Chapter 2
Crime and Drugs
1
Chapter 2: Crime and Drugs
Crime
•Any action that is forbidden by law and carries
criminal penalties
•Violent crimes: murder, rape, robbery, and
assault
•Offenses against property: arson and theft
•Other crimes: gambling, prostitution, possession
of and trafficking in drugs, and sales of
pornography
•Violent crime rates have fallen since 1990
Table 2-1: Violent crime rates in United States (number of crimes
per 100,000 inhabitants), selected years 1990–2011
aViolent
crime includes murder and nonnegligent manslaughter, forcible rape,
robbery, and aggravated assault; and by definition it involves force or threat of
force
Crime Prevention
•Crime prevention is an example of a public
good
•Public goods and services
• Characteristics
• Indivisible
• Nonrivalrous
• Nonexcludable
• Subject to the free-rider problem
• Often provided by the government
• Examples: national defense, street lights,
roads, crime prevention
Crime Prevention
Consider a Can of Coca-Cola (a private good) vs.
National Defense (a public good)
• Indivisible
• Impossible to divide national defense into units
sufficiently small to be sold in private markets
• Nonrivalrous
• National defense use by one person does not
prevent use by others
• Nonexcludable
• Benefits of national defense cannot be kept from
persons who do not pay for the goods’ provision in a
private market
Crime Prevention
•Free-rider problem
• Individuals that do not pay their share for a good
or service nevertheless enjoy its benefits
•Private market
• Is not efficient in providing public goods (if you
cannot make people pay for it)
•Government
• Usually provides public goods and services
• Finances them with tax revenues
Crime Prevention
•Cost-benefit analysis
• Should be done for all projects requiring public
spending
• A study that compares the costs and benefits of a
policy or program
• The activity is justified only if the benefits are
greater than the costs
• If two policies both have greater benefits to society
than their costs, the one with the larger net benefit
should generally be adopted
Crime Prevention
•Costs of anticrime activity
• Costs of equipment
• Squad cars and prison cells
• Salaries and fringe benefits of police, court, and
corrections personnel
• Costs of administering the system
• From 1982 to 2006, spending on police protection
increased 420%, spending on the judicial system
increased 503%, and spending on correction facilities
(mostly paid for by states) increased 660%
• Opportunity cost – production possibilities frontier
Production possibilities curve for crime prevention
Resources used for crime prevention are not available for other uses. Over time, the
United States has moved from a point such as A to a point such as B on the curve.
Crime Prevention
•Benefits of crime prevention activities
• Value of property damage that is prevented
• Medical expenses, psychological trauma, loss of
income, and other expenses that are not incurred
when criminal assaults are prevented
• Feeling of “being safe”.
•Net benefits
• The excess of benefits over costs
• Can be positive or negative
Incarceration rates (number of incarcerated people per
100,000 inhabitants), 20 selected countries
Crime Prevention
•Increased costs of our prison system
•Higher levels of incarceration, longer prison
sentences
• Supposed to reduce crime:
• Deter would-be offenders from committing crimes
because of the increased likelihood of a prison
sentence
• Physically prevent convicts from committing new
crimes while they are in prison
Empirical Studies of the Trend Toward Higher
Incarceration Rates
•Imprisonment policy discussions are usually
couched in terms of:
• Decreasing violent crimes against persons, and
• Prison overcrowding and the nature of the prison
population
Decreasing Violent Crimes Against Persons
• Studies with age-adjusted data find few benefits and
great costs associated with higher incarceration rates
• Studies without age adjustments find that the
benefits of increased incarceration greatly exceed the
costs
• Thus, conflicting research methods lead to uncertain
conclusions
Prison Overcrowding
Despite falling crime rates in 1990s to the present, the
prison population soared due to:
1. Establishment of mandatory minimum sentences for drug
violations and other offenses (less discretion)
• More than half (55 percent) of federal prisoners are drug
offenders
2. Truth in Sentencing provision in a 1994 federal crime bill
(tied to federal funding) affecting sentencing and paroles
3. Adoption by federal government and half the states of
“three strikes and you’re out” laws
• Require sentences of life for third conviction of certain crimes
(one stole video cassettes and another stole golf clubs)
• The “third” strike of more than half of the prisoners is for a
non-violent offense such as drug possession
The Death Penalty
CORE QUESTION
Should the Death Penalty Be Allowed?
