Friday, August 17, 2012

Dubbers Asks (Season 1, ep.2): Isn't It High Time We Legalized Marijuana?

Art Carden has yet another Forbes article questioning the wisdom of drug prohibition. One of my fondest memories of my Principles of Microeconomics class was hearing the economic arguments against prohibition for the very first time. In truth, the arguments are really not fundamentally different than anything else basic economics teaches: accounting of benefits while ignoring costs is aggressively dishonest. Skillfully including unseen costs* is the hallmark of an accomplished economist. In the case of the drug war, those hidden costs were never that well hidden and are increasingly wearing neon madras and waving glow-in-the-dark pennants. The violence, the disintegration of low-income families, the rise of civil asset forfeiture, the meth lab fires, these are all pretty hard to ignore.

It's encouraging that regular voters are starting to wise up to the damage that the drug war is causing**, but if a baseline for intervention into trade is that euvoluntary exchange is acceptable, it's worth asking whether or not drug use is euvoluntary. Also interesting might be production and distribution, both as-is and in a likely alternative regime. We can then follow up with an exploration of what changes might be directionally euvoluntary.

Drug use now: not especially euvoluntary, most notably because of potential regret. Some of that regret comes from the risk of adverse addiction, but some of it is from bad product quality. The basic economics of don't kill your customers still has some logic even the illicit drug trade, but if someone way up the production chain cuts the product with something poisonous, the end consumer has no legal recourse. It seems to me that conditional on use, prohibition might increase the risk of ex post regret.

What about uncompensated external costs? I seem to recall hearing an argument that widespread drug use will reduce productivity, thus harming GDP. Ignoring for a moment the uncomfortable anthropomorphism of a statistical artifact, note that if it weren't for state-sponsored social safety nets the costs of drug use wouldn't be borne by the taxpayers, but rather by users and their families. The uncompensated externality is created by institutional choices. A similar argument applies for more severe cases and the medical services they consume, again, occasionally at taxpayer expense. It occurs to me that since drug abuse and public service provision have joint production characteristics, it's misleading to judge one without considering the other. At any rate, conditional on the status quo provision of health care and basic income (recall that there may be better ways to provide basic income than through managed payments, see Munger (2011) and Wilson (working paper) for more details), legalization might increase taxpayer burden, though this isn't a slam-dunk case. It really depends on how many more people would end up on the dole or in overdose treatment and what other mitigation institutions might arise. This isn't the place for that sort of detailed analysis and this question is far from settled, even in the best academic literature. Suffice it to say that it's possible but not certain that relaxed or repealed drug laws might breed more problem addicts.

Now to the meat of the question: BATNA disparity. Incarceration for simple possession is linked very strongly to poverty. At my most charitable, I think you could make the following argument: drugs are bad for you and wealthy drug peddlers are exploiting poor people by getting them hooked on drugs. For their own good, we will prohibit drug consumption on penalty of imprisonment. If I were less charitable, I might allege that throwing users in prison is a reinvention of Jim Crow, but that's probably a more incendiary claim and one that I can't rigorously support, despite its intuitive plausibility. We can see that like with calls to shut down sweatshops, though once again, the cure is worse than the disease. I wonder what it would look like if we went around imprisoning people for their own good for other supposed offenses, like watching too much TV or forgetting to floss regularly. Prohibition itself makes BATNA less attractive and moves away from euvoluntary trade. I can't see how this is meant to be good for society.

So I then reiterate Carden's question: isn't it high time we legalized marijuana? If not for the obvious reason of refraining from punishing otherwise peaceful people for their choice of recreation, then for making the world a more euvoluntary place?

*good economic analysis should correctly identify transfers as well as costs and benefits, and good analysts must be able to clearly explain the difference between the two.

**recent Gallup polls have support for marijuana legalization around 50% and rising

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Do you have suggestions on where we could find more examples of this phenomenon?