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The Economics Behind the U.S. Government's Unwinnable War on Drugs: Benjamin Powell
4 paragraphs found.
The Economics of a Supply-Side War

Both the possession and distribution of illegal narcotics are criminally punishable. However, the penalties for distribution, whether street-level dealing or international smuggling, have always been much harsher than the punishments for possession. Possession—at least for marijuana—is becoming decriminalized in some states. Meanwhile, enforcement devoted to interdiction of imports and the breaking up of dealer networks continues. In short, while there are demand-side penalties, the U.S. government's war on drugs is primarily a supply-side war.


The amount of illegal drugs that people use is not very sensitive to price. Many addicts likely continue to consume close to the same quantity even in the face of large price increases. The demand for illegal drugs is what economists call "price inelastic."5 Figure 1 illustrates the effect of a supply-side drug war on an inelastic demand.

Figure 1. Effect of a supply-side drug war on an inelastic demand

Because the demand for drugs is not price-sensitive, each "victory" in the war on drugs enhances drug dealers' revenue, making future decreases in supply all the harder to achieve. It is no accident that the number of annual drug-related deaths in Mexico almost quintupled from 2,300 in 2007 to 11,000 in 2010. This increase was a result of the Mexican government's stepped-up enforcement efforts.6 The drug suppliers used their enhanced revenue to fight back more violently.


These costs, taken together with the above supply and demand analysis, indicate that the very concerns that animate drug prohibitionists—the harm to users and the violence in society—should cause them to oppose drug prohibition.