Moral & Ethical Issues
Is the Death Penalty Immoral?
Should Physicians Participate in Executions?
What Is the Hippocratic Oath?
Legal Considerations
Is the Death Penalty Unconstitutional?
Has DNA Testing Led to Significant
Improvements in the Criminal Justice System?
Is Poor Representation by Public Defense
Attorneys a Widespread Problem in Capital
Cases?
Is Prosecutorial Misconduct a Widespread
Problem in Capital Cases?
Deterrence & Retribution
Does the Death Penalty Deter Crime?
Should Executions Be Made Public?
Should the Death Penalty Be Used for
Retribution?
Social Issues
Does a Person's Race Affect the Likelihood of
Him/Her Receiving the Death Penalty?
Does a Person's Income Level Affect the
Likelihood of Him/Her Receiving the Death
Penalty?
Should a Death Penalty Moratorium Be
Implemented?
Should Victims' Opinions Matter When
Considering the Death Penalty?
Death Penalty vs. Life in Prison
Is Life in Prison without Parole a Better Option
Than the Death Penalty?
Does the Death Penalty Cost Less Than Life in
Prison without Parole?
Cost-Benefit Analysis of the Death Penalty
• Emotional issue
• Politicians not supporting the death penalty can
be seen as “soft on crime”
• Death penalty benefits
• Possible deterrent of capital crimes
• Death penalty costs
• More expensive than a sentence of life in prison
• Trials for death penalty
• Tend to take longer
• Typically require more lawyers and more costly
expert witnesses
• Are far more likely to lead to multiple appeals
17
Cost-Benefit Analysis of the Death Penalty
• Death penalty costs
• In CA, the death penalty costs $114 million per year beyond
the cost of lifetime imprisonment
• In KS, capital case costs are 70% more expensive than
comparable non-capital cases
• In NC, the death penalty costs $2.26 million more per
execution than the lifetime imprisonment of convicted
murderers
• In TX, a single death penalty case costs an average of $2.3
million, which is about three times the cost of imprisoning
someone in a single cell at the highest security level for 40
years
• In FL, the death penalty costs $51 million per year above
what it would cost to punish all first degree murderers with
life in prison without parole
• All the studies conclude that in terms of cost-benefit
analysis, the costs of the death penalty far exceed any
benefits.
18
Police Chiefs’ Views
Accurate
Inaccurate
Politicians support the death penalty as a symbolic
way to show they are tough on crime
69%
24%
Death penalty cases are hard to close
and take up a lot of police time.
61%
32%
Debates about the death penalty distract Congress
and state legislatures from focusing on real
solutions to crime problems.
50%
42%
The death penalty significantly reduces
the number of homicides
37%
48%
The death penalty is one of the most important
law enforcement tools
31%
46%
Murderers think about the range of possible
punishments before committing homicides
24%
69%
Smart on Crime: Reconsidering the Death Penalty in a Time of Economic Crisis
National Poll of Police Chiefs Puts Capital Punishment at Bottom of Law Enforcement Priorities
A Report from the Death Penalty Information Center (Washington, DC, October 2009)
Government Options
•
•
•
•
•
Tobacco
Alcohol
Drugs
Prostitution
Gambling
Regulate
Illegal
Tax
Legal vs. Illegal
• During Prohibition, the death rate from acute alcohol
poisoning was more than 30 times higher than it is today.
• In 1927 (alcohol illegal), 12,000 people died from acute
alcohol poisoning, and many thousands more were blinded
or killed by contaminated booze.
• When a substance is made illegal, there is an incentive for
users to switch to a less often but more intensive use (alcohol
and drugs).
• In Nevada, VD in registered prostitutes is almost nonexistent, and no prostitute has tested positive for AIDS.
• In Newark, NJ, 52% of prostitutes tested were infected with
the AIDs virus. (believed to be the same in NY and
Washington, DC)
• What about drugs?
• In 2017, 70,237 drug overdose deaths occurred in the U.S.
Opioids, mainly synthetic opioids (other than methadone)
are currently the main driver of drug overdose deaths.
Assume for the time being:
•No negative consequences to innocent third
parties
•People know what they are doing (they’re
rational)
•“Victimless” crimes
•So, why are they considered illegal?
Arguments for Making a Good Illegal
1. People have limited information about the good, are not
capable of making a good decision about the good, or the
good is addictive and one-time users can not learn from
their mistake.
