Drugs: Are We Better off Legalizing Them? (Part 1)

The fundamental point behind making drugs illegal is that in addition to law abiding citizens, those who wish to abuse anyways face high production and sale costs which in theory should decrease demand. But illegal drugs are a special case in that their price is fairly inelastic because they’re addictive. The result is that unlike most other commodities, people are always going to be willing to pay any affordable amount to get high. So making drugs illegal simply limits the number of dealers to those who can overcome legal barriers, and in the process makes them richer and spikes crime rates.

So to test this beyond the theoretical economic mind, NPR’s Planet Money talked to Freeway Ricky Ross who after became a large scale crack dealer in Los Angeles was sentenced to life in ’96 only to be released on parole 13 years later.

So the first part: making drug sales illegal drives the price up. To judge take a look at Ross’ numbers. Ross went through up to $3,000,000 a day out of which he made between 200 and 400k off each million. Of this profit he estimates that the forbidden nature of his products is responsible is responsible for approximately a thousand fold spike in their price.

                Now onto part two, that part of this money funnels into higher crime rates. Rick worked with 30-40 guys each of whom at any given moment was required to be armed. This thug and armed environment had obvious effects.

Drugs: Are We Better off Legalizing Them? (Part 2)

Money was further distributed to uphold ties between groups that bought you a free pass in the otherwise fatal streets of LA. And these guys weren’t necessarily drug dealers but included an assortment of criminals be they robbers, “jackers” etc. Other major costs ranged from reserves to pay bonds to financing lawyers to hiring the so-called small timers involved in the intricacies of running a drug operation.  To these individuals, seeing such profitable business is a huge enticement to enter this world.

But the thing that economists don’t necessarily take into consideration that Rick can point out is pretty simple if you think about it. Drug dealing is different from any other job you could ever have. High risk jobs normally demand high compensation but to starting dealers, life in gangs is a slow transition from life at home so any compensation can be seen as a lot. Furthermore, the life involved and processes becomes a culture unto its own that can be more engaging than it is dangerous. The result, even if you weren’t paid as much as Rick, even if you were broke and hunted, it was a life that some just wanted to live.

The simple solution is to legalize these substances but that would spike addiction. So the choice really is would we rather have higher crime or more people addicted to drugs? But there is a third option and that is to destroy the motivation to use or sell drugs in the first place. And that’s what Ross addresses now by talking to youth and others about the life after prison or lack thereof if you’re killed. It’s not an easy task but it may be the only option in a business that’s otherwise economically and socially irresistible.