Drugs were not always controlled by the government. It was not until the social cost was recognized that anyone was interested in controlling them. However, the beginnings of drug control only grew as fast as the problems of addiction grew. Human beings are hard-wired to become addicted because our pleasure centers can react unpredictably in some people and they feel a much stronger reaction to a substance or behavior. It takes extreme willpower to resist repeating whatever causes the intense pleasure, and most people are not only not up to it, but they may not even realize that the repetition is the first step toward addiction.
Until the beginning of the 1900s, the sale of patent medicines was unregulated and this led to widespread addiction to opium. In the nineteenth century, most drugstores sold things like Dover’s Powder and McMunn’s Elixir of Opium. Derived from the coca plant, cocaine products, including extracts were used as stimulants and were not considered harmful. Coca-Cola was a popular tonic that contained cocaine at that time. Social disapproval of their use was almost non-existent, consisting simply of religious institutions. After the turn of the century, the federal government began to control the sale and use of opiates. The Pure Food and Drug Act of 1906 stated that all patent medicines must have an accurate list of ingredients, conform to standards of purity, and describe their intended effects as truthfully as possible. A public effort was made to deal with addiction.
Since then, the government has continued to add new drugs to the list, and those which are not on the list are probably included under the “prescription drug act” plus there are some 28 chemicals that can be used to produce the drugs or synthetic substitutes, and which are just as dangerous. It’s pretty much true that the only drugs which are not controlled are coffee and tea. Cigarettes and alcohol are controlled, though not illegal. The control of cigarettes extends to limiting the age group which can buy them, how and where they can be advertised, labeling rules, and the public places where they can be used. For alcohol, there are more rules, including age limitations, restrictions of places for sale or consumption, prohibition of use before or during operation of motor vehicles, and miscellaneous things like labeling and advertising rules.
So Why is It Such a Problem?
Illegal drugs are merchandise that generates income (more than the national budget), and this has economic consequences. There is little profit in legal recreational drugs. Every drug debate includes the pros and cons of prohibition. For some, the built-in harm justifies the legal bans; the resulting illegal markets are seen as one more thing we need to suppress by more aggressive policies. For others, the resulting dangers to the consumers, plus the victims of crimes committed to support an expensive drug habit are worse than the drugs, and policy needs change. The economics of the illegal drug trade need to be examined to see if there is a definitive economic reason to change policy. Unfortunately, objective analysis of the economic outcomes from the policy is seldom possible.
The controversy is based upon two different economic approaches, notably liberal and interventionist. Using a fairly simple rule that individuals are the best judges of their well-being: as long as other members of society are not affected. Making this rule is much more simple than putting it into practice. First, can a drug user be considered rational? If we say no, because drug use is damaging, and it affects the mind, then we should protect the consumer from himself.
Second, does drug use affect only the drug consumer? Drug use affects not only those who take them but also their potential victims of crime and violence. Eventually, it affects the user’s family and ultimately it affects us all. Is it the nature of the drugs consumed that makes the consumer dangerous to others or is it because drugs are illegal that crime and violence happen? In other words, is it the drugs or their illegality that cause the problems? So the rule is still not so simple. So a rational discussion of the benefits and disadvantages of intervention to regulate drug use cannot result in a simple conclusion. It depends too much on the weight granted to individual rights versus the state’s role in controlling the populace. These debates have been going on for nearly two centuries and they will not be resolved any time soon.
A purely economic analysis of drug policy may be simplistic if it stops at identifying the sources of inefficiency in public policy. Of course, some economists compare the benefits of different policies, but few question the feasibility of the suggested solutions. Economic analysis of rational choices can handle all the alternatives. However, the best evaluation of any public policy may not indicate change, and most evaluations are slanted. Evaluation is used to support the favored policy, so policymakers carefully choose evaluators by the type of evaluation they are likely to do. In other words, they pick the outcome first and then seek the proof.
An analysis of the economics of drug use in general, not distinguishing between the products, is too general, as the ramifications of other effects and the cost-benefit ratios are very different. Cannabis does relatively little public damage when compared to cocaine or heroin, and the prices and profits are very different also. However, the policy is often the same, regardless of the drug involved. The policy may even have different objectives for different drugs. The economic analysis seeks to discuss the value of strategic objectives chosen by the public policy-maker, and, as is usually used by economists, considers that good policy results in a given result with the least cost. The good public policy thus must correct the inefficient allocation of resources by the markets. For those who will not accept purely economic analysis, the efficient policy for drugs minimizes the social cost imposed by drugs. Again we encounter the subjectivity of applied economics, that is, looking at the other consequences as being worth more or less economically eliminates the objectivity of the analysis.
So here is how it all adds up: Drugs are addictive and damaging, but they are also profitable to sell, mostly because they are illegal. We would have a drug problem if drugs were free. However, we might not have all the attendant crimes. The public policy seeks to eliminate illegal drug use, but profits are just too good for it to go away. One of the most damaging and most addictive of drugs is nicotine, but a huge tobacco industry keeps that legal, and it would be difficult to make tobacco products illegal because the deadly effects are too slow to prove the dangers legally. Besides, it would only add one more very profitable drug to the illegal list and fill up the pockets of organized crime.