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March 04, 2005

Seattle Leading the Way

Visit today's issue of Drug War Chronicle to read about the amazing work being done by our friends at the King County Bar Association in Seattle. And post back here with links to any articles you see about it. (The issue may be posted by tonight and will definitely be online by mid-morning at the latest.)

- Dave Borden, DRCNet

Posted by dborden725 at 01:06 AM | Comments (3) | TrackBack

Business Week Column Calls for Legalization

This week a column in the online edition of Business Week called for legalization. I don't know yet if it is also appearing in print Following is the text of our Drug War Chronicle article about the column, slated to be distributed tomorrow morning -- followed by some thoughts I have:

In a Monday column for the Internet version of Business Week, contributing economics editor Christopher Farrell called for legalizing currently illicit drugs and taxing them at very high rates. In his regular "Sound Money" column, Farrell called for "a new kind of drug war," arguing that, "The conventional one has been highly costly, with little return. Making narcotics legal -- and very expensive -- can reduce addiction and crime," he wrote.

Citing Boston university economist Jeffrey Miron, Farrell wrote that government at all levels had spent $33 billion in prosecuting the drug war in recent years. "How is the return on that investment?" asked Farell. "Abysmal." Farrell cited the usual litany of disasters to make his case -- continuing strong demand for drugs, the growth of drug trafficking organizations, crime and corruption, overstuffed US prisons.

"It's time to consider a dramatic shift in policy," Farrell concluded. "Instead of the battle cry 'war on drugs,' let's try the mantra 'legalization, regulation, and taxation.' We should regulate narcotics just as we do cigarettes and alcohol, restricting sales to minors and imposing steep excise taxes... Indeed, the model for dealing with alcohol is instructive. Banning alcohol outright in the US was a public policy disaster. Ending Prohibition quickly cleaned up the liquor industry. Gangsters were denied a lucrative source of income, and violent crime associated with the business fell."

While the idea of legalization and regulation is not new, Farrell wrote, it has never been implemented because of fears that cheap legal drugs would create an army of addicts. The solution, Farrell opined, is to tax newly legalized drugs at rates so high that prices remain similar to current black market prices. Even though demand for drugs is relatively inelastic, it is not completely inelastic, he argued. Higher drug prices mean lower drug use levels.

"With the addition of a steep excise tax -- several hundred percentage points above the cost of wholesale production, for example -- the price of cocaine could be greater than the price the fruitless war on drugs supports. It's possible that consumption would be lower in a high-tax regime than it is in today's law-enforcement environment."

Farrell did not come to this conclusion easily, saying he did not look forward to heroin and cocaine being made available at the corner liquor store. "I know that the cost of drug abuse and addiction -- including nicotine and alcohol -- is already substantial, especially measured by increased health-care expenditures and lower worker productivity. And I have no wish to see the numbers of addicts increase. But there's the hope that with a carefully crafted new paradigm of legalization, there could be fewer users. That's positive. There's nothing positive to be derived from staying with the status quo."

In addition to writing the regular "Sound Money" column for Business Week, Farrell also hosts the nationally-syndicated "Sound Money" program for Minnesota Public Radio and contributes to National Public Radio's "Marketplace" program.

Obviously it's great that this column has run. While praising Farrell for raising the legalization issue, I also want to raise some cautions about the idea of ultra-high prices through taxation. "Vice taxes" to discourage drug use financially while keeping it legal are one option to consider. But if the price goes too high -- if it's as high or higher than current black market prices as Farrell has suggested -- the result will be a significant black market as buyers and sellers seek to avoid the high taxes. Not quite as terrible a black market as we have now, perhaps, but pretty bad.

My other caution is that a lot of the harm to addicts results from the high prices, which have a financially destabilizing effect on them, in serious cases literally driving people to homelessness, theft, prostitution, etc. So I think there are limits to how high we can wisely drive up the price.

Still, he called for legalization in the pages of a widely read publication read by the economically-focused, and my points are not intended to take away from that. Check out the column, which is titled "A New Kind of Drug War." There is a lot of interesting discussion and good statistics which are well worth examining. If anyone locates letter to the editor information, please post it here, as I was unable to find it.

- Dave Borden, DRCNet

Posted by dborden725 at 12:51 AM | Comments (4) | TrackBack