Transcript lecture 5 war on drugs

Casual Users, Substance
Abusers, and Public Policy
The War On Drugs
Llad Phillips
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Questions
 Should
public policy towards marijuana be
any different than public policy towards
alcohol consumption and cigarette
consumption?
– Why?
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Drugs and Crime: The Perception of the Victim
Source: http://www.ojp.usdoj.gov/bjs/
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Arrests: The War on Drugs
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State Prisoners
Federal Prisons:
In 1996, Drug Offenders
accounted for 60% of
Federal Prisoners
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Federal Spending on Drug Control
1981 $1.5 Billion
1989 $6.7 “
1990 $9.8 “
1995 $13.0 “
2000 $17.9 “
2001 $18.1”
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Federal Drug Budget By Function
 Total
$17,940.3
$18,053.1
 Drug treatment $2,915.2
$3,168.3
 Drug prevention 2,338.6
2,515.7
 Criminal justice system 8,429.0
 International 1,892.9
 Interdiction 1,965.9
Phillips
Research 89.6
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9,357.7
609.7
1,950.4
106.1 10
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Drug Use by High School Seniors
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ER Incidents
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http://www.cdc.gov/hiv/graphics.htm
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Death Rates from HIV
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Questions About Crime
 What
are the Social Policy Options Towards
Victimless Crimes?
– education problem
 prevention
– health problem
 cure
for addicts and abusers
– fiscal problem
 control
use through taxes
– law enforcement problem
 focus
on demand?
– users
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
focus on supply?
– distributors
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Education
 Let
an informed public make a choice
– An individual would weigh the benefits against
the costs
– If the benefit/cost ratio exceeds one
 smoke
 drink
– Could impose costs on others
 driving
under the influence
 second hand smoke
– Protection of Minors
 blandishments
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of advertising
 influence of peers
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Health
 Treat
substance abuse
– Need to identify the abusers
 many
citizens are not covered under health plans
– Difficult to cure addicts
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Fiscal Policy
 Use
excise taxes, a tax per unit, to control
demand
– tax per pack of cigarettes
– tax per bottle of gin
 Policy
moderates rather than eliminates use
– lacks the moral suasion of a law prohibiting use
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Law Enforcement
 Control
demand?
– hard to keep tabs on numerous users
– loss of respect for the law
 people
 Control
like to party
supply?
– at home

search and destroy policies have a low success rate
– abroad
 interdiction
of supply has low success rate
 we export our enforcement problem to:
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– producing countries, e.g. Bolivia
– transhipment countries, e.g. Mexico
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What are the Tradeoffs
Among Policy Options?
Policy
Benefits
Education
Prevent Abuse Limited Effect*
Health
Cure the
Abuser
Fiscal
Decrease
Demand
Enforcement Discourage the
Law-Abiding
Costs
Limited
Coverage
Does Not
Eliminate Use
Limited
Effectiveness
* Scare tactics such as Reefer Madness are not convincing
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Some Consequences from
Criminalizing Substance Use
 barrier
to law-abiding suppliers
 enriches crooks
– prohibition financed the Mafia in the US
– drug profits have created a new Mafia in
Colombia
 high
prices drive some users to crime to
support their habit
 easy money corrupts some law enforcement
officials
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“Scale, nature, and perception
of the drug problem are very
different in ...”
