The war on drugs: A public bad

Abstract

The standard economic justification for a government intervention into private affairs requires that these private activities produce externalities: from a neoclassical economics perspective, public policy should intervene only if private-sector actions generate costs or benefits that are imposed on or captured by someone other than the decision maker so they are not taken into account in the decision. When negative externalities (external costs) are significant the market allegedly allocates too many resources to the activity,while a positive externality (external benefit) implies that too few resources are allocated to the activity. A "public good" implies a situation in which the external benefits of producing the good are very large. As a consequence, the private sector presumably will not produce the good (or at least, significantly under produce the good) because the producer cannot exclude non-payers from consumption of the benefits, creating incentives for consumers to free ride. The so-called "war on drugs" is often justified because drug prohibition and resulting enforcement allegedly generate large positive externalities. The most important of these alleged external benefits is that drug prohibition reduces non-drug (primarily property and violent) crime. In other words, drug prohibition is claimed to be an effective crime-fighting weapon, because drug users allegedly commit property crimes in order to gain the economic means to support their habits, and/or because some psychopharmacological (or economic compulsive) effect of drug--use leads to increased violence: drug-use causes non-drug crime so drug prohibition reduces such crime.