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January 20, 2006

Nobel Laureate Gary Becker argues that legalising illegal drugs could reduce consumption - Tim Worstall asks if this will convince people to change their minds and support legalisation

Posted by Tim Worstall

The legalisation of illegal drugs - it is often argued - would boost their consumption. Nobel Laureate Gary Becker has however recently argued that legalising drugs might actually reduce consumption: in a legalised and taxed
environment the price of previously illegal drugs may actually go up, not down - and consumption thus go down, not up. Tim Worstall asks, will this persuade many people to change their minds and advocate legalisation? The views expressed in this article are those of Tim Worstall, not those of the Social Affairs Unit, its Trustees, Advisors or Director.

It's not all that often that we find ourselves having to do the Keynesian Two-step, that "The facts have changed Sir, so I'll change my mind" thing as I misquote it. I rather hope that a recent paper [Gary S. Becker, Kevin M. Murphy, & Michael Grossman, The Economic Theory of Illegal Goods: The Case of Drugs, Working Paper 10976, National Bureau of Economic Research, 2004] from Nobel laureate Gary Becker and friends will, however, provoke a number of such soft shoe'd shuffles. For what they've done is put the final nail in the coffin of the case against the legalization of drugs, rather an interesting thing to do when Charles Clarke is criticised over his decision not to move cannabis back to a Class B rather than Class C drug.

The standard (classically) liberal or libertarian view of drugs is easy to outline. Consenting adults have a right to ingest whatever they wish subject only to their interference with the rights of others, just as they have similar unfettered rights to offer their gonads for pay or play. Drugs should therefore be legal to sell, purchase and consume to the great benefit of the freedom and liberty of society. It's also acknowledged that such things as addiction do indeed exist and that such freely marketed drugs will need to be taxed so as to pay for treatment and so on.

In this imagined world where policy is decided by what is logical, rather than by emotional appeals, we would therefore have pharmaceutically pure drugs, meaning consistent portions and thus fewer overdoses, less hepatitis and HIV infections as needles and syringes were not shared, and a great deal less petty crime and theft to pay for them. We would also have ripped the heart out of the largest illegal trade in the world and contributed greatly to the reduction in crime in the producing areas like the Andes and Himalayas.

Sadly, as we know, policy is more often decided by emotion or, if we are to be more accurate, prejudice. Social authoritarians of all stripes denounce the evils of drugs. Quite why is difficult for me to understand but perhaps from the left it's based on the old puritan ideas that people really shouldn't enjoy themselves too much and from the right, well, perhaps that the proles shouldn't enjoy themselves too much.

The one objection that does have some traction is that if drugs were legalized and thus became much cheaper, then a much larger number of people would take them. Trailing my libertarian credentials here I would of course regard this as a good thing, more people being able to do as they wish being the whole point of the way in which we set the rules for society. I'm aware that there are those who would disagree, those for example who point to cannabis' connection with psychosis and regard people's protection from the consequences of their own drug abuse as paramount. I'm not sure I quite buy this - not every cokehead of my acquaintance has fallen so far as to become a Tory MP for example.

Still, that philosophical difference, that adults don't need to be free, they need to be coddled, protected from the results of their own naughtiness, won't be bridged. Which is why the referenced paper is so important, for it shows that the legalization and taxation of drugs would actually lead to lower consumption than the current prohibition (and its associated smuggling and so on). This is entirely counter-intuitive and relies upon such arcana as the difference between the social and private value of the consumption of goods and the elasticity of demand for those same goods. Yes, OK, no one wants to go off and study economics for three years to understand those phrases but when you have a Nobel Laureate in Economics and a MacArthur Foundation "Genius" award winner throwing them about with gay abandon it might be worth looking at their conclusion:

We show that a monetary tax on a legal good could cause a greater reduction in output and increase in price than would optimal enforcement, even recognizing that producers may want to go underground to try to avoid a monetary tax. This means that fighting a war on drugs by legalizing drug use and taxing consumption may be more effective than continuing to prohibit the legal use of drugs.
So let's assume that those who oppose drug legalization are in fact motivated by their concern for the effects upon users, rather than the killjoy motives I impute above. That the desire really is to reduce consumption of drugs, lessen the horrific effects of addiction. As a result of this research we now know that the path to the consummation of their desires is the very legalization they have so far set their hearts against. Will we see some conversions? Possibly a few "Ah, yes, I see what you mean"s? To get the quote from Keynes correct:
When the facts change I change my mind - what do you do, Sir?
Or is that too much to hope for?

Tim Worstall graduated from the LSE and immediately went into small business where he has remained for twenty odd years, working in the US, UK and Russia in fields as diverse as newspaper distribution, offshore programming and exotic metals. He is the author of 2005 Blogged: Dispatches from the Blogosphere and blogs at

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bliss on earth,legal cheap drugs.... and they will be cheap for the same reason alcohol is cheap... tax it too much and you are back to prohibition..

all and sundry point to the massive losses due to drink who gladly tell us it exceeds the pain due to the drug trade...

anyone wanna bet the pain from legal drugs will match the damage from alcohol??

Posted by: embutler at January 20, 2006 11:36 PM

One of the truly wonderful things about libertarians is that no quantity of fact can shift their blind allegiance to ideology. In that respect they are similar to the 20th Century's other ideolgues, the communists, the nazis, and nudists.

We do not need to read pages of cod-scholarly thumb-sucking or Nobel-celebrity endorsements for theories on whether legalising drugs would not increase their consumption. We can walk through London late on any night. We were bombarded with furry arguments claiming that extended pub hours would decrease drunkenness and now the streets are puddles of lager mixed with vindaloo. Every telephone kiosk in England is now a urinal. But it does not matter, for our libertarians mere facts do not figure. Everything is deduced from first principles. They are nuts.

Posted by: s masty at January 21, 2006 02:09 PM

You can reject science for common sense if you wish, just as you can use folk remedies to cure your ills, if you should so wish.

But just as leeches or cupping are unlikely to cure your cancer while an oncologist might, ignoring the insights of one of the world’s finest economists is unlikely to aid you in making sense of the world.

Posted by: Tim Worstall at January 22, 2006 09:18 AM

Doesn't Gary Becker's argument weaken rather than strengthen the standard argument for legalising drugs? It is often argued that the illegality of drugs forces the price of them up - so addicts have to commit crime (burglary, robbery, theft) to fund their habits. If drugs were legalised - or so the standard argument goes - the price of drugs would fall dramatically. So each heroin addict would not have to be a minor crime epidemic on their own to feed their addiction - and the rest of us would not have to suffer as a consequence.

If, however, Gary Becker is right and legalised and taxed drugs could be more expensive than they are now, then this argument does not apply. I suppose one could get around this by giving free heroin to registered addicts - but this creates a whole new set of perverse incentives.

Posted by: Dave at January 23, 2006 08:55 PM

I have not studied the paper yet but I am sure that while the research conducted by the Nobel Laureate must be top grade, there are always considerations and assumptions in such studies. Perhaps some angles were missed? I don't think any decision based on this study can be warranted until there is some kind of experimental proof of this actually happening.

Posted by: Vijit Jain at July 13, 2008 05:04 PM
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