Economic Issues of Legalizing Drugs

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Economic Issues of Legalizing Drugs
There is no way around it, drugs and drug use are ingrained human activities. Every culture has a robust history when it comes to different types of drug use and each also has their own way of dealing with the substances. No matter what our individual or societal views are when it comes to drugs, you have to appreciate the complexity of the world drug trade. Using the term paper, “The Economics of the Legalization of Drugs” as well as a survey from The Economist (which was used as a reference in the term paper) as jumping off points, this paper discusses the legalization of drugs from an economics perspective. Humans have used various types of drugs through out our history. Ancient cultures “used narcotic plants to relieve pain or to heighten pleasure; they used hallucinogenic plants to induce trance-like states during religious ceremonies. Natural substances, used directly or in refined extracts, have also served simply to increase or to dull alertness, to invigorate the body, or to change the mood” (Plus, 2003). Even with a diverse world history, when Richard Nixon ran for president of the United States in 1968, he included a strong anti-drug sentiment to his platform, which came to be called (as we still know it today) as the “War on Drugs.” According to the U.S. Department of Justice Bureau of Justice Statistics website, the amount of arrests for drug abuse violations has increased from just over 500,000 in 1982 to well over 1.8 million in 2007. Breaking these down to the number of arrests by type of drug law violations, we see that the crime of possession saw roughly 538,000 arrests in 1982 with an increase to over 1.5 million in 2007. The crime of sales/manufacturing saw roughly 138,000 arrests in 1982 with an increase to over 322,000 in 2007. Putting it into more perspective, the amount of arrests in 1982 were almost 585,000 adults and 91,000 juveniles. In 2007, the numbers increased to 1.6 million adults and 196,000 juveniles (Bureau of Justice Statistics, 2009). Based on this information alone, it is clear to see that the amount of money needed to curb drug use, manufacturing, and sales is enormous. One can see just how much money is being spent this year, in real time, from the Drug War Clock on the Drug Sense website As of Sunday, November 15, 2009 at 3:34:39 pm, the amount of money spent at the Federal level was estimated at almost $18 million. The amount spent at the state level was estimated at $27 million. This is a total estimate of $44 million spent this year alone. This website makes their estimate based on the information from the Office of National Drug Control Policy. With so much money being spent, one has to ask if the cost of curbing the behavior (and not legalizing drugs) outweighs the benefits of not curbing the behavior (and legalizing drugs). According to “The Economics of the Legalization of Drugs” paper, the survey in The Economist laid out the most important aspect for legalizing drugs as profitability. Why is it so profitable? Simple, according to this survey: “the amount paid by the consumer on the street for a small amount of any illegal drug is astronomically higher than the cost of producing it. The survey pointed out a 330,000% markup in the price of a kilo of heroin from what the producer receives to what a consumer in the U.S. pays” (“The Economics of the Legalization of Drugs, 2001). Other huge markups for other drugs were also noted. Even with the markup, the worldwide market for illegal drugs is huge. Actual numbers, of course, have to be guessed at because quantity of sales and prices are not known for certain. “One widely accepted United Nations figure is $400 billion (bigger than the global oil industry), employing around 20 million people and serving 70 to 100 million customers” (Coyle, 2002). This high demand in the face of increased prices shows that the demand for...
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