According to a 2011 Gallup Poll, the percentage of Americans who favor legalization of marijuana stands at 46 percent, up from 24 percent in 1990. During that period, the number of persons who had used marijuana in the past month rose by 28 percent. These trends are not alarming to someone like me who supports declaring the war on drugs to be a failure and legalizing their use.
The present situation is especially grim. The US government has spent more than $30 billion per year in real terms since the early 1980s to apprehend and convict drug dealers and users and to destroy crops. Despite this vast allocation of resources, the prices of cocaine and heroin trended downwards until the early 2000s, before plateauing at low levels. Forty percent of drug arrests are for possession of marijuana. Twenty percent of those arrested are juveniles. Drug offenders account for 25 percent of the American prison population, and almost all of them committed non-violent crimes.
Not only would legalization of drugs eliminate the enormous costs just outlined, but it also would have substantial benefits. Some are obvious such as the ability to raise revenue via taxation. Others are more subtle. For example, in a recent study, Mark Anderson, Daniel Rees, and Benjamin Hansen find that the use of marijuana rose in the sixteen U.S. states that legalized medical marijuana since 1990. At the same time, traffic fatalities fell by 9 percent. Why? That study and others contain evidence that alcohol and marijuana are substitutes in the sense that a reduction in the price of one leads to an increase in its use and a reduction in the use of the other. Simulator and driver-course studies show that both alcohol and marijuana impair driver-related functions. But the evidence suggests that impairments due to alcohol increase the risk of collision, while impairments due to the use of marijuana do not.
A regime in which such substances as marijuana were legal would resemble the current U.S. markets for alcohol and cigarettes. Consumption would be regulated via taxation, minimum purchase age laws, restrictions on advertising, warning labels, and bans on consumption in certain places. Not only would excise taxes help reduce the federal deficit, but they also may be able to reduce drug use by more than the war on drugs. Opponents of legalization assume this would not occur because producers could always choose to go “underground” and sell illegally if a monetary tax made legal prices higher than underground prices.
Gary S. Becker, Kevin M. Murphy, and I have shown, however, that the market price of drugs with a monetary excise tax could be greater than the price induced by a war on drugs, even when producers could ignore the monetary tax and produce illegally underground. The reason is that the government could allocate resources to preventing production in the illegal market. In effect it imposes a non-monetary tax in this market whose expected value exceeds the tax in the legal market. We conclude that the threat of imposing a cost on illegal producers that is above the excise tax if they produce legally is sufficient to discourage illegal production. Hence the threat does not have to be carried out on a large scale and is much less costly to implement than a war on drugs in a regime in which drugs are illegal. In the long run legalization might lead to a lower level of consumption than the present situation.
Read more in this debate: Walter Block.