debate is important.  Both sides really do need to be heard.

Among other arguments, Dalrymple says:

1. Even legal drugs cause crime because many substances like crack cocaine cause violent paranoid behavior.
2. Saying the War on Drugs has been lost  because there are still drugs is like saying that the war on bank robbers has been lost so we ought to abandon it. He didn’t mention the War on Terror but he was writing pre-9/11.
3. He has anecdotal evidence that the elasticity is actually higher than one – even with alcohol (but he doesn’t recommend a new prohibition on alcohol).
4. Amsterdam, where drug access is easy, is squalid and crime-ridden.  Actually, I like Amsterdam but it is reasonable to suspect that the place with the most liberal drug policy will attract (not necessarily create) a high proportion of drug users.  It is not, I think, a good example of what would happen if drugs were re-legalized for adults in the huge United States.

There have been more news stories recently about the drug trade in Afghanistan.  US Forces are targeting it, presumably because it supports terrorists.  The Afghan government is cooperating to help deny this revenue to the remnants of the Taliban and various freelance warlords – and probably also to please their patrons from Europe and North America.  I think this is a sad and probably unproductive diversion.  We should follow the advice Speaker Hastert didn’t give and re-legalize drugs for adults.