Elasticity implication?
2. There are externalities, effects of a transaction that hurt
or help people who are not a part of that transaction,
involved in the production or consumption of the good.
• E.g., families of someone addicted to drugs, alcohol, or gambling
• Or crimes committed by someone addicted to drugs
3. The good is immoral.
Sin taxes
Preventing Bad Decisions
• Economists are typically reluctant to assume that
people can not make good decisions (not consistent
with the assumption that people are rational).
• Drugs tend to be an exception to this rule because
they are addictive (e.g., cocaine).
• Ads may appeal to children
• Whaaassuupp
• Joe Camel
• NASCAR Winston Cup, Busch Series
• Virginia Slims Tennis
Preventing Bad Decisions
• Vast majority of smokers begin smoking well before
becoming adults, so . . .
• Preventing a child from having access to cigarettes is
in society’s interest and in the child’s long-term
interest
• What about
• Alcohol?
• Gambling?
• Drugs?
Should Drugs Be Legalized/Decriminalized?
• Substance Abuse and Mental Health Services
Administration of the U.S. Department of Health and
Human Services
• Regularly conducts a national survey on drug abuse
• 46% of population - admits to using some illicit drug
during their lifetime
• Marijuana or hashish
• Prescription drugs
Should Drugs Be Legalized/Decriminalized?
United States admissions aged 12 years and older, by
primary substance use: 2017
Total
(Number)
Alcohol Only
Alcohol with secondary drug
Heroin
Other opiates
Cocaine (smoked)
Cocaine (other route)
Marijuana
Amphetamines
Other stimulants
Tranquilizers
Sedatives
Hallucinogens
PCP
Inhalants
Other/Unknown
Total (All Substances)
323,790
248,200
507,708
146,070
59,333
40,585
237,164
198,014
2,027
19,641
3,204
2,183
5,148
888
126,584
1,920,539
Percent
16.86%
12.92%
26.44%
7.61%
3.09%
2.11%
12.35%
10.31%
0.11%
1.02%
0.17%
0.11%
0.27%
0.05%
6.59%
100.00%
Data Source: National Survey of Substance Abuse Treatment Services
27
Should Drugs Be Legalized/Decriminalized?
•Background on the legal status of drugs, U.S.
• 1914, opiates illegal
• 1937, marijuana illegal
• 1920 – 1933, alcohol prohibited
• Currently: alcohol and tobacco are legal but
cannot be sold legally to minors
•Many European countries
• Much more relaxed drug laws and policy
Should Drugs Be Legalized/Decriminalized?
29
The War on Drugs: U.S. Antidrug Policy
•Decrease the supply of drugs (up to 95% of effort)
• Efforts to prevent drugs from entering U.S.
• Increased severity of punishment for selling drugs
• Involve the U.S. military
The War on Drugs: U.S. Antidrug Policy
•Decrease the demand for drugs (about 5% of
effort)
• Drug awareness & education programs for youth
• Increased penalties for possession of illegal drugs
• Prisons - drug treatment programs for offenders
• Zero tolerance of drug use
The War on Drugs: U.S. Antidrug Policy
•Argument against drug legalization
• Adverse personal health consequences of drugs
• Expected increase in drug-related social problems if
drugs were to be legalized
• Success of the war on drugs
The War on Drugs: U.S. Antidrug Policy
•Argument in favor of drug legalization
• Efforts to restrict the supply of drugs have largely
failed
• Link between illegal drugs and crime
• Drugs may contribute to corruption
• Drug law enforcement may be discriminatory
• Drug enforcement may violate our constitutional
rights
• Financial & opportunity costs of drug enforcement
• Health consequences of our drug policies
The War on Drugs: U.S. Antidrug Policy
•Benefits of the legalization/decriminalization
of drugs
• Tax dollars for the government
• Drugs would be safer
• Organized crime might exit the drug industry
• Less criminal activity
• Resources saved: education & treatment programs
Centers for Disease Control and Prevention
• It’s legal in many states, so doesn’t that mean marijuana
is safe?
• The fact that it’s legal does not mean that it is safe. Using
marijuana especially at an early age can lead to negative
health consequences.
• Heavy marijuana use (daily or near-daily) can do damage to
memory, learning, and attention, which can last a week or more
after the last time someone used.
• Using marijuana during pregnancy or while breastfeeding may
harm the baby, just like alcohol or tobacco.
