The Economics of Abuse
Ryan, your book seems destined for instant best-sellerdom, as it is certain to please both the drug hobbyists and the libertarians. It's also astonishingly clear-headed and well-written, as if someone had taken David Courtwright and added just a splash of Hunter Thompson. And of course I'm delighted to see a little bit of economic analysis applied to the problem.
But a little learning can, indeed, be a dangerous thing. Let me ask you about two of the economic ideas in the book:
You talk about "inelastic demand," but most of the current evidence suggests that the quantity of drugs purchased rises and falls more than proportionally with the price. That makes sense, once you consider that most of the volume goes to heavy users, for whom the price of their favorite drug is likely to be a major budget item. Indeed it's the light users whose demand tends to be inelastic; since I rarely drink, the price of alcohol is such a trivial part of my monthly expenditure that a price increase or decrease doesn't matter much to me. The failure of increased drug enforcement to reduce drug consumption results not from inelastic demand but from the failure of increased enforcement to raise prices.
The book also pays a lot of attention to substitution effects, which, you say, makes drug policy a mere game of "whack-a-mole." But substitution is only one of two logical possibilities: the other is complementarity. The stimulants seem to be mostly inter-substitutable, though the substitution is never perfect; some of the people who use cocaine have a genetic condition that leads them to hyper-metabolize the amphetamines, so they couldn't switch to meth even if they wanted to; it simply wouldn't have any effect, because it would be metabolized so quickly that little of it would reach the brain.
The opiates substitute for one another, and so do the benzos and the barbiturates. Different brands of beer are clearly substitutes; it also seems that beer substitutes for wine and distilled spirits. To some extent the hallucinogens may substitute for one another, and perhaps for cannabis as well.
I think that's the full list of documented substitution effects. The list of complementarities is longer. Basically, any stimulant (cocaine, amphetamines, methylphenidate, caffeine) complements any depressant (alcohol, opiates, benzos, barbiturates): think of rum-and-cola or cafe royale, or someone taking a drink or a Valium to get to sleep after a speed or coke run. Roughly speaking, stimulants keep you awake to enjoy more and more of your favorite depressant, and depressants help you come down from your favorite stimulant. More surprisingly, the depressants seem to potentiate one another. Casual drug users are sometimes specialists, but heavy drug users, other than some alcoholics, tend to be generalists.
So when people tell me that easing up on drug laws would merely shift drug users around among drugs without increasing the total number of people in trouble, I have to scratch my head. Increased consumption of cocaine would almost certainly lead to increased alcohol abuse.
So I want to press you on your claim that the drug laws are basically futile. If we doubled the alcohol tax, don't you think that would reduce alcohol abuse? (Phil Cook thinks so; doubling the tax, which would increase the price to the consumer by about 10%, would, according to Cook, decrease alcohol-related traffic fatalities by something like 6%.) By the same token, if we eliminated the tax, wouldn't you expect alcohol abuse to go up?
By the way, the claim that the U.S. is an unusually heavy consumer of drugs is true only if you define "drug" not to include alcohol. Most of the use and abuse of intoxicants (by which I mean to exclude caffeine and nicotine) involves alcohol, and the U.S. isn't anywhere near the top of the world league table for alcohol consumption. We do have an unusually high consumption of cocaine and cannabis; otherwise, the U.S. is unremarkable.
Flipping the question over, do you really believe that legalizing cocaine wouldn't lead to an explosion of cocaine use? There are about eight times as many problem drinkers as there are problem cocaine users; if the two drugs competed on a level regulatory playing field, I very much doubt that alcohol could maintain that advantage. Do you disagree?
Would legalizing a drug really increase its use? Only if most people are actually swayed by the law and I'm not sure they are. I know tons of people who have and hadn't used drugs but its legality never seems to have anything to do with the decision.
If most people decide to try, use or not for personal reasons rather than legal reasons, then we can assume that legalizing particular drugs won't cause an explosion in their use.
As for the issue of people mixing drugs with alcohol -- they do that already so what's the difference?
July 20, 2009 6:16 PM | Reply | Permalink
Another thing to note here is the title: "the economics of abuse." I think "use" would be a more neutral and fairer term. What constitutes abuse is for an individual to decide.
July 20, 2009 10:15 PM | Reply | Permalink
i would agree that the term 'abuse' outside of a clinical/medical context incorrectly implies an unecessary value judgment.
