Thoughts on Drug Policies

韋興寧

ABSTRACT：Through the book “The economics of Public Issues”，in chapter 6，the author discussed why the government could not easily get spectacular success in the illegal commodity such as sex，booze，and drugs in economic way.In normal market， according to the law of demand，when the price of good is rising，the consumed amount will decrease.However，the government has executed a lot of policies to reduce supply of drugs， but the consequence is not as good as they expected. Economics can help to find the answer to the phenomenon and improve the governments decision.

KEY WORDS：Thoughts； Drug ； Policies；Government

Policy Background

Drug abuse is a great problem， which every government paid much attention on it. In January 1972， Richard Nixon coined the term “War on Drugs”. The War on Drugs is a campaign aimed to reduce illegal drug trade. This initiative includes a set of drug policies of the United States that are intended to discourage the production， distribution， and consumption of illegal psychoactive drugs （War of Drug） Each president insisted in that campaign and increased the budget of the program so that they can reduced the drug. However， the record is bad. The record shows that high school students report the same rates of illegal drug use as they did in 1970， and the Centers for Disease Control and Prevention says drug overdoses have “risen steadily”since the early 1970s to more than 20，000 last year. This year， 25 million Americans will snort， swallow， inject and smoke illicit drugs， about 10 million more than in 1970， with the bulk of those drugs imported from Mexico.

In 2012， the Obama administration claimed that they would no longer use the term “War on Drugs”and put emphasis on curing addictions. They pointed out that drug addiction is a chronic disease of the brain that can be prevented and treated. （Drug Policy for the 21st Century）

Economic Principles

What is the demand curve of drug looks like？ When you are addicted to one substance， often there are no close substitutes. The price elasticity of a demand curve depends on four factors： the necessity， the available of substitutes， the faction of income being spent and the time period. For drugs， there is not much substitution and the prices are almost same； the prices are really high so the fraction of income is high； the time period is short because addicts will buy drugs soon. Therefore most economists consider the demand for illegal addictive drugs to be almost perfectly price-inelastic meaning the demand curve is almost completely vertical， which means the demand curve elasticity is very low. Also， the price elasticity of the supply curve is high because there are many foreign sources.

Now， lets think about the “War on Drugs”， the government try to reduce the illegal drugs， which means they attempt push the supply curve of drugs inward as far as possible. Therefore， the buyers of drug will decrease because higher the price of a good， the lower the amount consumed. However， this could not work because even the price is high by reducing supply， the demand wont change a lot. There are some other effects will influence the policy as well. While the government increases the price of drug， the crime rate will increase because illegal contracts are usually not enforceable through legal channels. Buyers and sellers of illegal goods must frequently resort to private methods of contract enforcement， which often entails violence. Furthermore， the increase of price will provide higher profits for those who have a comparative advantage- people who can evade the police. （The Economics of Public issues， P. 39） Illegal activity attracted people who are good at being criminals so the higher profit will encourage new entrants. Therefore the more suppliers will impel the supply curve shift back. So， the “War of Drugs”actually did not do anything， the market even become worse because the crime rate become higher than before.

Application to the policies

From the analysis， our purpose is reducing the quantity of drugs. With the legally drug trading， the government need to do more. First， The directly way is reducing the demand. For those addicts， government can help them to get rid of drugs and they need put more money on this area to help addicts. This is an effective method， but it is hard to give up smoking drugs and it is easy to use drug again. So， government also need enhance the education among students. Also， we government need to increase the employment rate because lots of people smoking drug are workless. Those people smoking drugs due to they lost the confidence of life.

Second， government must specify the drug market and make the standard of drug， the low quality drug could not go into the market. The suppliers need the permit to sell the drugs just like gun selling. Moreover， decreasing quantity demanded and decreasing the net revenue of sellers. To decrease quantity demanded， the economic way is to increase the price of drugs. But as we know， the increase in the price usually results in higher revenue of sellers. The way to solve this problem is to increase the cost of sellers so that the net revenue will decrease. One effective way the government can do to increase the cost of sellers will add tax on drugs， which could increase the revenue of the government as well. Again that is definitely only feasible when drugs are legal market goods.

So economic method will be a good tool to control the drug market with the premise that government making drug a legal good in the market.

References：

[1]Sebelius，K，Holder，E.&Kerlikowske，G.“Drug Policy for the 21st century”.White House.Amril17，2012.Http：//www.whitehouse.gov/blo/2014/04/17drug-policy-21st-

centruy.

[2]North，D，Benjamin，D.& Miller， R.“The Economics of Public Issues”Pearson.Chapter 6.

“War on Drugs” ikipedia，8September 2012. http：//en.wikipedia.org/wiki/war on Drugs.