• Marijuana use has been linked to anxiety, depression, and
schizophrenia, but scientists don’t yet know whether it directly
causes these diseases.
• Smoking any product, including marijuana, can damage your
lungs and cardiovascular system.
35
Where are we today?
Marijuana is legal in 11 states for adults over the age of 21, and legal
for medical use in 33 states.
Economics of Prohibition or Legalization
•Effect of legalization on demand for drugs
• Increase in demand
• Higher price
• Higher quantity
•Effect of legalization on supply for drugs
• Increase in supply
• Lower price
• Higher quantity
• How much the use of the drugs would increase depends
on elasticity of demand
Figure 2-3: Effect of legalization of drugs on the demand
for drugs
Legalization would increase demand from D to D’, which would increase price to P’ and
quantity to Q’
Effect of legalization of drugs on the
supply for drugs
Price
S1
S2
Demand
0
Quantity
Legalization would increase supply from S1 to S2, decreasing the price and
increasing the quantity supplied.
39
Chapter 2 Appendix: Elasticity
•Elasticity of demand
• Responsiveness of consumers buying decisions to
changes in the price of the product
•Elastic demand
• Buyers – more responsive to changes in price
•Inelastic demand
• Buyers – less responsive to changes in price
Elasticity
• Elasticity coefficient
Elasticity
If demand is elastic
Elasticity coefficient > 1 (absolute value)
Any percentage change in price causes a
larger percentage change in quantity
demanded
If demand is inelastic
•Elasticity coefficient < 1 (absolute value)
•Any percentage change in price causes a
smaller percentage change in quantity
demanded
Elasticity
•Demand curves
•The flatter (closer to horizontal) curve will
be more elastic
•The steeper (closer to vertical) curve will
be more inelastic
Figure 2-7: Two demand curves of varying elasticity
D1 is less elastic than demand curve D2 at prices near their $4 intersection
Figure 2-4: Effects of the legalization of drugs on the
supply of drugs
Legalization of drugs would increase supply from S to S’. which would decrease price to P’
and increase quantity to Q’. The size of the effect on price and quantity depends on the
elasticity of demand which is why it is important to have some knowledge of the
elasticity of demand.
Elasticity
•Excise tax – supply decrease
•Less physically addicting drug
• Elastic demand
• Greater decrease in quantity
• Smaller increase in price
• Greater burden of the tax falls upon the
supplier
• Lower profits
Elasticity
•Excise tax – supply decrease
•More physically addicting drug
• Inelastic demand
• Little decrease in quantity
• Bigger increase in price - by almost the full
amount of the tax
• Greater burden of the tax falls upon the
consumer
• Higher price of the drug
Figure 2-8: Two demand curves of varying elasticity
with the imposition of an excise tax
Economics of Prohibition or Legalization
•Regulation through economic policies
• Government’s expenditures on drug-related programs
• Demand-side treatment & education programs
• A system of excise taxes levied on legal drugs
• Decrease the supply of the drug
• Regulated and kept out of the hands of minors
• Drivers under the influence of any drug could be
arrested
• What is the elasticity of demand for drugs in the U.S.?
• We don’t know
Tax Revenues from Pot Sales are not a sure bet
• NJ estimated that legal sales of marijuana would reap
between $80 and $120 million annually
• Pa lawmakers estimated that legal sales of marijuana
would reap $580 million in additional tax revenues
• A recent study by the Pew Charitable Trusts suggests
that these projections might be the stuff of champagne
dreams and caviar wishes
• Reasons:
• Overly aggressive taxes keep the black markets alive
• Positive outcomes:
• Taxes exceed the costs of administrating the programs
• Hundreds of millions saved in criminal justice system
50
Safehouse: a Proposed Philadelphia Safe Injection Site
• Opioid overdoses continue to rise around the U.S.