July 21, 2009 1:53 PM | Reply | Permalink
"The failure of increased drug enforcement to reduce drug consumption results not from inelastic demand but from the failure of increased enforcement to raise prices."
No, because as you point out, most drugs go to heavy users, heavy users are typically "addicted". Therefore, the only thing you will get by increasing prices is more violence and robbery as the addicts have to get more money to support their habit. The very nature of addiction is "inelastic demand". Increased enforcement therefore = more violence.
"the other is complementarity."
This complementary drugs argument, while maybe true, misses the point entirely. What he means with substitution is that, should enforcement shut down an entire drug market in one drug, people will just move their demand to a drug that is more available. The "generalists" you talk about, prove this point. Since they are not "specialists", they merely move their drug of choice to what is available. Government crackdown on pot? Get me some Valium to come down from speed. Meth not available? Ok I guess Coke will do, or ice or aderall. This is the very point about inelasticity. The demand for drugs goes nowhere, even if enforcement makes major headway in one particular drug.
"Increased consumption of cocaine would almost certainly lead to increased alcohol abuse."
Total conjecture. I would like to see any evidence at all that this is true. Just because you think you have logically arrived at this conclusion does not make it true in real life.
"If we doubled the alcohol tax, don't you think that would reduce alcohol abuse?"
Certainly not. You would just have poorer drunks. People who are addicted don't take price into account, even though they should. They merely spend money that they should be paying their bills with. You know what else you WOULD have though? An illegal market of home-brewed beer being sold to avoid taxes. Then you might get turf wars and major bootlegging operations. Then you would certainly get violence.
"Flipping the question over, do you really believe that legalizing cocaine wouldn't lead to an explosion of cocaine use?"
We have already seen an explosion in cocaine abuse, in the 80's if you wanted it you could get it. Anyone with a desire do do the drug could do it. And it was illegal.
People are not waiting for drugs to become legal to do them. If they want to use them, they already do. If they do not use them, legality is rarely the reason they don't use them. You would be hard pressed to find someone who says "I sure would like to try that Marijuana, if only it weren't illegal."
Enforcement and taxes do not reduce consumption, the only things that do are public awareness campaigns and rehabilitation clinics.
July 21, 2009 11:03 AM | Reply | Permalink
the author's statment is that increased enforcement does not (or at least, has not) lead to increased prices. in the absence of increased prices, there is no evidence of inelastic demand (at least, as the author points out, insofaras heavy users can substitute their drug of choice from within the broader category that drug belongs to). increase the price of heroin, and heavy/dependent heroin users will shift to other opiates (or opiate-like pain-killer/depressants).
July 21, 2009 2:09 PM | Reply | Permalink
the author doesn't miss the point about substitution, he restates it rather succinctly. however, i think you have missed his point about complimentarity - that drugs are often paired, so that a rise in the use of one naturally coincides with the rise in the use of its complimentary pair(s).
however i'm not sure how the author concludes that complimentarity could somehow lead to a net increase in the event of legalization. by my math, grim's whack-a-mole analogy would still seem to hold. if a user switches from one drug to another drug, they wouldn't gain the new drug's compliment without leaving the previous drug's compliment.
also, on the point of complimentarity i think it's worth noting that cannabinoids and psychedelics/hallucinogens don't really have compliments. at least not from my experience (unless you count junk food and trippy music).
July 21, 2009 2:35 PM | Reply | Permalink
while your homebrew blackmarket scenario seems far fetched - it is more likely that we would see heavy alcohol users ('abusers' in the author's construction) switching to more potent potables (beer to wine, wine to liquor, liquor to higher proof liquor) and to lower quality/cheaper (from smirnoff to five o'clock, for example). and certainly we'd see poorer drunks before we'd see the ranks of alcoholics anonymous swell.
without a link to phil cook's conjectures on alcohol taxes, the only way i see alcohol taxes decreasing traffic fatalities is if it led to more people staying home to drink rather than going out to restaurants and bars to tie one on. decreasing alcohol-related traffic fatalities is obviously not the same thing as decreasing alcohol consumption among heavy users.
July 21, 2009 2:50 PM | Reply | Permalink
That's an excellent point. A policy aimed specifically at reducing traffic fatalities might be more targeted -- a higher tax on drinks in bars and restaurants. Or a progressive tax on drinks in bars and restaurants (first 2 at 6%, 3rd drink at 10% -- 4th at 16%) Or hell... just make it illegal for anyone to have more than 2 drinks in a bar in an hour.
