Pubdate: Sat, 26 May 2012
Source: Sydney Morning Herald (Australia)
Copyright: 2012 The Sydney Morning Herald
Contact:  http://www.smh.com.au/
Details: http://www.mapinc.org/media/441

PROHIBITION COULD BE A FALSE ECONOMY

Economists believe a more liberal attitude to drugs may help
society.

As one of history's foremost advocates of economic rationalism, Milton
Friedman makes for an unlikely poster boy for the stoner generation.

Drug dilemma special index The recipient of the Nobel memorial prize
in economics was, after all, adviser to Ronald Reagan even as the US
president declared official war on drugs in 1982.

But while Reagan's views on trickle-down tax theory may have found
their origin in his advice, Friedman remained, until his death in
2006, a passionate opponent of drug prohibition.

In a television interview in 1991 the economist spelt it out: "Now
here's somebody who wants to smoke a marijuana cigarette. If he's
caught, he goes to jail. Now is that moral? Is that proper? I think
it's absolutely disgraceful that our government, supposed to be our
government, should be in the position of converting people who are not
harming others into criminals, of destroying their lives, putting them
in jail."

While economic rationalism has come to be associated with a certain
type of conservative politics, in its truest form, free-market
economics is about the power of individual choice to enchance
society's wellbeing. Friedman was a libertarian, in the true sense of
the word.

Broadly, economics breaks society down into markets in which
individuals come together to make mutually beneficial trades, thereby
enhancing the wellbeing of society. Prices are determined by the
relative forces of supply and demand. To economists, drugs are just
another consumption good, that individuals should be left to buy and
sell in peace.

If drug consumption imposes an external cost on society - health,
policing - then it makes it a good target for taxation, like the so
called "sin taxes" levied on alcohol and tobacco.

"Economists think about unintended consequences and recognise that a
lot of the negative effects that we attribute to drugs in fact come from
prohibition," the Harvard University economist Jeffrey Miron, explained
in a 2009 CNN interview about his book Drug War Crimes: The Consequences
of Prohibition.

Better to have it all out in the open, economists argue, than to force
consumers to access black markets. They are marked by higher prices
and inferior quality products. In free drug markets, prices would be
lower and quality higher.

"With lower prices for legal drugs, people would have less of an
incentive to steal or engage in prostitution and other things like
that in order to support their drug habit."

In 2005, Friedman was one of more than 500 economists who signed a
petition to the US president George Bush opposing drug prohibition and
supporting the findings of a paper by Miron titled The Budgetary
Implications of Marijuana Prohibition.

In it, Miron estimated that the total annual cost to US state and
federal governments of the prohibition of marijuana at $US14 billion
in 2005.

The direct cost of law enforcement, policing, running court cases and
the cost of imprisoning users, was estimated at $US7.7 billion a year.
The remaining cost was the tax revenue forgone from the exclusion of
sales on the black market from the government's tax base.

Costs excluded from this analysis include the costs to the health
system of caring for drug addicts, the income tax lost from drug users
not working, or working less, and the hard-to-quantify value of lives
lost.

The stumbling block to a full cost-benefit analysis of the policy of
drug prohibition is the assessment of the benefits of prohibition as a
deterrence. It is hard to measure the benefits from people not
consuming drugs. And advocates of decriminalisation point out that
even these benefits must be weighed against the harm to existing drug
users from inferior quality drugs, or indeed, the enjoyment many
people get from some drugs.

In assessing the relative harm from drug use, the debate moves beyond
the scope of economics into the realm of public health. But empirical
findings on the impact of changing drug laws remain scarce, given the
paucity of countries that have decriminalised.

Don Weatherburn, the director of the NSW Bureau of Crime Statistics
and Research, says the Dutch experience shows marijuana consumption
did increase after decriminalisation, but to what degree of detriment
is unclear. He says people are sensitive to drug prices and
availability.

"Research has shown that when the prices of heroin and cocaine go up,
emergency department admissions for heroin and cocaine go down. When
the price of heroin in Australia went up around Christmas 2000, the
level of drug-related crime came down," Weatherburn says.

Economic analysis has provided a helpful framework in which to think
about the merits of drug prohibition. But without better knowledge of
the true health impact of increased legal drug use, firm conclusions
about the relative benefits and costs of prohibition have remained, so
far, illusive. 
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