• Safe injection sites
• Provide addicts with a place where they can use drugs
under the supervision of a trained medical staff that have
naloxone available and provide clean needles and other
supplies
• Users bring their own drugs
• Site staff provides counseling about accessing treatment,
legal help, housing and other social services
51
Safehouse: a Proposed Philadelphia Safe Injection Site
• Supervised injection sites operate in Canada,
Europe, and Australia
• Safehouse is the first one proposed in the United
States
• Located in a Kensington area known for its drug use
• Supported by local government(?), but opposed by
federal government
• Health officials in cities (Seattle, New York, and
Denver) and states (Massachusetts, Vermont, and
New Jersey) have discussed similar injection site
proposals
• Another NIMBY issue
52
Conservative versus Liberal
Economic conservatives
Economic liberals
• Less government involvement • Greater government
in economic realms
intervention in the
marketplace
• Support the legalization of
drugs and other victimless
• Favor the criminalization and
crimes
prohibition of drug use and
other so-called victimless
• Excise taxes
crimes
• Note: Social conservatives
• Note: social liberals are more
would not support such
likely to support legalization
legalization
of drugs
Websites discussing drug
legalization/decriminalization
• http://www.heritage.org
• http://www.cato.org
• http://www.leap.cc/
Law Enforcement Action Partnership (LEAP)
55
Chapter 2: Crime and Drugs
The Table below shows violent crime rates in United States (number of crimes per 100,000
inhabitants) for selected years from 1990 to 2011.
a
Violent crime includes murder and nonnegligent manslaughter, forcible rape, robbery, and
aggravated assault; and by definition it involves force or threat of force
Crime Prevention
Crime prevention is an example of a public good. Public goods and services have the following
characteristics. They are: indivisible, nonrivalrous, and nonexcludable. You cannot prevent
someone from consuming a public good or service even if that person does not pay for the good
or service. As a result they are subject to the “free-rider problem.” As a result, they are usually
provided by the government. Examples include national defense, street lights, roads, and crime
prevention.
Consider a Can of Coca-Cola vs. National Defense
Indivisible:
Impossible to divide national defense into units sufficiently small to be sold in private
markets as is done with Coca-Cola
Nonrivalrous:
National defense use by one person does not prevent use by others. If you buy a can
of Coca-Cola, that can is yours. Others can also buy other cans of Coca-Cola, but not
the one you purchased.
Nonexcludable
Benefits of national defense cannot be kept from persons who do not pay for the
goods’ provision in a private market. Unless you share your can of Coca-Cola, no
one else benefits from it except you.
Free-rider problem
Individuals that do not pay their share for a good or service nevertheless enjoy its
benefits
The private market is not efficient in providing public goods, so the government usually provides
public goods and services and finances them with tax revenues
Cost-benefit analysis: Should be done for all projects requiring public spending. A cost-benefit
analysis is a study that compares the costs and benefits of a policy or program. The activity is
justified only if the benefits are greater than the costs. If two policies both have greater benefits
to society than their costs, the one with the larger net benefits should generally be adopted.
Costs of anticrime activity
Costs of equipment (e.g., police vehicles and prison cells
Salaries and fringe benefits of police, court, and corrections personnel
Costs of administering the system
From 1982 to 2006, spending on police protection has increased 420%, spending on the judicial
system increased 503%, and spending on correction facilities has increased 660%
Benefits of crime prevention activities
Value of property damage that is prevented
Medical expenses, psychological trauma, loss of income, and other expenses that are not
incurred when criminal assaults are prevented
Feeling of “being safe”.
Net benefits
The excess of benefits over costs which can be positive or negative.
The Table below shows incarceration rates (number of incarcerated people per 100,000
inhabitants) for 20 selected countries
Increased costs of our prison system
Higher levels of incarceration and longer prison sentences were supposed to reduce crime by
deterring would-be offenders from committing crimes because of the increased likelihood of a
prison sentence while physically preventing convicts from committing new crimes while they are
in prison
Empirical Studies of the Trend Toward Higher Incarceration Rates
Imprisonment policy discussions are usually couched in terms of decreasing violent crimes
against persons, and prison overcrowding and the nature of the prison population
Decreasing Violent Crimes Against Persons
Studies with age-adjusted data find few benefits and great costs associated with higher
incarceration rates, while studies without age adjustments find that the benefits of increased
incarceration greatly exceed the costs. Thus, conflicting research methods lead to uncertain
conclusions
Prison Overcrowding
Despite falling crime rates in 1990s to the present, the prison population soared due to:
1. Establishment of mandatory minimum sentences for drug violations and other offenses (less
discretion)
• More than half (55 percent) of federal prisoners are drug offenders
2. Truth in Sentencing provision in a 1994 federal crime bill (tied to federal funding) affecting
sentencing and paroles
3. Adoption by federal government and half the states of “three strikes and you’re out” laws
• Require sentences of life for third conviction of certain crimes (one stole video cassettes and
another stole golf clubs)
Cost-Benefit Analysis of the Death Penalty
It is an emotional issue. Politicians not supporting the death penalty can be seen as “soft on
crime”
Death penalty benefits:
Possible deterrent of capital crimes
Death penalty costs:
More expensive than a sentence of life in prison
Trials for death penalty
Tend to take longer and typically require more lawyers and more costly expert witnesses
Are far more likely to lead to multiple appeals
Examples of death penalty costs:
In CA, the death penalty costs $114 million per year beyond the cost of lifetime imprisonment
In KS, capital case costs are 70% more expensive than comparable non-capital cases
In NC, the death penalty costs $2.26 million more per execution than the lifetime imprisonment
of convicted murderers
In TX, a single death penalty case costs an average of $2.3 million, which is about three times
the cost of imprisoning someone in a single cell at the highest security level for 40 years
In FL, the death penalty costs $51 million per year above what it would cost to punish all first
degree murderers with life in prison without parole
All the studies conclude that, in terms of cost-benefit analysis, the costs of the death penalty far
exceed any benefits.
