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November 9, 2013

"Drug policy: Moral crusade or business problem?"

The title of this post is the headline of this notable recent Detroit News op-ed by law prof Mark Osler.  Here is how it gets started:

Slowly, Americans are beginning to realize what a mess our “War on Drugs” has been. We have spent billions of dollars and prosecuted millions of people, all to little real effect. Michigan has been front and center in this sad drama.

At the root of this failure is a simple error: We have treated narcotics as an issue of morality rather than business.  Our efforts have been focused on punishing relatively minor actors through mass incarceration rather than on the very different goal of shutting down drug businesses.  A starting point as we reconsider our efforts should be the simple recognition that narcotics trafficking is first and foremost a business.

That means that we need to put business experts in charge of the effort to close down narcotics businesses. This change might make all the difference.

A business expert, for example, would know enough to identify a proper measure of success or failure.  The only real way to know if narcotics interdiction is working isn’t how much cocaine is piled up in a bust, or how many people we lock up.  Rather, the best measure is an economic one: the price of narcotics on the street.  If we are successful at restricting supply, the price should go up (given a rough consistency of demand). Hiking the price is important.  We have learned from cigarettes that raising the price of something addictive reduces usage rates.  Still, governments continue to measure success by narcotics seized, arrests made, and sentences imposed rather than the street value of illegal drugs.

Similarly, no knowledgeable businessperson would use an analytical device like the system we have in place to rank-order the importance of narcotics defendants, where the weight of drugs those defendants possess is usually used as a proxy for culpability.  If you have a lot of drugs on you, you get a high sentence.  In reality, important figures in narcotics organizations don’t possess drugs at all — that is left to mules, street dealers, and low-level managers.  Given this false proxy, it shouldn’t be surprising that our prisons are stuffed full of mules, street dealers and low-level managers.  Who keeps the profit is a better gauge of responsibility and culpability.  That’s how a business works.

A businessperson would also realize the futility of sweeping up low-wage labor in an effort to close down a business. Or, for that matter, grabbing inventory periodically (which we do via drug seizures) or occasionally seizing profits (which we do when we forfeit drug dealer’s homes or cars).  In real life, the way to shut down a business is to curtail cash flow, because without that there can be no labor hired, no inventory produced, and no profit generated.  Conversely, so long as cash flow exists (or credit, which drug dealers generally can’t obtain), labor, inventory, and profit can be replaced.  Yet, the one thing we do not focus on is cash flow, which we could capture through forfeitures.  We keep the money, the business fails, and drug dealers are out of work rather than in prison.

November 9, 2013 at 11:13 AM | Permalink

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Price on the street is a nonsense measurement. Yes, it helped with cigarettes and it might help with drugs to a certain extent. However, cigarette use has declined for a number of reasons that aren't relevant to drugs (for starters, most people smoke because their parents smoke, so discouraging parents from smoking and early intervention with kids goes a long way. However, drug use is rarely associated with learning from ones parents). I'd also wager that cigarette use, in spite of the cost, is still higher than drug use. The problem with this analysis is that drugs are highly inelastic in demand. Because of this, increased cost means increased profitability. This is a major reason organized crime likes the drug trade. Increased price has been shown to lead to an increased involvement by violent cartels.

In the end, it's still a moral judgment. It's a question of how much drug use is acceptable vs. the costs. There's no objective business measure (like there is with money) to decide this question.

Posted by: Erik M | Nov 9, 2013 12:18:52 PM

Those that promote cigarette use are quite organized. "Winston tastes good, as a cigarette should." So said Walter Cronkite during his news show while reading us the news. In his Memoirs he says that the bosses at CBS chastised him for not saying "as a cigarette should". He was correcting the improper usage and got chastised. He does not apologize fifty years later, for promoting tobacco use to millions of kids. Hundreds of thousands have since died from cancer, heart disease, lung disease. Be consistent. Outlaw tobacco and pot. Tell your kids not to watch all those movies on TCM from the 20's to present day with actors smoking away as if it is sexy and fine. Suicide is dangerous, hazard to your health. Does that mean anything to you?

Posted by: Liberty1st | Nov 11, 2013 8:21:04 AM

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