But a blanket tax icnrease would not make the problems go away.
July 21, 2009 3:25 PM | Reply | Permalink
Not sure that there's a plausible level of a drink tax in bars that would cut consumption in a serious way. If someone is buying 3 or 4 drinks in a bar, they're already spending $10-20 plus tip (plus food) and adding a buck or two wouldn't make much difference (except maybe to sales of top-shelf drinks). You would need enough of a tax that 3 surtaxed drinks would cost the same as 4 drinks do now, or something like that.
I would favor a revision of the dram-shop laws. If a bar has a parking lot, there's a box to blow into on the way out. Allowing patrons to get in their cars with over-limit BAC would be a directed-verdict and loss-of-license offense in the case of an accident or moving violation.
Whoever planned suburbia must have just thought people didn't drink...
July 22, 2009 1:26 PM | Reply | Permalink
why would users of alcohol (a depressant), switch to cocaine (a stimulant)??
this doesn't even jibe with your earlier point about complimentarity.
also, (setting aside the sensational phrasing of 'an explosion' gasp! panic!) even if legalization of cocaine meant that we would have more 'problem users' of cocaine and fewer 'problem users' of alcohol, you seem to be suggesting that this would be a necessarily bad thing. am i reading you correctly? if so, why would that be? i would imagine that problem cocaine users are more productive than problem alcohol users and problem alcohol users pose a far greater risk to others.
July 21, 2009 3:05 PM | Reply | Permalink
I'm a proponent of some level of legalization of cannabis, MDMA, and the safer hallucinogens (in certain settings), but I'm not fooling myself by thinking use will not increase.
To think otherwise is to say that every potential drug consumer has no fear of getting caught breaking the law. Prohibition certainly "works" to reduce use, but has MANY bad side effects worth considering, including making the remaining use less safe (think kids drinking unsupervised).
@permanentilt: "People who are addicted don't take price into account..."
Everyone takes price into account to some extent. Certainly raising prices for heavy tobacco smokers will hurt the wallet of some smokers, but many others will cut back or make more efforts to quit. If you don't think it works this way, imagine the other direction. Halve the price of cigarettes and use would certainly rise among the already smokers, and teens could much more easily afford to pick up the habit.
Kleiman never suggests prohibitions and tax raises are silver bullets, but it's absurd to suggest they have NO effect.
July 21, 2009 5:04 PM | Reply | Permalink
serious question: which drugs have you never used only because they are illegal?
also, it is important to distinguish between an increase in the number of users and an increase in the frequency of use among past/current/future users.
i can say for myself that while i might use certain drugs with a slightly greater frequency if they were not illegal, there are no drugs that i have not used in the past or do not currently use or do not intend to use (or leave open the possibility of using) in the future because of their legal status.
no.
a fear of getting caught for breaking the law is not the same thing as not breaking the law for fear of getting caught.
July 22, 2009 10:39 AM | Reply | Permalink
I'd try cannabis or MDMA once if they were legal. I think my next door neighbor sells pot, but I would be terrified to be caught with possession and probably too paranoid to enjoy them. Prohibition certainly deters (at least me) from experimenting with some drugs, and if a lot of people believe that those drugs are "gateways" to harder drug use (I don't), then you see why prohibition is attractive to them.
I know the arguments against prohibition (stopthedrugwar.org and drug warrant reader), but I think it hurts the credibility of reformers when they claim that prohibition does not deter use at all. Of course it does (criminality adds risk to behaviors and rational persons take risk into account when making decisions). It just sets the simplistic goal of eliminating use rather than the better goal of minimizing harm, and it succeeds at neither.
July 23, 2009 2:54 PM | Reply | Permalink
I'd almost buy the argument about prohibition, except for two things:
- cocaine wasn't illegal until 1914.
- it was made illegal based in large part on racially-motivated statement such as: “Most of the attacks upon the white women of the South are the direct result of a cocaine-crazed Negro brain.” (1914, Dr. Christopher Koch of Pennsylvania’s State Pharmacy Board)
The act passed that year criminalized the sale and distribution of cocaine, but not the use. It wasn't officially made a "controlled substance" until 1970.
So, armed with the historical facts, we see that the massive explosion of cocaine-related crime can be directly traced to then-President Nixon's "War on Drugs".
July 23, 2009 12:53 AM | Reply | Permalink