CORE QUESTION
Should the Death Penalty Be Allowed?
Moral & Ethical Issues
Is the Death Penalty Immoral?
Should Physicians Participate in Executions?
What Is the Hippocratic Oath?
Legal Considerations
Is the Death Penalty Unconstitutional?
Has DNA Testing Led to Significant
Improvements in the Criminal Justice System?
Is Poor Representation by Public Defense
Attorneys a Widespread Problem in Capital
Cases?
Is Prosecutorial Misconduct a Widespread
Problem in Capital Cases?
Deterrence & Retribution
Does the Death Penalty Deter Crime?
Should Executions Be Made Public?
Should the Death Penalty Be Used for
Retribution?
Social Issues
Does a Person's Race Affect the Likelihood of
Him/Her Receiving the Death Penalty?
Does a Person's Income Level Affect the
Likelihood of Him/Her Receiving the Death
Penalty?
Should a Death Penalty Moratorium Be
Implemented?
Should Victims' Opinions Matter When
Considering the Death Penalty?
Death Penalty vs. Life in Prison
Is Life in Prison without Parole a Better Option
Than the Death Penalty?
Does the Death Penalty Cost Less Than Life in
Prison without Parole?
So Called “Victimless Crimes”
•
•
•
•
•
Tobacco
Alcohol
Drugs
Prostitution
Gambling
Regulate
Illegal
Tax
Government Options: regulate them, legalize them, and / or tax them
Legal vs. Illegal
During Prohibition, the death rate from acute alcohol poisoning was more than 30 times higher
than it is today.
In 1927 (alcohol illegal), 12,000 people died from acute alcohol poisoning, and many thousands
more were blinded or killed by contaminated booze.
When a substance is made illegal, there is an incentive for users to switch to a less often but
more intensive use (alcohol and drugs).
In Nevada, VD in registered prostitutes is almost non-existent, and no prostitute has tested
positive for AIDS.
In Newark, NJ, 52% of prostitutes tested were infected with the AIDs virus. (believed to be the
same in NY and Washington, DC)
What about drugs?
Drug overdoses kill about 48,000 people a year in the U.S. (19,000 attributed to prescription
painkillers, and another 11,000 tied to heroin).
Assume for the time being:
No negative consequences to innocent third parties, and people know what they are doing, that
is, they’re rational. If these are “victimless” crimes, why are they considered illegal?
Arguments for Making a Good Illegal
(the time being is over)
1. People have limited information about the good, are not capable of making a good decision
about the good, or the good is addictive and one-time users cannot learn from their mistake.
Elasticity implication?
2. There are externalities, effects of a transaction that hurt or help people who are not a part of
that transaction, or involved in the production or consumption of the good.
3. The good is immoral.
Sin taxes
Preventing Bad Decisions
1. Economists are typically reluctant to assume that people cannot make good decisions (not
consistent with the assumption that people are rational).
2. Drugs tend to be an exception to this rule because they are addictive (e.g., cocaine).
3. Ads may appeal to children
Whaaassuupp
Joe Camel
NASCAR Winston Cup, Busch Series
Virginia Slims Tennis
Vast majority of smokers begin smoking well before becoming adults, so . . . preventing a child
from having access to cigarettes is in society’s interest and in the child’s long-term interest.
What about
Alcohol?
Gambling?