 United
States
 Canada
 Western Europe
Source: Peter Reuter et. al., Comparing Western Europe and
North American Drug Policies, Rand
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The Western Nations Drug
Problem
Country Heroin Use Cocaine
Use
US
high
high
Europe moderate
low
Canada low
low
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Social
Problem
Violence
guns & drugs
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Behavior
Social Problem
crime
drug use
AIDS
( violence: US with guns,
50 million hanguns in
private hands = 100 times
the per capita rate in
Europe)
(free needles for addicts:
Germany
Italy
Netherlands
Switzerland
Great Britain)
Country
Number of Heroin Addicts
US
600,000 - 800,000
Great Britain
Germany
Netherlands
Spain
Canada
None
Epidemic Decades
60’s & 70’s
60’s
60’s
60’s
80’s
Country
Number of Cocaine Addicts Epidemic Decades
US
1,800,000-2,000,000*
80’s
Canada
None
* 12,000,000 users of at least once per year
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The Western Nations Drug Problem
Country
US
Policy Response Comments
law
enforcement
Italy
health problem decriminalized
use
Netherlands health problem Cannabis legally
available
Spain
health problem drug use or
possession, legal
Switzerland health problem heroin
maintenance
plan
England
health problem methadone
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available
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Market Analysis
 Compare
and contrast
– free market
– enforcement
– fiscal policy
 excise
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tax as a control device
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Market Analysis
 concepts
– market supply
 marginal
cost of production: the additional cost of
one more unit
 cost of production equals the sum of marginal costs
 revenue = price * quantity sold
– market demand
 price
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some consumers are willing to pay
 expenditure = price * quantity bought
 consumer surplus: a measure of welfare for those
consumers willing to pay above the market price
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Market Analysis
 Concepts
– supply and demand
 determines
the market price
– the marginal cost of production = the marginal value of
consumers
 the
quantity demanded equals the quantity supplied
 profit = revenue - cost of production
– profit, or producer’s surplus, is a welfare measure
 total
welfare benefit = consumer’s surplus +
producer’s surplus
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Market Supply
Marginal
Cost
Marginal Cost
of Production
Cost of
Production
Quantity Produced
Quantity
Market Demand
Consumer
Surplus
Market
Price, PM
Market Demand
Revenue
R = PM QM
Quantity Demanded, QM
Market Supply and Demand
Consumer
Surplus
Triangle
Market
Price, PM
Supply
Profit =
Revenue Cost
Demand
Cost of
Production
Trapezoid
Quantity Demanded
and Produced, QM
Enforcement Policy: Search, Confiscate, Resale
Price,
Marginal
Cost
Search, Confiscate,
Resale: Supply
2 PM
Free
Market
Supply
PM
2a
PM
a
Quantity Produced
Price,
Marginal
Cost
Enforcement Policy: Search, Confiscate, Resale
Search, Confiscate,
Resale: Supply
Search,
Confiscate
and
Resale
Price, PS, C, R
Free
Market
Supply
Free
Market
Price, PFM
2a
Demand
a
Quantity Produced
and Demanded, QS, C, R
Enforcement Policy: Search, Confiscate, Burn
Search, Confiscate, Burn: Supply
Price,
Marginal
Cost
QM / 2
Search, Confiscate,
Resale: Supply
2 PM
Free
Market
Supply
PM
2a
PM
a
QM
Quantity Produced
Enforcement Policy: Search, Confiscate, Burn
Price,
Marginal
Cost
Search, Confiscate, Burn :
Supply
Search, Confiscate,
Resale: Supply
Search,
Confiscate
and
Burn
Price, PS, C, B
Free
Market
Supply
Free
Market
Price, PFM
2a
Demand
a
Quantity Produced
and Demanded, QS, C, B
Fiscal Policy: 50% Excise Tax, Government Keeps the Revenue
Price,
Marginal
Cost
2 PM
50 % Excise Tax
Supply
Tax/unit = 0.5 Price/unit
Revenue - Tax = $20,000
2 Plots*P - 2 Plots*T = $20,000
2(P - T) = $20,000
2(P - 0.5P) = $20,000
P = $20,000
Free
Market
Supply
PM
2a
PM
a
Quantity Produced
Fiscal Policy: 50% Excise Tax, Government Keeps Revenue
Price,
Marginal
Cost
50 % Excise Tax
Supply
After a 50 %
Excise Tax:
Price, P
Tax Rate =
0.5 P
Free
Market
Supply
Free
Market
Price, PFM
2a
Demand
a
Quantity Produced
and Demanded, Q
Fiscal Policy: 50% ExciseTax, Use Revenue to Buy Marijuana
Price,
Marginal
Cost
50 % Excise Tax and Buy
Program
Supply
50 % Excise Tax
Supply
Price, P
with a 50
%
Excise Tax
and Buy
Program
Free
Market
Supply
Free
Market
Price, PFM
2a
Demand
a
Quantity Produced
and Demanded, Q