Economics Behind the War on Drugs

In 1971, President Richard Nixon declared drugs public enemy number 1, initiating the perpetual war
on drugs that we are still dealing with today. A famous quote from another ex-president, James
Buchanan, was that “Economics puts limits on people’s utopias.” So what are the economics behind the
war on drugs that make the government’s utopian vision of drug prohibition so seemingly impossible to
achieve?
According to our government, “the more Americans use drugs, the higher the health, safety,
productivity, and criminal justice costs we all have to bear.” Therefore, prohibition seems like the right
means to achieve the end utopian society. But illegal drugs have become an entire industry, so much so
that the demand for drugs in the US has caused a spike in violence in Mexico. This issue seems to come
more from the fact that they are illegal which is why many drugs are imported in from Mexico.


The distribution of illegal drugs has always been harsher than the punishment for possession with the
idea that if you take out the dealers nobody will have anyone to get their drugs from. But as soon as one
dealer goes down, they are just replaced with another one. It’s basic supply and demand of the streets:
as long as someone wants cocaine and is willing to pay for it, someone will be there to supply it.


The current state of our war on drugs is that it essentially acts as a tax placed on drug suppliers. Less
and less dealers are willing to take that risk. But the demand stays the same with a lower supply,
therefore causing an increase in the price. In theory, the economics behind this seems like it would be
effective in reducing the number of people buying these drugs due to the increase in prices. However,
that isn’t the case with drugs due to the fact that a majority of people who buy them are addicted.
And addicts will pay any price to get what they’re craving. The demand for illegal drugs is relatively
price inelastic.


The only way for the war on drugs to be effective is to reduce the quantity of drugs in the market instead
of increasing the cost. The supply-side drug war just increases the amount of money made by the dealers
which just means they have more means to smuggle drugs into the country and bribe off law enforcement,
therefore making it harder in the long run to reduce the supply.


Drug prohibition has also proven to be more harmful than beneficial. When drugs are illegal, the cost
differential between less and more potent drugs is lower and therefore people opt for the more potent ones.
Illegality also makes the product more dangerous because you never know what it might be laced with.
Distributors can get away with selling bad doses without damaging their reputation because there’s no
brand name associated with their product. This was discovered as since Nixon declared the war on drugs,
the rate of death from drug overdose increased by a factor of 10.


Drug business is violent because it’s illegal. Since they can’t settle disputes in court, they do it on the
street. The same was seen in the 1920s during alcohol prohibition. Violent, criminal gangs catered to the
nation’s demand for alcohol, and as soon as prohibition was lifted this violence ended. The estimated
increase in homicide rate due to prohibition is 25-75%.

The war on drugs is financed by American tax dollars. Currently, the government spends $51 billion
annually on this war. More than half a million people are incarcerated in this country due to drug
convictions, which is paid for again by taxes. There have been cases where the police make mistakes and
raid innocent people’s homes and kill innocent civilians because they were looking for drugs. The
supply-side war on drugs that we are fighting is not one that we are going win, and in the long run the
general public seems to be suffering more from drug prohibition than this war than from the drugs
themselves.

https://www.econlib.org/library/Columns/y2013/Powelldrugs.html
https://jis-online.org/2017/04/13/narcotics-nation-the-economics-behind-the-war-on-drugs-and-why-
us-drug-policy-fails-to-yield-results/
http://www.drugpolicy.org/issues/making-economic-sense

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