Drugs?
Should Drugs Be Legalized?
Substance Abuse and Mental Health Services Administration of the U.S. Department of Health
and Human Services regularly conducts a national survey on drug abuse. Forty six percent of
population admits to using some illicit drug during their lifetime, primarily marijuana and
prescription drugs.
Background on the legal status of drugs, U.S.
1914, opiates illegal
1937, marijuana illegal
1920 – 1933, alcohol prohibited
Currently: alcohol and tobacco are legal but cannot be sold legally to minors
Many European countries have much more relaxed drug laws and policy
The War on Drugs: U.S. Antidrug Policy
Decrease the supply of drugs (up to 95% of effort)
Efforts to prevent drugs from entering U.S.
Increased severity of punishment for selling drugs
Involve the U.S. military
Decrease the demand for drugs (roughly 5% of the effort)
Drug awareness & education programs for youth
Increased penalties for possession of illegal drugs
Prisons - drug treatment programs for offenders
Zero tolerance of drug use
Argument against drug legalization
Adverse personal health consequences of drugs
Expected increase in drug-related social problems if drugs were to be legalized
Success of the war on drugs
Argument in favor of drug legalization
Efforts to restrict the supply of drugs have largely failed
Link between illegal drugs and crime
Drugs may contribute to corruption
Drug law enforcement may be discriminatory
Drug enforcement may violate our constitutional rights
Financial & opportunity costs of drug enforcement
Health consequences of our drug policies
Benefits of the legalization of drugs
Tax dollars for the government
Drugs would be safer
Organized crime might exit the drug industry
Less criminal activity
Resources saved: education & treatment programs
Where are we today?
As of January, 2019, recreational marijuana is legal in nine states and medical marijuana is legal
in 30 states.
Economics of Prohibition or Legalization
Effect of legalization on demand for drugs
Increase in the demand for drugs resulting in
Higher price
Higher quantity
Effect of legalization on supply for drugs
Increase in supply of drugs resulting in
Lower price
Higher quantity
How much the use of the drugs would increase depends on elasticity of demand
Chapter 2 Appendix: Elasticity
Elasticity of demand is defined as the responsiveness of consumers buying decisions to changes
in the price of the product
The elasticity coefficient is equal to the percentage change in the quantity demanded divide by
the percentage change in the price.
Demand is elastic if the elasticity coefficient > 1 (absolute value). Any percentage change in
price causes a larger percentage change in quantity demanded
Demand is inelastic if the elasticity coefficient < 1 (absolute value). Any percentage change in
price causes a smaller percentage change in quantity demanded
D1 is less elastic than demand curve D2 at prices near their $4 intersection
The flatter (closer to horizontal) demand curve (D2) will be more elastic
The steeper (closer to vertical) demand curve (D1) will be more inelastic
Effect of an excise tax on suppliers
Imposing an excise tax on suppliers increases the cost of supplying the product shifting the supply
curve to the left.
For a less physically addicting drug (e.g. marijuana), the demand will be more elastic than for a
more physically addicting drug (e.g. heroin), resulting in a greater decrease in quantity and a
smaller increase in price than would occur for the more physically addicting drug.
For a less physically addicting drug (more elastic), a greater burden of the tax falls upon the
supplier lowering profits. For a less physically addicting drug (less elastic), a greater burden of
the tax falls upon the buyer of the product.
Economics of Prohibition or Legalization
The regulation of legalized drugs through economic policies would be somewhat similar to the
regulations related to alcohol including:
Government’s expenditures on drug-related programs
Demand-side treatment & education programs
A system of excise taxes levied on legal drugs
Decreasing the supply of the drug
Prohibitions against buying by or selling to minors
Drivers under the influence of any drug could be arrested
What is the elasticity of demand for drugs in the U.S.?
We don’t know.
The Figure below shows two demand curves of varying elasticity with the imposition of an excise
tax
Conservative versus Liberal
Economic conservatives
Less government involvement in economic realms
Support the legalization of drugs and other victimless crimes, and the use of
excise taxes
Note: Social conservatives would not support such legalization
Economic liberals
Greater government intervention in the marketplace
Favor the criminalization and prohibition of drug use and other so-called victimless crimes.
Note: social liberals are more likely to support legalization of drugs.
Websites discussing drug legalization/decriminalization
http://www.heritage.org
http://www.cato.org
http://www.leap.cc/
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