Friday, April 10, 2009

The Economics of Legalization

British study sees annual savings of $20 billion.

Legalizing heroin and cocaine would save Great Britain as much as $20 billion a year, a British drug reform group claims in a 50-page report issued this week. The Transform Drug Policy Foundation said the savings would come primarily in the form of reductions in the cost of government enforcement.

The report, “A Comparison of the Cost-effectiveness of Prohibition and Regulation,” purports to be the first cost-benefit analysis ever undertaken with respect to drug prohibition in Britain. According to an analysis in the Drug War Chronicle, the British government has relied on mere assertion to justify maintaining prohibition and to argue that the harms of legalization would outweigh its benefits.” The drug reform foundation examined criminal justice, drug treatment, crime, and other social costs, and concluded that “a regime of regulated legalization would accrue large savings over the current prohibitionist policy.”

The Drug War Chronicle reported that the reform group “postulated four different legalization scenarios based on drug use levels declining by half, staying the same, increasing by half, and doubling. Even under the worst-case scenario, with drug use doubling under legalization, Britain would still see annual savings of $6.7 billion. Under the best case scenario, the savings would approach $20 billion annually.”

Specifically, the report says that “even in the highly unlikely event of heroin and cocaine use increasing 100%, the net benefit of a move to regulation and control remains substantial. The economic benefits of regulation identified are also of a magnitude to suggest that even with significant margins of error we can assume that legally regulated markets would deliver substantial net savings to the Treasury and wider society.”

In addition, the report notes that “The Government has also repeatedly failed to acknowledge that prohibition is a policy choice, not a fixed feature of the policy landscape that must be worked within, or around.”

“The most striking conclusion from the analysis of current costs,” the report concludes, “is that prohibition of drugs is the root cause of almost all drug-related acquisitive crime, and that this crime constitutes the majority of drug-related harms and costs to society.”

The full report from the Transform Drug Policy Foundation can be downloaded in PDF format here.

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Adi Jaffe said...

It is true that the cost/benefit of legalization, whether regulated or not, should be carefully assessed.
Still, given the societal costs of heavy, dependent, drug use, I doubt that a policy which may double current use would ever be considered by any western government.
Still, I think that well designed studies that would give us a better idea of the likely, not possible, changes in use and dependence problems are necessary.

Dirk Hanson said...

"... well designed studies that would give us a better idea of the likely, not possible, changes in use and dependence problems are necessary."

Indeed they are, I agree. I think we might be in for some surprising discoveries. My own personal hunch is that the availability of taxed and regulated heroin would not double the population of existing users. It might not increase very much at all.

Most people who don't use, and have never used, aren't likely to start. And some of the societal costs are offset by connecting legalization to the medical treatment community. Supervised withdrawal under a personal physician becomes a possibility for the already-addicted. Some form of legalization would allow many addicts to come in out of the cold and get treatment if they could be assured it wouldn't lead to a prison sentence.

Not to say there aren't downsides to blanket legalization. Personally I favor harm reduction strategies that stop short of full decriminalization.

Anonymous said...

This is an interesting study, because this strategy of legalization is not in any other aspect of society. For instance, murder will never be legalized just to make people not want to do it, yet our jail system puts the everyday citizen in debt.

I'm not saying that the Bible endorses anything, but I thought this was interesting... "I would not have known what sin was except through the law. For I would not have known what coveting really was if the law had not said, 'Do not covet.' But sin, seizing the opportunity afforded by the commandment, produced in me every kind of covetous desire. For apart from law, sin is dead." Romans 7:7-8

I just thought it interesting that we, like children, find thrill in disobeying the law and living differently than we're told.

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